Political Economy of China. Topic 2

Transcription

1 Political Economy of China Topic 2

2 Goals of Topic 2 Understanding the inner workings of autocracies. An introductory overview of the Chinese economy and political system. An application of our study of autocracy and informal/relational institutions (guanxi). Politico-economic challenges. CCP Factions. Conclusions Notes: Sources are Baron ch. 16; the CIA s World Factbook; Francois, Trebbi, Xiao (2017). Pardon my Mandarin. 2

3 Why China? The world's fourth largest country in terms of area (after Russia, Canada, and US) The country with the largest population in the world: 1,338,612,968 (July 2009 est.) The country has embarked since 1978 on an economic path of reform ( open door ). Real GDP Growth rates have averaged 9% per year since This implies the economy has roughly doubled every ten years. Communist state [one of the last five Communist states with Vietnam, North Korea, Laos, and Cuba] 3

4 People s Republic of China Source: CIA World Factbook 4

5 History Unfortunately we do not have time for an adequate treatment. Overview: The pre-republican era (until the end of 19 th century /the beginning of 20th century) The Republican era ( ) The Communist era ( ) The Reform era (1976-onwards) 5

6 60 Seconds History of China Political turmoil and Feudal infighting until 221 BC (unification under the Qin or Ch'in Dynasty). Confucius ( BC) writes in that period. The Qin Dynasty plants the seeds of a powerful bureaucracy. However regional aristocracies play an important role for at least the following millennium. Pre-Ming Dynasties generally economically successful and open to trade. Florid pre-colonial trade with Africa by the Chinese. The peak of Chinese economic wealth paradoxically around the 12 th -13 th century while Europe was undergoing some of its darkest hours (Middle age). Starting with Ming Dynasty ( ) progressive insulation and economic decadence. Intensification of military treats. 6

7 60 Seconds History of China Source: Ian Bremmer, Eurasia Group 7

8 60 Seconds History of China Imperial China collapses under the call for modernization. In 1905 the Mandarin centuries old examination system is abolished. 1 January 1912 (Qing or Ch'ing Dynasty replaced by the Republic of China); Guomindang (GMD) under Chiang Kai-shek and the Chinese Communist Party (CCP) contend political authority. In 1934 Mao Zedong s Long March. A fragmented China is invaded by Japanese troops in Occupied territory until the end of WWII. 1 October 1949: People's Republic of China established after 3 years of civil war between GMD and CCP. Mao s economic policy pushes towards heavy industry (same as USSR under Stalin) with mixed success. 8

9 60 Seconds History of China Great Leap Forward Agricultural cooperatives increasingly unproductive. Great Famine in Million people die. See The Institutional Causes of Famine In China by Qian, Meng and Yared (ReStud 2015). 9

10 60 Seconds History of China 10

11 60 Seconds History of China Qian, Meng and Yared (2015) show that were the high productivity areas where starvation happened. They show that the Great Famine was due to the inflexible government procurement policy. Paradoxically the country had resources as a whole to feed itself. But the centralized procurement policy hit so hard the high-productivity provinces with dues to the central government during a low-yield crop period that it left those provinces starving. Great famine in 1962 induces social unrest & several crackdowns (Great Cultural Revolution in 1966). Key role of the Army in sedating internal uprisings. Deng Xiaoping assumes the leadership after Mao s death in Open Door policy starts in 1978, the road towards economic liberalizations begins (Four Modernizations: Agriculture, Defense, Science, & Technology). 11

12 Economy CHINA GDP - per capita (PPP): $6,000 (2008 est.) GDP (official exchange rate): $4.222 trillion (2008 est.) GDP - composition by sector: agriculture: 10.6% industry: 49.2% services: 40.2% (2008 est.) Labor force - by occupation: agriculture: 43% industry: 25% services: 32% (2006 est.) CANADA GDP - per capita (PPP): $39,300 (2008 est.) GDP (official exchange rate): $1.564 trillion (2008 est.) GDP - composition by sector: agriculture: 2% industry: 28.4% services: 69.6% (2008 est.) Labor force - by occupation: agriculture: 2%, manufacturing: 13%, construction: 6%, services: 76%, other: 3% (2006) USA GDP - per capita (PPP): $47,000 (2008 est.) GDP (official exchange rate): $14.33 trillion (2008 est.) GDP - composition by sector: agriculture: 1.2% industry: 19.6% services: 79.2% (2008 est.) Labor force - by occupation: agriculture: 0.6%, manufacturing: 22.6%, managerial, technical 35.5%, sales and office 24.8%, other services 16.5% 12

13 Executive Branch Hybrid regime. Leninist architecture. Chief of state: President XI Jinping (since 14 March 2013); Vice President LI Yuanchao (since 14 March 2013) Head of government: Premier LI Keqiang (since 16 March 2013); Cabinet is called the State Council and it s appointed by National People's Congress (NPC). About 100 members. 13

