Lynette H. Ong

State-Led Urbanization in China: Skyscrapers, Land Revenue, and 'Concentrated Villages'

This article examines the rationale behind municipal and local governments’ pursuance of urbanization, and the political and socio-economic implications of the policy to move villagers from their farmland into apartment blocks in high-density resettlement areas, or “concentrated villages.” It provides evidence of an increasing reliance by municipal and local governments on land revenues and the financing of urban infrastructure by the governments’ land-leasing income. Following their relocation to apartment blocks, villagers complain that their incomes fall but their expenditures rise.Moreover, although they cede rights to the use of their farmland to the government, they are not given access to the state-provided social welfare to which urban residents are entitled. The paltry compensation which they receive for their land is insufficient to sustain them. Displaced or landless peasants are emerging as a distinctly disadvantaged societal group, deprived of the long-term security of either farmland or social welfare. The question of whether or not rural land rights should be freely traded is not as crucial to the future livelihoods of landless peasants as allowing them access to the full range of social welfare afforded to urban residents.

The Political Economy of Township Government Debt, Township Enterprises and Rural Financial Institutions in China

This paper sheds light on the ways in which township governments had mobilized resources from local financial institutions, and how failure to repay many of these loans had given rise to sizable local government debt. Mobilization of resources was done through loans to collective enterprises whose de facto owners were township authorities. Though the enterprises were nominal borrowers, loan transactions would not have occurred in the absence of guarantees by township governments. Another way of financial resource mobilization was by establishing local informal financial organizations that were subject to less strict regulations, and over which township authorities could exercise control. Further, because the enterprises’ profits and taxes ultimately went to township authorities, and the enterprises also contributed towards provisions of public goods that were the authorities’ obligations; enterprise financing became a roundabout way in which township authorities had sought financial assistance for their fiscal needs.

Between Developmental and Clientelist States: Local State-Business Relationship in China

This paper investigates the changing nature of state-business relations in China based on its recent privatization experience. Drawing on an analytical framework based on statist literature, this study seeks to explain why pervasive governance problem occurred during the privatization of local government-owned firms. The two contributing factors are the state’s declining capacity to regulate the market and its reduced autonomy from the emerging elites. Consequently, local states were transformed from those in which there was “embedded autonomy” to those with a “clientelistic” form. This study questions whether the conventional wisdom that local states have played a positive role in China’s economic development is still valid. It provides a more nuanced understanding of cronyism in the relationship between the Chinese Communist Party and capitalists.

Fiscal Federalism and Soft Budget Constraints: The Case of China

China has been held up as a modern-day exemplar of ‘market-preserving federalism.’ This article challenges this popular belief by showing that its local governments face soft budget constraints. Fiscal indiscipline among subnational governments, which risks national indebtedness and macroeconomic instability, can pose serious dangers to federations. A large body of literature which proposes solutions to fiscal indiscipline through electoral incentives and political party structure cannot be applied to China. The Chinese Communist Party’s cadre-evaluation and dual accountability systems make it an imperative for local officials to augment fiscal revenue and allow them to tap resources at local credit institutions. This has resulted in mounting local government debt, the lion’s share of which is unrepaid loans owed to local credit institutions. To harden budget constraints, political institutions need to be reconfigured to allow the central government more effectively to hold local authorities accountable for resources deployed in achieving their job-performance targets.

Social Unrest in China

Social unrest is on the rise in China. Few incidents of public demonstrations, disruptive action or riots occurred in the 1980s, but the 1989 student protests in Tiananmen Square marked a turning point. In 1993, there were already 8,700 ‘mass incidents’ recorded. By 2005, the number had grown tenfold to 87,000. Unofficial data estimated by a researcher at Tsinghua University suggests that there were 180,000 incidents in 2010.1 These figures could easily be interpreted as signs that the days of the Chinese Communist Party’s (CCP) rule are numbered. However, the number of media outlets has proliferated since the 1990s; and with that, the incentive to report on eye-catching stories has increased. In comparing these incidents with the protests that toppled several authoritarian regimes during the Arab Spring of 2011, a number of significant differences emerge. The scale of most protests in China is much smaller. Protestors are usually a homogenous group, such as peasants, taxi drivers, migrant workers or homeowners. Mobilisation across social groups, an important precondition for system-threatening collective action, is therefore largely absent. Further, despite rising unrest, the death toll in such activities remains low.

