«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»
their legal enforcement, including the incorporation of private property rights in to the constitution, remain precarious and unstable. Still, what McNally calls the ―Leninist principles of political organization‖ influence policy decisions, even though the private sector gained some momentum within the Chinese economic system. However, the ―moves towards creating effective constitutional constraints on the party-state have been highly circumscribed‖.1495 Also, the possibility to join the CCP for many ‗new rich‘ entrepreneurs means not more than just having one more honorable ornament without any implication for political participation.1496 By 2004, 35 percent of entrepreneurs had joined the party – compared to 6 percent of the entire population, which shows the growing integration of economic elites into the CCP. It has to be kept in mind that many of those entrepreneurs were former managers of SOEs that were privatized by the Chinese government, so-called xiàhăi (下海, ‗plunge into the sea‘). As those, they already were members of the CCP. In contrast, a 2004 party survey claims that of 2.42 million new members only 894 were private entrepreneurs. One reason of this might be that with the growing commitment of the party to the private sector, membership was not seen as necessary or desirable anymore.
Holbig, 2002, p. 49.
Dickson, 2007, p. 837f.
Meyer-Clement, 2004, p. 79.
Pearson, 1997, p. 117, similar Dickson, 2007, p. 829f.
Goodman, 2007, p. 182.
gain political influence, for following their interests and participating in decisions in matters of public concern. Also, voluntary membership in associations is regarded as the beginning of civil society structures that organizes people outside state organizations. As outlined above, in the Chinese case associations play a different role, because they are governed by either the party or the state and also because the main actors of the middle class, which first and foremost are the entrepreneurs, are not interested in engaging for a ‗greater cause‘. However, in the civil society strand of literature, the emergence of civil associations is regarded as being highly correlated with Guanxi to represent group interests.1501 In 2002, 83.4 percent of private entrepreneurs were members of the various organizations of the All-China Federation of Industry and Commerce (ACFIC) (which itself focuses more on political and ideological work), 35.1 percent in the Political Consultative Conferences (PCC), 17.4 percent in the People's Congresses (PC), and 48 percent in the two associations for self-employed laborers (SELA) and private enterprises (PEA).1502 The latter two are often not differentiated and treated as one. Both are often under the guidance of the local Industrial and Commercial Bureaus (ICB), which are the organs of local governments for registering and administer associations.1503 The membership within these associations gives the party the opportunity to develop tighter relations to an important economic power and also prevents entrepreneurs to engage in other, opponent organizations. Moreover, this can also be understood as a means to avert the emergence of a bourgeois middle class. Membership or positions in business associations are thus another way to integrate private entrepreneurs in the local state. However, as already mentioned, leading positions are on the one hand given to private entrepreneurs, but there are always also officials involved. Business associations were on the one hand established to monitor, control and educate private entrepreneurs since their resurgence in the 1980s. On the other hand, they serve as tools to communicate the demands and expectations of private entrepreneurs to (local) officials.1504 This feedback mechanism of associUnger, 1996. He and Reisner, 2006, p. 445ff. On the role of corporatism in China, please refer to Unger and Chan, 2008.
In the 1980s, membership in SELA or PEA was mandatory for self-employed and private entrepreneurs.
However, in 1998, new regulations on societal associations (shehui tuanti) were introduced by the Ministry of Civil Affairs that required voluntary membership. ICB data states that still 80 to 100 percent of newly established private enterprises joined those associations. These high percentage rates could not be confirmed in research, for example by Alpermann, 2006, p. 44f. Also, business associations differentiate locally and sectorally. In Xiajin, for example, the Association for Private Entrepreneurs was established, administered by the Private Economy Development Bureau (formerly the Township and Village Enterprise Administration Bureau), which is a more exclusive, elitist organization. Alpermann, 2006, p. 46 and Unger, 1996 for a detailed description of the structure of individual business associations.
Dickson, 2007, p. 844ff., Alpermann, 2006, p. 42-45 and summarizing Meyer-Clement, 2004, p. 75.
Alpermann, 2006, p. 42f.
ations is supposed to foster ―harmonious relations‖ among private firms and foster stabilization.1505 In giving entrepreneurs the feeling they can influence policy outcomes, the central party tries to get rid of a societal force that could possible endanger their own position.1506 ―China‘s entrepreneurs remain willing to be co-opted by the CCP and support the formation of corporatist links between business associations and state organs, both to gain political recognition and to better access state resources‖.1507 Although private entrepreneurs could act independently from local government agencies in starting a business, they were forced to co-operate with local cadres once their business started to grow and produce profits. Often they were expected to take on local official positions or to share their profits with local officials in order to be allowed to pursue. For that reason, it is extremely helpful for entrepreneurs when at least family members join the CCP and thus are part of the partystate.1508 However, often the entrepreneur at the same time functions as party secretary, which seems not to be conceived as contradictory but rather as a useful management tool for guaranteeing stability within the firm. For the party in turn this means to be able to reach out to ‗basic workers‘ within private firms that were otherwise outside the control of party organs.1509 Some entrepreneurs were not permitted to join the party, although they were extremely successful and party branches have been established within their companies. These entrepreneurs function as model entrepreneurs and thus have representative duties rather than real power and in a more unofficial way they are also members of the party.1510 Although especially in Wenzhou (one of experimental provinces, where the private sector accounts for 90 percent of output already as early as in 1994 (in comparison with 2.3 percent in Songjiang and mere 0.9 percent in Wuxi, see also chapter 7.2.), trade chambers and business associations became relatively independent organizations well suited for the market economy, their impact on political participation remains unsure.1511 Besides that, the Chinese government also tried to regain some control over the private sector in employing mandatory membership in those associations. Although these organizations performed some services for the entrepreneurs, they are more ―an arm of the local tax and industrialcommercial bureaus‖ and ―assist local governments in combating tax evasion‖.1512 For Li and Li, 2007, p. 46, Alpermann, 2006, p. 43. See also chapter 5, fn 785.