14 Executive Branch The president is also the chairman of the Party and the head of the Chinese army (People s Liberation Army). Elections: President and vice president elected by National People's Congress for a five-year term (eligible for a second term); Premier nominated by president, confirmed by National People's Congress; elections last held in March 2013 (next to be held in mid- March 2018). Note: President XI elected by NPC with 2952 votes out of 2987 total seats (98.8%). 14

15 Legislative Branch No direct elections. Unicameral National People's Congress or Quanguo Renmin Daibiao Dahui. 2,987 seats. Highest legislative body. Representation is geographic and corporatist. Members elected by municipal, regional, and provincial people's congresses, and People's Liberation Army to serve five-year terms. Local People s Congresses elections were once considered mere formalities. They have become less so. 15

16 Legislative Branch Parties in Legislative: Chinese Communist Party or CCP; eight registered small parties controlled by CCP. Non-CCP delegates are about 20-30% of total 3,000 delegates. Traditionally a weak organ, the progressive decoupling from CCP has fostered more political weight to the NPC. Notice that this trend follows local politics trends where the decoupling has been traditionally stronger (with party member representing central interests and non-party officials representing local interests). 16

17 CCP The role of the communist party is enshrined in the Constitution. Primary source of political power in China. Party hierarchy mirrors state hierarchy. The People s Liberation Army is sworn to defend the party, not the state. Represented in virtual all social and economic activities. Organizes labor (other labor unions are illegal). Pervades all ministries and commissions. Only 6% of the population was member of the CCP in million members in th Party Congress: held in October

18 CCP Organized in a National Party Congress which meets every 5 years and a Central Committee (198 members). The central party and local party members are represented together with members of the military. It has veto authority. (e.g. Local organizations acquired substantial weight through careful use of the veto threat in the Central Committee.) The ordinary administration is exercised by majority rule by the Politburo (25 people addressing ordinary administration issues) and the Standing Committee of the Politburo (7 people: the agenda setters). Numerous factions within the party. Francois, Trebbi & Xiao (2017). Major policy areas (kous) define the factions. Why? Because the patronage attached to the policy area is pertinence of that group. Important kou ( entrance ) include the Military Affairs and the Party Affairs. 18

19 Government of the People s Republic of China President Premier State Council (~50) Standing Committee of NPC (~150) National People s Congress NPC (~3000) 19 Communist Party of China General Secretary of CCP Politburo (~25) Central Committee (~200 members) National Party Congress (~2200)

20 CCP Process of approval in the Central Committee is by majority vote and several veto players can obstruct policy. This implies that many different veto players can extract surplus along the process of approval of important legislation. Of course this fosters particularistic interests and also fosters party unity through patronage to obtain access to rents. E.g. It is at the Central Committee level that Deng s reform had to lean in favor of local and provincial governments. He had to avoid vetoes. The party has also traditionally controlled the Judicial branch. No tradition of independent judiciary in China. This is changing though. 20

21 Bureaucracy The Administrative branch of government is usually understudied. Extremely important in China where by the time of the Tang Dynasty (AD ) imperial bureaucracy played a fundamental political role. Strong mechanism of social stability. Linked to the CCP since First bureaucratic wave were veteran revolutionaries from Mao s era. Since 1980 s several reforms introduced mandatory retirement of bureaucrats, the introduction of several new waves of more qualified bureaucrats. By 1988, 90% of bureaucrats had been appointed after 1982 (Li, 1998). 60% had college degree in The old SOE s have been partially replaced with semi-private enterprises from which bureaucrats profit. Finally, the revolving door operates in China as well. Using State connections for private profit upon leaving office s boom of xiahai (joining private businesses). This deliberately created a constituency for economic liberalization within the elite. 21

22 SOEs State Owned Enterprises. For a long time the SOE was the most prominent type of company in mainland China (in terms of employment for the country until the 1990 s). In 1997 SOEs employment was of over 112 million people (65% of the urban labor force). SOEs have the typically socialist dual role of employer and welfare provider. Also the main provider of social security, health care, housing, etc. through the danwei (work unit) system. SOEs lost money, overinvested in capacity, while absorbing much of the country s available capital. Banks were also hooked to them through political (and underperforming) loans. 22

23 Provincial Level Provincial governors and National ministers are equivalent in rank and appointed by the Politburo. Interesting form of checks and balances between Beijing and the rest of the country. One indication of the rank equivalence between ministries and provinces is the fact that ministers and governors sometimes exchange positions. Jiang Zemin, for example, was the Minister of Electronics before he became the mayor of Shanghai, which was not considered a demotion. (Huang, 2002, Pol. Studies) 23

24 Political Promotions and Economic Performance at Provincial Level Political turnover and economic performance: the incentive role of personnel control in China (Li & Li-An, JPubE 2005). Employing the turnover data of top provincial leaders in China between 1979 and 1995, the authors find that the likelihood of promotion of provincial leaders increases with their economic performance, while the likelihood of termination decreases with their economic performance. Very strong evidence this performance system continues 1995 to present. 24

25 Li and Li-An, JPubE

26 Conclusions on Topic 2 Introduction to the political economy of China. Politico-economic issues and reform. Factional politics in the CCP. Democratization? What are the chances? 26