Corruption Driven Reform: China's Economic Reforms in the Post-Mao Period
This paper has examined three possible explanations for the success of Chinese economic reform in light of the local governments’ supposed resistance. It has refuted two of the three hypotheses, and, with the last hypothesis standing, explored the mechanisms through which it could have been realized. Finally, the paper has provided a preliminary look into available empirical evidence to identify possible evidences that are consistent with this hypothesis.
As it turns out, the preponderance of evidence lies in favor of the corruption motives hypothesis, as opposed to the null “local resistance did not matter” hypothesis and the alternate “political motives” hypothesis. The null hypothesis was rejected on the grounds that the competition between reformers and conservatives within the CCP was a pitched battle, in which local officials had both a significant role to play and powerful means to let its opinions be heard. The alternate hypothesis was also eventually rejected. In this case, it was because (1) local officials’ political advancement had no direct connection to economic successes, (2) picking-the-winner behaviors could explain neither the provinces’ preference for the reformist camp nor their overwhelming enthusiasm.
What remains at the end is therefore the corruption motives hypothesis. Among the others, this hypothesis alone explains the success of the reforms in overcoming local resistance, as well as the “double paradox” of rapid growth and rising corruption in China, by suggesting that corruption facilitated the initiation and created vested interests in the economic reforms from within the localities. What’s more, available evidence seems to be consistent with this hypothesis. Even if the empirical support is indirect, it demonstrates a rather compelling case for the main hypothesis, as opposed to the other two alternatives, which the evidence rejects.
The finding that corruption has such an important role to play in the Chinese economic reform is first and foremost a direct hit against the dominant contempt for political corruption. While the literature has viewed corruption as universally harmful, this finding suggests that there is at least one way in which corruption can play a positive, if not crucial role in an economy’s progress. This challenge is made even more remarkable by the fact that it leaves all the established findings on the relationship between corruption and economic inefficiency or societal injustice untouched. In other words, the paper’s finding argues that corruption can be useful in spite of all its shortcomings and harms.
Another impact of this research’s findings can be found in the literature on the Chinese economic reform. The research identifies local officials as the key determinant of reforms. These stakeholders started off with a negative disposition toward reforms, and had to be won over if the reform was to go forward. In a sense, this research extends the local developmentalism literature (Oi, 1995; Shirk, 1993). Similar to these earlier works, it attributes the dynamism of China’s reforms to a bottom-up process, even when the official push toward reforms came top-down from the center. In another sense, it actually provides a more nuanced view of the reform’s political logic. Whereas previous literature blackboxes the provinces as autonomous agents and views them as a coherent unit vis-à-vis the center, this paper shifts the level of analysis to the individual, and repaints the picture in deeply personal colors.
Finally, the research findings change some of our perception of Chinese politics, while at the same time reinforcing several others. In fact, it can be seen as a mediation of some conflicting perceptions. While the research makes a case for local, informal politics as opposed to the structural or hierarchical models, it nonetheless relies on several analyses of Chinese institutions e.g. the veto power of the Central Committee. As the study puts these two puzzle pieces together, it thus tacitly advances the implication that informal politics are ultimately based on a set of institutionalized rule-of-the-game rather than having an independent origin.
Generalizability and Looking Beyond China
Considering the results of this inquiry pose an important question: to what extent can these findings be generalized to beyond the China case? Given uniqueness of the Chinese reforms, it is obvious that the same conclusion can hardly be replicated in any other country. Nonetheless, the reforms also featured several common political characteristics, such as a state of local-central incongruity and/or entrenched elite interests in the status quo. These characteristics have plenty of foreign equivalents, which hold promising prospects for future comparative studies.
To examine the generalizability of this current research, future studies should best not jump ahead into radically different contexts. Compare China to, say, the developed Scandinavian social democracies, would be too much of a stretch. Rather, realistic efforts should focus more on countries that share political resemblance (e.g. Russia – see Sun, 1999), regional proximity (e.g. other East Asian emerging economies), or physical size (e.g. India), etc.