Chinese Rural Cooperative Finance in the Era of Post-Commercialized Rural Credit Cooperatives

Rural credit cooperatives have become increasingly commercialized over the last decade. However, this does not spell the end of cooperative finance in rural China. Various new cooperative credit organizations have sprung up in recent years with endorsement from the central and local governments. They are designed to meet the wide-ranging credit demand of rural households and microenterprises that are increasingly left behind by formal credit institutions. Rural mutual aid funds (nongcun zijin huzhushe) are a cornerstone of cooperative finance in rural China, filling in the market gap left behind by commercialized financial institutions.

Communist Party and Financial Institutions: Institutional Design of China's Post-Reform Rural Credit Cooperatives

Despite the fact that the Rural Credit Cooperatives are the only formal credit providers to millions of households in rural China, empirical evidence suggests that they hardly serve the interests of member households. This study examines the extent to which the recent institutional reform have ameliorated the problems of “insider control” and “collective action” in the corporate governance, as well as local political influence in their operations.This study makes the following contributions to the understanding of China’s financial sector reforms: first, it illustrates how the configurations of the Communist Party’s power in the post-reform credit institutions are still fundamentally incompatible with effective corporate governance structure; and second, it contributes to the scanty literature explaining why local political interference in loan allocations has been so persistent in China.

Reports of Social Unrest: Basic Characteristics, Trends and Patterns, 2003-12

A persistent question that preoccupies scholars who study authoritarian China is social stability and durability of the communist regime. The authoritarian government that is obsessed with social stability looks for any sign of unrest which may pose a threat to the regime. It invests in hundreds of millions of dollars every year in stability maintenance, Internet monitoring, and propaganda to root out would-be protestors. Despite that, gleaning from various media reports, we surmise that the number of social unrest cases — a major threat to the Communist Party’s rule — has been on the rise. While that may be true, the frequency, size, scope, grievances and impact on the regime of social unrest are still rather illusive. Publicly available official figures had indicated a total of 8,700 “mass incidents” in 1993, and it increased by ten-fold to 87,000 in 2005. However, the authorities have ceased issuing any official figures since then. A frequently cited estimate by Sun Liping, a researcher at Tsinghua University, suggests that there were 180,000 incidents in 2010.This chapter addresses these important issues by analyzing a dataset of social unrest in China constructed from more than 2,500 cases during 2003-2012. The dataset is constructed based on coding of unrest cases reported in the Chinese language and English media.

Multiple Principals and Collective Action: China’s Rural Credit Cooperatives and Poor Households’ Access to Credit

Ample empirical evidence suggests that Rural Credit Cooperatives (RCCs), which are the core credit institutions in rural China, are not accountable to their member households. This article argues that this conundrum can be explained by an institutional analysis of the credit cooperatives using the multiple principals-agent framework: the credit cooperatives as agents are accountable to multiple heterogeneous principals – with multiple conflicting objectives. The multiple principals are (1) the County RCC Unions, which exercise control using the evaluation criteria on which the remuneration of grassroots RCC officers is assessed; (2) local party secretaries, who exert influence through top personnel appointment and dismissal in the credit cooperatives; and (3) member households, which are a “collective” principal. In a multiple-principals scenario, the “collective” principal has weaker control over the agents due to the “collective action” problem.

What Drives People to Protest in an Authoritarian Country? Resources and Rewards vs. Risks of Protests in Urban and Rural China

What drives people to protest in an authoritarian country? Drawing from a rich set of individual-level data from the China General Social Survey 2010, we address the question of protest participation by focusing on the factors of resources, and rewards vs risks, that might be unique to protestors in an authoritarian state. We find strong evidence for education, typically conceived as a key enabling resource in protests, to be negatively associated with likelihood of participation. There are, however, significant differences between political behavior in urban and rural samples. We find some, though rather weak, evidence to suggest that as urban residents become wealthier over time, they will increasingly turn to protests as a form of political participation, demanding greater accountability of government and corporate actions.