Dancing with the devil : the political economy of privatization in China

289 Pages·2017·2.464 MB·English

by  Lin, Yi-min

Dancing with the Devil

DANCING WITH
THE DEVIL
The Political Economy
of Privatization in China
YI-M IN LIN
1
3
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Contents
List of Illustrations  vii
Introduction  1
Privatization as a Process of Endogenous Institutional
Change: Toward an Eclectic Perspective 5
Driving Forces of Privatization 9
Political Actors as Change Agents: The Main Storyline 21
Note on Statistical Analyses, Data Sources, and
Chinese Materials 27
1. The Changing Fate of Private Ownership since 1949  28
Socialist Transformation and the Mao Era 29
From Getihu to “Equal Protection” of Public and
Private Property Rights 31
Reversal or Moderation of Privatization? 36
Broad Trends of Change 39
Summary and Questions 59
2. Demographic Pressures  60
Structure and Change of the Post- 1949 Population 61
Buildup of Employment Pressures 67
Labor Market: Occupational and Spatial Movements 71
Aging and Old- Age Support 76
Summary 80
3. The Evolving Structure of Public Finance  82
“Unified Revenue and Spending” 83
Fiscal Contracts 86
Revenue Partitioning 93
Implications 102
vi Contents
4. Careerism and Moral Hazard in Early Marketization  106
Large Is Beautiful: Political Performance Assessment
under Economic Decentralization 107
The TVE Spectacle 116
The SOE Sideshow 128
Summary 135
5. Rule Bending for the Necessary Evil  137
Uneven Paces of Early Privatization 138
The Wenzhou Story Retold 141
Beyond Wenzhou 161
Summary 167
6. FDI and Privatization  169
Centrally Imposed Constraints and Local Rule Bending 170
FDI Entry Mode and Resource Dependence 183
Bipolar Concentration of Risk Taking 187
Summary 193
7. The Tipping Point and Beyond  195
The Triggers 196
The Political Bandwagon 202
From Industrial Development to Urbanization 211
Asset Stripping and Insider Control 216
The End Game: SASAC and the Remaining SOEs 221
Summary 229
Conclusion  231
Institutional Stability and Unintended Consequences
of Rule Compliance 233
Noncompliance and Political Risk Management 235
Path Dependence in Endogenous Institutional Change 238
Bibliography  243
Index  263
Illustrations
Tables
1.1. Categorization of nonfarm economic
organizations  42
1.2. Number (millions) of industrial and commercial
organizations  44
1.3. Shares (%) of public and nonpublic enterprises in
industrial assets, 1993– 2014  45
1.4. Shares (%) of public enterprises in secondary and
tertiary sector assets  46
1.5. Shares (%) of contributions by public enterprises
to GDP  48
1.6. Estimates of contribution (%) by the nonpublic
sector to GDP  49
1.7. Changing significance of public entities and
quasi-private entities in nonfarm employment  51
1.8. Share (%) of publicly owned entities in secondary
and tertiary sector employment  52
1.9. Sectors with dominant SOE shares (%) in economic
census years  53
1.10. Number of industrial sectors with paid- in capital
dominated by different owner groups, 2013  54
1.11. Selected statistics on the relative significance (%)
of entities with FDI in the economy  55
1.12. Selected statistics on the geographic and sectoral
distribution of FDI  56
1.13. Organizational forms of FDI in the industrial sector,
1978– 2008  58
viii Illustrations
2.1. Selected statistics from population censuses  63
2.2. Cultivated land and per capita shares  66
2.3. Distribution of workforce in selected years  73
2.4. Urban retirees on old (mainly work- unit- based)
benefit schemes, 1978– 1998  78
3.1. Selected statistics of public finance, 1978– 2010  88
3.2. Taxes due and paid by township and village
enterprises (RMB billions)  92
3.3. Revenue partitioning between central and provincial
governments in 1994  94
3.4. Acreages (1,000 hectares) of different types of
land use right transfer, 1993– 2005  101
4.1. Financial liabilities of public enterprises versus equity
and government revenue  125
5.1. Selected indicators on economic
conditions in 1978  144
5.2. Selected statistics on cities and counties
in Wenzhou  159
5.3. Selected statistics on privatization and initial
economic conditions in prefectural cities of
Zhejiang  162
6.1. Selected statistics of foreign- invested industrial
enterprises  177
6.2. Selected statistics on wholly foreign- owned
enterprises and joint ventures in the
industrial sector  180
6.3. Percentage of joint ventures with more than 50%
of equity capital held by local partners  181
6.4. Selected statistics (%) on fiscal
conditions of counties  189
6.5. Selected statistics on foreign- invested industrial
enterprises in Guangdong, 1995  191
7.1. Redundant and furloughed employees in urban
public enterprises (millions)  197
7.2. Selected financial indicators of industrial SOEs,
1980– 1997  198
7.3. Percentage of remaining industrial SOEs relative
to previous year’s, 1996– 2002  203
7.4. Decline of TVEs in Jiangsu province  210
Illustrations ix
7.5. Industrial enterprises centrally located in
urban areas  215
7.6. Insider control of former industrial SOEs after
privatization  219
7.7. Selected statistics on industrial SOEs before and after
ownership restructuring  223
Figures
2.1. Natural rate (‰) of population growth,
1949– 2009  62
2.2. Estimates of net addition (millions) to workforce
pool, 1949– 2010  67
2.3. Percentages of graduates able to enter next level of
school, 1949– 2010  69
2.4. Number of persons in (intercounty) “floating
population” (million persons), 1982– 2010  76
3.1. Major components (%) of tax revenue, 1978– 2010  89
3.2. Extrabudget revenue and SOE- related funds
(100 million yuan), 1978– 1992  90
3.3. Enterprise income tax paid as percentage of gross
profit of industrial SOEs, 1985–1 997  92
3.4. Land sale proceeds as percentage equivalent of local
budget revenue, 1995– 2010  99
4.1. Taxes and profits versus sales, 1984– 1990  121
4.2. Sales growth rate (five- year moving average) of TVEs,
1980– 1998  122
4.3. TVE output, sales, and GDP, 1985–1 998  122
4.4. Taxes and profits as percentage of TVE
sales, 1978– 1998  123
4.5. Debt, sales, and profit of TVEs, 1984– 1998  123
4.6. Sales growth rate (five- year moving average) of
industrial SOEs, 1980– 1997  130
4.7. SOE taxes, profits, and sales 132
4.8. Taxes and profit as percentage of industrial SOE
sales, 1978– 1998  132
5.1. Share of public enterprises in nonfarm workforce,
1984– 2004  155
5.2. Size of Wenzhou’s public sector, 1978– 1997  158