The motives of the players
At the end of 1978, decision-makers in Beijing agreed to turn away from the Maoist mode of development â which had dictated relative autarky, big pushes for growth spurred by disruptive âmass movementsâ, and anti-materialism. This late 1970s choice entailed casting economic modernisation as the key engine of policy, and a series of retreats then unravelled, tilting policy towards the realm of non-state activity with a result that over stages allowed for more and more market activity. The most critical reason for this undoing was the need at all levels for funds, along with a belief that providing individual incentives â and thereby stirring up peopleâs initiative to find ways to earn their own income â would generate wealth at the micro-level while developing the nation.
Through the 1980s, the leadership recognised the utility of granting small groups (in agriculture), and then individual entrepreneurs (in commerce), some margin for money making. However, as the years passed, early qualifications on this activity became fewer and fewer. And as actors grabbed at opportunities to go a bit further than official regulations decreed, by the 1990s (Solinger 1984b, 1985), small-scale openness gradually spun away from control by the authorities (Lu 2013).
Still, even if officialdom seemed to be giving in to something not yet decreed, the impetus for the venture was not undermined. For the pushes forward that followed from below achieved what the policymakers truly intended: activating the economy, spurring productivity and making China and (most of) its people wealthier, all on the understanding that such inducement to profit would, with time, spell growth for the country at large. What happened, however, was that the authorisation to âget richâ for some soon became a fetish for funds, a craving for capital and a stimulation to competition that made the socialist-era rivalry between the state and the private economy pale into pettiness (Solinger 1984a: Chapters 1 and 4). Indeed, to simplify somewhat, one could claim that for every actor in the new marketplace, the impulse to join in came chiefly from a hunger for cash.
This phenomenon â this choice to go for wealth â appears in every scholarly treatment in the English-language literature on the moves towards marketisation and privatisation. For instance, already in the 1980s, the fees and any profits that accrued to local cadres from entrepreneursâ dealings meant income for official coffers, in addition to providing cash that those in charge could skim off for themselves (Wank 1999: 68). By the time of the 1989 Tiananmen upheaval, a prominent popular grievance was the raging corruption of the political elite at all strata, made possible by the copious flow of cash. Later, companies, created in the hordes in the early 1990s, enabled their official owners to rake in wealth as they converted public assets into money of their own (Li 2013: 2).
In 1997, when the Fifteenth Party Congress called for downsizing and âletting goâ of the smaller and medium-sized, state-owned firms, the purpose was to absolve the government from having to go on subsidising losers, thereby saving it investment funds (Batson 2014: 7). For as early as the mid-1990s, when somewhere over half of the smaller enterprises had already been released to private owners, as much as 90% of the loss-making concerns were small ones, and some 60% of these were operating at a loss (Cao, Qian and Weingast 1999: 105, 107). So official attitudes to them were often âgood riddance!â
District and subdistrict levels of government, suffering from funding shortage, were desperate for any revenue that could be found beyond their budgets and so created new nonstate business entities, with the express goal of gaining income (Duckett 1998: 42, 44â45). Also, public institutions, such as hospitals or universities (shiye danwei), were ordered to find their own sources of financing, which they did by retailing their services through newly constructed commercialised auxiliary units (Lin and Zhang 2011: 208). For all such entities in what had become a competitive marketplace, debts, pension obligations and taxes that were higher than earlier, and fluctuating prices drove an urge for cash acquisition outside state channels (Duckett 1998: 137, 145â149).
At the urban level, local authorities, evaluated on the basis of how much growth and revenue they could generate, figured they could enhance their own chances for promotion should they hand over their less profitable state firms to these enterprisesâ managers; in addition, managers bought off local officials to gain ownership (Zeng and Tsai 2011: 47, 68; Oi 2005: 116; Cao, Qian and Weingast 1999: 121; Ding 1999: 39; Nee and Opper 2012: 229; Putterman 1995: 1052; Whiting 2001: 173; Young 1995: 103â104).
Central-level politicians and their families â all the way up to the kin of a premier, have benefited handsomely from their access to secret shares in shareholding companies formed to draw in new sources of funding. In some cases the figures reveal enormous stakes, even as high as $2 to $3 billion dollars (Barboza 2012, 2013; Barboza and LaFraniere 2012; Barboza, Silver-Greenberg and Protess 2013). As Xueliang Ding explained nearly two decades ago, officials of senior rank found it easy to get a hold of low-cost shares in the form of dividends and profits (Ding 1999: 36). In the extreme cases, politicians âhollowed outâ public property, fostering a âcompetitive private sectorâ with its âroots in state agenciesâ (Walder and Oi 1999: 17, 19). Leading officials becoming managers was commonplace (Duckett 1998: 136) by taking state-owned enterprises as their âtoolsâ for making money (Demick 2013).
Those outside the state who managed to build up their own private wealth were often sought out by the Party. In the 1980s, but more so after Party General Secretary Jiang Zemin welcomed private entrepreneurs as Party members and representatives of the âadvanced productive forcesâ in 2001, they were co-opted into political office at all levels of the polity (Gold 1991: 93; Dickson 2003, 2008; Chen and Dickson 2010; McGregor 2010: Chapter 2). Similarly, what are now private ventures that once belonged to the state have slipped into managersâ hands and become their own possessions, whether via buyouts, shareholding, diversion, stealing, stripping or startups (Ding 1999, 2000).
For the regime as a whole, in the late 1970s, urban private business seemed to promise policymakers solutions to the serious scarcity of urban jobs and an answer to the long-silenced demands of the public for daily use commodities and services. But most importantly, privatisation augured an increase in the tax take that the state could garner, vital to a regime bent on modernisation and economic revival (Gold 1990: 158, 162). As early as the mid-1980s firms short on cash were permitted to convert themselves to shareholding entities for the express purpose of getting access to outside funding, a motive the state sustained for years to come (Ma 1998: 385; Oi 2011: 15).
Similarly, when stock markets were expanded in and after the 1997 Party Congress, again the intention was to draw in capital that could relieve the state firmsâ financial problems (Ma 2008: 202); in putting factoriesâ and other firmsâ shares up for sale, a major reason was to raise funds for a state-run social securi...
