Mingxing Liu

Getting Ahead in the Communist Party: Explaining the Advancement of Central Committee Members in China

Spectacular economic growth in China suggests the ruling Chinese Communist Party (CCP) has somehow gotten it right. A key hypothesis in both economics and political science is that the CCPs cadre evaluation system, combined with Chinas geography-based governing logic, has motivated local administrators to compete with one another to generate high growth. We raise a number of theoretical and empirical challenges to this claim. Using a new biographical database of Central Committee members, a previously overlooked feature of CCP reporting, and a novel Bayesian method that can estimate individual-level correlates of partially observed ranks, we find no evidence that strong growth performance was rewarded with higher party ranks at any of the postreform party congresses. Instead, factional ties with various top leaders, educational qualifications, and provincial revenue collection played substantial roles in elite ranking, suggesting that promotion systems served the immediate needs of the regime and its leaders, rather than encompassing goals such as economic growth.

Land Leasing and Local Public Finance in China’s Regional Development: Evidence from Prefecture-level Cities

By analysing the evolution of local governments’ roles in different periods of China’s growth in transition, this paper explores local fiscal incentives to use subsidised land and infrastructure as key instruments in regional competition for manufacturing investment since the mid 1990s. Local land development behaviour is related to China’s current land use institutions and intergovernmental arrangements. On the basis of panel data covering prefectural-level cities from 1999 to 2003, the paper empirically identifies and compares the fiscal impacts of different forms of land leasing (by negotiation versus by auction/tender). Policy implications are drawn from this analysis, for the further reform of China’s urban land system and fiscal institutions.By analysing the evolution of local governments’ roles in different periods of China’s growth in transition, this paper explores local fiscal incentives to use subsidised land and infrastructure as key instruments in regional competition for manufacturing investment since the mid 1990s. Local land development behaviour is related to China’s current land use institutions and intergovernmental arrangements. On the basis of panel data covering prefectural-level cities from 1999 to 2003, the paper empirically identifies and compares the fiscal impacts of different forms of land leasing (by negotiation versus by auction/tender). Policy implications are drawn from this analysis, for the further reform of China’s urban land system and fiscal institutions.

Petitioning Beijing: The High Tide of 2003-2006

What precipitated the 2003-2006 “high tide” of petitioning Beijing and why did the tide wane? Interviews and archival sources suggest that a marked increase in petitioners coming to the Capital was at least in part a response to encouraging signals that emerged when Hu Jintao and Wen Jiabao adopted a more populist leadership style. Because the presence of tens of thousands of petitioners helped expose policy failures of the previous leadership team, the Hu-Wen leadership appeared reasonably accommodating when petitioners arrived en masse in Beijing. Soon, however, the authorities shifted toward control and suppression, partly because frustrated petitioners employed disruptive tactics to draw attention from the Center. In response to pressure from higher-ups, local authorities, especially county leaders, turned to coercion to contain assertive petitioners and used bribery to coax officials in the State Bureau of Letters and Visits to delete petition registrations. The high tide receded in late 2006 and was largely over by 2008. This paper suggests that a high tide is more likely after a central leadership change, especially if a populist program strikes a chord with the population and elite turnover augments confidence in the Center and heightens expectations that it will be responsive to popular demands.

Urban and Rural Household Taxation in China. Measurement, Comparison and Policy Implications

ABSTRACT By measuring the tax burdens for both Chinese urban and the rural households in the 1990s, we find that the taxes on the urban households were mainly indirect taxes through consumption of goods and services while those on rural households were largely direct taxes such as state agricultural taxes, local fees and tuition. Although the incomes of rural households were much lower than those of their urban counterparts, rural households were taxed much more heavily than their urban counterparts. By calculating the total tax burdens for different income groups of both urban and rural households, we find that rural tax in general was much more regressive. The main reasons for rural tax becoming more acute in the 1990s were the increasing rural income disparity and the uneven tax incidence biased against poorer households. Policy implications are drawn for the ongoing rural tax reform, the rearrangement of inter-governmental relationships as well as improving local governance in China.

