Changes in Economy, Central-Local Relations, and the Emergence of Civil Society in China Hairong Lai Deputy Director and Senior Fellow China Center for Comparative Politics and Economics CCTB, CC of CCP

Overview: 30 years of moving away from totalitarianism Changed and Changing: Smaller State and Bigger Society Power distribution within the shrinking state power: decentralization or devolution Emerging Check and Balance Institutionalization of peaceful power transfer Reconfiguration of the Ideology: goals, perceptions, strategies, instruments Changed citizenry

Changes in Economy: Marketization and Privatization Absolute withdrawal of the state in intervening the economy: Freeing pricing: mid-1980s (dual track pricing), mid-1990s (converging to the market) Canceling production and marketing plans for SOEs Privatizing SOEs and TVEs: 1992 on, Upward spreading (small to large scale, from county to provincial levels, and partial privatization of centrally subordinated: listed) Relative withdrawal: Mushrooming of Privately Owned Enterprises, Foreign Direct Investments, Joint Ventures

Accelerated Privatization: changing ownership structure of GDP State sectorPrivate sector 1978 (Yan, 2005)99.1%0.9% 1997 (Yan, 2005)75.8%24.2% 2006 (Li, 2007)35%65% 2010 (prediction)20%80%

Remaining State-Owned Industries Oil, Railway, Aviation, Telecommunication, Electricity (except for hydropower in a few provinces) Banking (emerging competition) : little accessibility to small- medium- scale privately owned enterprises Education, Health Care (emerging competition), Traditional Media (weakly emerging competition)

Increasing Liberty in the Society No longer controlled by the state: migration, education (study abroad), employment, housing, transportation, and consumptions … Emergence and expansion of private sphere: diversified values, life style, moral codes.

The Chronologically Changing Battle Fields for the Interaction between the State and the Society YearsFields Early 1980sCloth, Hair-style Late 1980sPop music, Pop arts, Literature 1980s and 1990sSexuality

Emerging Civil Society Civil society organizations: 3 millions (> 300,000 registered and > 2.6 millions unregistered) (Yu Keping, 2007) Two examples: A Village Education Charity Fund, A Car Club for Tourism The citizen: resourceful, independent, and Internet as a communication platform ( ) The State: struggling with cooperative/subversive perception Still very weak, but developing fast Unexpected show-up: 2008 Sichuan earth quake alleviation efforts

Political System: simplified Five levels: Center, Provinces (34-3), Prefectures (330), Counties (2,600), and Townships (38,000) Loosely connected to the party-state: villages (620,000) Unitary system directed from top down

Decentralization within the Shrunk State Power Fiscal federalism: from bargaining to institutionalization (1994) Economic activities administration: registration, investment projects Social life administration: social security, health care, education, passport granting Decision making: city planning, public utilities, infrastructure

Increasing Role of Localities in Promoting Reform Initiatives taken by localities without central plans: 1)privatization (1992) 2)semi-competitive election (mid-1990s) Pattern of reform in 1980s (e.g. Special Economic Zones): centrally driven Pattern of reform since 1990s: central initiatives + local initiatives Motivation for local initiatives: localitys lack of resources to hold responsibility; competition among localities (private sector promotion, FDI attraction).

Path Dependence of Relatively Decentralized Command Economy: Maoist Version of Stalinization : centralization (Great Leap Forward): decentralization : centralization (Cultural Revolution): decentralization (irreversible) : continued decentralization 1994 on: partial recentralization of fiscal revenues, expenditure responsibility and accompanying decision-making power further decentralized

Institutionalization of Power Holding and Transfer Before 1990s: no terms, no limitations After 1997: term of office 5 years; Limited terms 2 Peaceful transfer of highest power: 1) 1997 (unprecedented in socialist China), 2) 2002 (unprecedented in 2000 years of China), 3) 2007 (consolidation) Real Existing socialist states (party-states): either died at office (life-long) or demoted through harsh power struggle;

The Magnitude of Peaceful Power Transfer (generational) since 1997 Standing Committee of the Politburo (7 or 9 members) Politburo (20-25 members) Central Committee (around 190 members) Alternate Members of the C.C. (around 130) 19972/750%n.a /7(including general secretary) 70%~50% 20074/940%~50% 2012 (predictable) 2/9 (including general secretary) ~50%

Conditions for the Institutionalization of Power Holding and Transfer Elite: lessons from Cultural Revolution and early disasters Critical Actor: Deng Xiaoping Societal Condition: 1)separation of politics and economy, 2)separation of state and society Power change and the society: limited influence to each other Elite: no need to invoke and mobilize the society. Society: little interest to engage the power transfer.

Challenges in China: mixture of conflicting elements Inconsistency among norms Inconsistency between norms and actual life Inconsistency among levels, regions, social stratus, different elite … Biggest Challenge: managing the increasing participation in political process

Looking Ahead No change was linear and will never be Changing values among different generations Changing state power and structure Strengthening civil society Deeper integration into the world community Time Matters

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