Holbig, 2002, p. 46f., Dickson, 2007, p. 836+852; similar Dickson, 2003, p. 81f.
McNally, 2007a, p. 183.
Goodman, 2008b, p. 34, 36.
Holbig, 2002, p. 50, 52.
Goodman, 2007, p. 184.
Meyer-Clement, 2004, p. 79, data also taken from Whiting, 2001, p. 173.
Whiting, 2001, p. 190f.
sure, they gained influence over the local private sector, but local officials themselves doubt the ability of these associations to implement policies, whereas, depending on research studies in different localities, more optimistic private entrepreneurs do believe they can have an impact on policy making through their membership.1513 Other studies have opposite results. They found that entrepreneurs evaluate business associations as rather ineffective and believing that their only function is to extract fees and contributions. In one study, private entrepreneurs are interpreted as being as realistic as the local officials described above.1514 Being part of the political system, and thus enhancing their social status, is considered as contributing to the success, growth and reputation of their companies by facilitating the access to bank loans and obtaining vital information. Membership in these associations is also seen as a mean to improve Guanxi with local officials.1515 In turn, local governments hope ―to improve the tax discipline of the new economic elites. […] Although private enterprises and individually owned enterprises together account for more than 20 percent of GDP, they are reported to contribute less than 10 percent (in some places less than 5 percent) to the local coffers‖. The same rationale can be found in the party‘s move to allow private entrepreneurs to join the party as one prerequisite for them is not to be guilty of tax evasion.1516 It is thus doubtful if membership rates of entrepreneurs in associations are able to tell us something about the degree of (in a Western sense) institutionalizing, organizing and therefore democratizing tendencies of entrepreneurs or other straightforward causalities. However, associations for sure act as ―bridges‖ between government and business circles.1517 One other factor is that ―local state officials are first and foremost political, not economic, actors‖ and thus, although participating actively in local economies, ―they do so in highly politicized ways‖.1518 As there is no such thing as a free lunch, there is also a negative side to the co-operation between local authorities and private entrepreneurs. Local cadres discriminate against entrepreneurs in putting pressure on them to obtain shares of their firms and to partake in their profits as ―backstage bosses‖.1519 In return, officials would provide information on supplies and resources or enable access to state bank loans. Close Dickson, 2003, p. 75, 81.
Alpermann, 2006, p. 49.
Meyer-Clement, 2004, p. 75.
Holbig, 2002, p. 43, 45. Another ―delegation of socio-economic responsibilities to the ‗new rich‘ is that they are supposed ―to repay society out of the wealth they have accumulated‖, p.45.
Alpermann, 2006, p. 49, Unger, 1996.
Whiting, 2001, p. 12.
Liu, 1992b, p. 305f.
connections to local administration not only facilitated to start-up businesses, they also caused the entrepreneurs to anticipate the influence of the local government on their enterprise and structure the production in a way so to secure profits to their families and networks and also to minimize the impact of politicians on business. Depending on their length of service, local cadres are more inclined to support the private sector and hence, economic growth, or more interested in extracting as much as possible without considering the long-term consequences for the private sector.1520 Only well-established Guanxi to an official will help entrepreneurs to influence ―what are considered costs and what are considered profits‖.1521 Ole Bruun notes that ―the utterly impenetrable principles for tax collection, if principled at all, were a constant source of conflict. There were no consistent methods for assessing turnover and computing taxes, and the tax bureau‘s statement that it was without the ―scientific means‖ to determine turnover in many cases appeared to be an excuse for maintaining serious discrimination‖.1522 If an entrepreneur refuses to cooperate, she is at risk to lose the support of the local authorities. A way to solve that problem is to register as collective business but in reality running it as privately-owned firm or as socalled ‗red hat enterprise‘ which is often tolerated by local officials (see also chapter 7). In these companies, managers are not always managers but owners and thus ownership structures can be often more blurred than the differentiation between state, collective and private sector suggests. ―Indeed, ownership and management are probably less important signifiers of activity than entrepreneurship‖.1523 Regardless of the type of registration, the risk of ―ad-hoc taxation‖ or confiscation of profits and physical assets by local cadres remains. As a result, it encouraged entrepreneurs to diversify their product portfolio and invest in multiply sectors.1524 Private entrepreneurs had no control over the amount and level of ―management fees‖ and hardly any possibility to protest against them.1525 This and other not ex ante anticipated changes in the political climate favors flexibility in production. Already during the mid-1980s, entrepreneurs reacted in creating a whole set of different production options, or producing in diverse industrial sectors or different localities. Also, they do not let their company grow over a certain size – they rather set up a new business that produces different products or in a differLevi, 1988, p. 32, as quoted in Whiting, 2001, p. 110 fn 76.