Among these possibilities, the most prominent one is perhaps China’s next door neighbor Vietnam. In fact, very few countries – if any at all – can share commonalities with the China’s case to such an extent. Politically, both countries were (and still are) governed by their respective Communist Parties, whose resilience has kept them alive and well-off even after the fall of the Soviet bloc. Economically, the growth-and-corruption patterns of the two countries, both pre- and post-reform, can also be considered parallel.7 Most importantly, however, is the fact that Vietnam also experienced its own marketization reform in 1986. Termed Doi Moi (Renovation), the reforms entailed many aspects identical to the Chinese forerunner, most notably the “net contract system” (Khoan gon), fiscal decentralization policies, and the opening of Vietnam’s economy to foreign trade and investment (Vo, 1990).
Future researches can definitely take advantage of these qualitative similarities: they can use Vietnam as a starting point for any further generalization and make inferences on the determinants of corruption’s effect based on existing comparisons of the two regimes’ economics, politics, and even culture. Would corruption still be necessary when economic necessities had already created intense pressure to reform? How did the Vietnamese Communist Party’s greater internal stability (Kerkvliet, Chan, & Unger, 1998) and higher accountability (Abrami, Malesky, & Zheng, 2010) affect the channels for corruption motives? Questions like these, if properly explored, will provide great insights into the new research avenues that this research paper has opened up. As soon as they do, the literature will be able to move forward, toward a better understanding of not only China’s, but also our modern world’s phenomenon of corruption.
Abrami, R. M., Malesky, E. J., & Zheng, Y. (2010). Vietnam Through Chinese Eyes: Divergent Accountability in Single-Party Regimes.
Campos, N. F., & Dimova, R. (2010, December 24). Corruption does sand the wheels of growth. Retrieved from Centre for Economic Policy Research Portal: http://www.voxeu.org/article/does-corruption-sand-or-grease-wheels-economic-growth
Central Discipline Inspection Commission. (1987 ). Circular on rectifying discipline. In M. o. Personnel (Ed.), Selections of documents on personnel work (Vol. 10, pp. 124-27). Beijing: Laodong Renshi Chubanshe.
Chang, P. H. (1978). Power and Policy in China. University Park: Pennsylvania State University Press.
Cheung, P. T., Chung, J. H., & Lin, P. T. (Eds.). (1998). Provincial Strategies of Economic Reform in Post-Mao China: Leadership, Politics, and Implementation. New York: M.E. Sharpe.
Department of Organization. (1980 ). Circular on suggestions on provisionally implementing a system of cadre evaluation. In B. o. Personnel (Ed.), Selections of documents of personnel work (Vol. 1, pp. 12-15). Beijing: Laodong Renshi Chubanshe.
Department of Organization. (1986 ). Circular on changes in the method of reporting to the Party Center for the record on cadres. In M. o. Personnel (Ed.), Selections of documents on personnel work (pp. 322-25). Beijing: Laodong Renshi Chubanshe.
Derngerger, R. F. (1986). Economic Policy and Performance. In U. C. Committee, China's Economy Looks Toward the Year 2000. Washington, D.C: Government Printing Office.
Dikötter, F. (2010). Mao's Great Famine: The History of China's Most Devastating Catastrophe, 1958-62. Bloomsbury Publishing.
Friedrich, C. J. (2002). Corruption Concepts in Historical Perspective. In A. J. Heidenheimer, & M. Johnston (Eds.), Political Corruption: Concepts and Contexts (3rd edition ed., pp. 15-24). New Brunswik & London: Transaction Publishers.
Gallagher, M. E. (2004). "Time is Money, Efficiency is Life": The Transformation of Labor Relations in China. Studies in Comparative International Development, 39 (2), 11-44.
Goldstein, A. (1990). Explaining Politics in the People's Republic of China: The Structural Alternative. Comparative Politics, 22 (3), 301-322.
Gong, T. (1994). The Politics of Corruption in Contemporary China: An Analysis of Policy Outcomes. Westport, CT: Praeger.
Heidenheimer, A. J., & Johnston, M. (Eds.). (2002). Political Corruption: Concepts and Contexts (3rd edition ed.). New Brunswick & London: Transaction Publishers.
Hirschman, A. O. (1970). Exit, voice, and loyalty: Responses to decline in firms, organizations, and states. Cambridge: Harvard University Press.
Hua Guofeng. (1977, February 7). Study the Documents Well and Grasp the Key Link. People's Daily.
Huang, Y. (1996). Inflation and investment controls in China: The political economy of central-local relations during the reform era. Cambridge, New York & Melbourne: Cambridge University Press.
Huntington, S. P. (1968). Political order in changing societies. New Haven: Yale University Press.
Huntington, S. P. (2002). Modernization and Corruption. In A. J. Heidenheimer, & M. Johnston (Eds.), Political Corruption: Concepts and Contexts (3rd edition ed., pp. 15-24). New Brunswik & London: Transaction Publishers.
Hurst, W. (2004). Understanding Contentious Collective Action by Chinese Laid-Off Workers: The Importance of Regional Political Economy. Comparative International Development, 39 (2), 94-120.
Jae, H. C. (1998). Shandong's Strategies of Reform in Foreign Economic Relations. In P. T. Cheung, J. H. Chung, & P. T. Lin (Eds.), Provincial Strategies of Economic Reform in Post-Mao China: Leadership, Politics, and Implementation (pp. 253-301). New York: M.E. Sharpe.
Johnston, M. (1997). The vices--and virtues--of corruption. Current History, 96 (611), 270-273. Retrieved Novenber 24, 2012 from United Nations Public Administration Network.
Kerkvliet, B., Chan, A., & Unger, J. (1998). Comparing the Chinese and Vietnamese Reforms: An Introduction. The China Journal,, 40 (Special Issue: Transforming Asian Socialism. China and Vietnam Compared), 1-7.
Leff, N. (1964). Economic development through bureaucratic corruption. American Behavioral Scientist, 8, 8-14.
Leys, C. (1989). What is the problem about corruption? In A. Heidenheimer, M. Johnston, & V. LeVine (Eds.), Political Corruption: A Handbook (pp. 51-66). Oxford: Transaction Books.
Li, L. C. (1998). Central-Provincial Relations: Beyond Compliance Analysis. In J. Cheng (Ed.), China Review 1998 (pp. 157-186). Hong Kong: Chinese University Press.
Library of Congress – Federal Research Division. (2005). Country Profile: Vietnam.
Lou, J. (1992). On the Division of Economic Power between Central and Local Levels. Chinese Economic Studies, 25, 25-34.
Mulvenon, J. (1998). Military corruption in China. Problems of Post-Communism, 45 (2).
Nathan, A. J. (1973). A Factionalism Model for CCP Politics. The China Quarterly (53), 34-66.
New York Times. (October 25, 2012). Billions in Hidden Riches for Family of Chinese Leader.
Nye, J. S. (2002). Corruption and Political Development: A Cost-Benefit Analysis. In A. J. Heidenheimer, & M. Johnston (Eds.), Political Corruption: Concepts and Contexts (3rd edition ed., pp. 15-24). New Brunswik & London: Transaction Publishers.
Oi, J. C. (1995). The Role of the Local State in China's Transitional Economy. The China Quarterly (144), 1132-1149.
Oksenberg, M. (1971). Policy Making under Mao. In J. M. Lindberg (Ed.), China: Management of a Revolutionary Societ (pp. 79-115). Seattle: University of Washington Press.
OpenSecrets. (2012). Historical Elections: Top Overall Donors. Retrieved November 24, 2012 from http://www.opensecrets.org/overview/topcontribs.php?Bkdn=DemRep&Cycle=2012#
Pye, L. (1980). The Dynamics of Factions and Consensus in Chinese Politics: A Model and Some Propositions. Santa Monica: RAND Corporation.
Shirk, S. (1993). The Political Logic of Economic Reform in China. Berkeley: University of California Press.
Statistical Yearbook. (1990).
Sun, Y. (1999). Reform, State, and Corruption: Is Corruption Less Destructive in China than in Russia? Comparative Politics, 32 (1), 1-20.
Sun, Y. (2004). Corruption and Market in Contemporary China. Ithaca: Cornell University Press.
Teiwes, F. C., & Sun, W. (2011). Chinese New Economic Policy under Hua Guofeng: Party Consensus and Party Myths. The China Journal (66), 1-23.
Ting, W. (1980). Chairman Hua: Leader of the Chinese Communists. Montreal: McGill-Queen's University Press.
Tong, J. (1989). Fiscal Reform, Elite Turnover and Central-Provincial Relations in Post-Mao China. The Australian Journal of Chinese Affairs (22), 1-28.
Transparency International. (2011). Corruption Perception Index.
Tullock, G. (1987). Autocracy. In G. Radnitzky, & P. Bernholz (Eds.), Economic Imperialism: The Economic Method Applied Outside the Field of Economics, (pp. 365-82). New York: Paragon House Publishers.
van Klaveren, J. (2002). Corruption as a Historical Phenomenon. In A. J. Heidenheimer, & M. Johnston (Eds.), Political Corruption: Concepts and Contexts (pp. 83-94). New Brunswick: Transaction Publishers.
Vo, N. T. (1990). Vietnam's Economic Policy Since 1975. Singapore: Institute of Southeast Asian Studies.
Vogel, E. F. (2011). Deng Xiaoping and the Transformation of China. Cambridge & London: Belknap Press of Harvard University Press.
Wall Street Journal. (November 26, 2011). Children of the Revolution.
Wang, L. (1989). Local Governments in Behavioral Contradictions: Theoretical Confusions and Real Choices. Economic System Reform (2), 64-68.
Wedeman, A. (2012). Double Paradox: Rapid Growth and Rising Corruption in China. Ithaca & London: Cornell University Press.
World Bank. (2011). Corruption, Poverty, and Inequality. Retrieved November 06, 2012, from http://go.worldbank.org/6UZ4XEP700
Xiang, L. (April 20, 2012). Bo Xilai probe shows up China's outdated system of government. South China Morning Post.
Xizhe, P. (1987). Demographic Consequences of the Great Leap Forward in China's Provinces. Population and Development Review, 13 (4), 648-649.
Yang, D. Y.-R., & Wang, H.-K. (2008). Dilemmas of Local Governance under the Development Zone Fever in China: A Case Study of the Suzhou Region. Urban Studies, 45 (5&6), 1037–1054.
Zhang, J. (2011). Interjurisdictional Competition for FDI: The Case of China's 'Development Zone Fever'. Regional Science and Urban Economics, 41 (2), 145-59.
1.) A mid-estimate. Scholars differ widely on the exact number of casualties, with estimates ranging from around 20 million (Xizhe, 1987), to even above 42 million (Dikötter, 2010)
2.) This has yet to include municipal-level military officials, which Shirk places in another category. Arguably, local military leaders may display some pro-region tendencies like government officials did, but they might also have different interests and agenda.
3.) For an account of Chinese style of federalism, see Huang (1996). For a “factionalist” perspective, see Nathan (1973)or Pye (1980). For a “structuralist” explanation, see Goldstein (1990)
4.) For a breakdown of the top donors’ contribution in the US’s election campaigns since 2000, see OpenSecrets ( 2012)
5.) This region was concentrated with large-scale heavy industry, and according to Hurst, “has never been the site of any appreciable commercial centers (Hurst, 2004). As a result, it stood to gain little from the economic reform.
6.) This is important, considering that there are many other non-material seeking types of activities that were classified as corruption in China, such as moral decadence, misappropriation, privilege seeking, or negligence (Sun, 2004)
7.) Vietnam has a CPI ranking of 112th (Corruption Perception Index, 2011) and its growth rate, in comparison to China’s 8.75%, was an average of 7% by the late 1990s (Federal Research Division, 2005)