The Political Economy of Earmarked Transfers in a State-Designated Poor County in Western China: Central Policies and Local Responses

Abstract In 2002 in order to improve the effectiveness of redistributive policies, the Chinese government increased intergovernmental fiscal transfers and imposed more stringent regulations on the use of earmarked funds. This articles draws on a case study of K county in the northwestern Province to evaluate the impact of increasing transfers and stricter regulation on the diversion of earmarked transfers. The case study finds that the misappropriation of earmarked transfer did decreas but that this does not necessarily indicate an improvement in local governments’ compliance in the usage of transfers. This is because county governments found ways to sabotage the central policies by exporting fiscal burdens to the subordinate bureaus that received the earmarked subsidies. In some bureaus this was done by reducing the amount of funds allocated for operating expenses. In other bureaus this involved increasing staff numbers. These findings provide a basis for evaluating the effectiveness of using earmarked funds and internal supervisory mechanisms to achieve redistribution in an authoritarian regime. Keywords: Intergovernmental Fiscal Transfers, Earmarked Funds, Redistributive Effectiveness

Rural Informal Taxation in China: Historical Evolution and an Analytic Framework

The present paper examines the historical evolution of Chinas rural taxation system from the pre-reform period to the late 1990s. We propose that because of information asymmetry between the upper-level and the lower-level governments, local governments had to be granted some informal tax autonomy to fulfill the upper-level policy mandates. This easily led to excessive local informal taxation on farmers. As market liberalization of the grain sector progressed, the low-cost tax instruments implemented through the traditional approach of implicit taxation gradually eroded. Local governments in agricultural regions had to resort to informal fees collected directly from individual rural households while the more industrialized regions shifted to non-agricultural taxes that are less costly in terms of tax collection. Hence, political tension between farmers and local governments in agriculture-based regions emerged and rural tax reform became necessary.

Grain Procurement, Tax Instrument and Peasant Burdens during China's Rural Transition

In this paper, we argue that Chinas grain procurement system as a major instrument in rural taxation survived the communes and lost its importance only gradually in recent years. However, as agricultural liberalization progressed, the traditional tax instruments of ‘tax deduction prior to grain procurement payment’ and implicit taxation through ‘price scissors’ gradually eroded. Under such a circumstance, local governments in agriculture-based regions resorted to informal fees collected directly from individual rural households while the more industrialized regions shifted to non-agricultural taxes that are less costly in terms of tax collection. Empirical evidence based on a large panel data set supports our hypotheses of rural taxation in China.

Development Strategy, Viability, and Economic Institutions: The Case of China

In recent years, many economists believe that least developed countries (LDCs) failed to catch up with the developed countries because of bad institutions with weak protection for property rights and ineffective constraints on power holders (Acemoglu et al. 2004). At the same time, how to understand government behaviour becomes the most important issue for research on institutions. Both policy reformers and researchers from a very diverse set of perspectives have tried to understand how government intervention and regulation occur and how they can subsequently shape the macro incentive structure that firms in an LDC face.

State Capacity, Local Fiscal Autonomy, and Urban—Rural Income Disparity in China

Continued urban—rural income disparity poses a serious policy challenge in China’s economic transition. As the Chinese economy booms and the state’s fiscal capacity grows, there should be a corresponding increase in the center’s capacity to redress urban—rural inequality. However, it seems that the stronger state extractive capacity since the mid-1990s has not translated into better urban—rural disparity outcomes. Based on a panel data set covering 270 prefectures in China between 1994 and 2003, the article evaluates the impact of local fiscal spending on urban—rural income disparity. Findings reveal a strong urban bias in China’s local fiscal system under an increasingly centralized fiscal system. The centralized fiscal model has in fact reinforced this tendency and ironically weakened the capacity of the central state in achieving the policy goal of reducing the urban—rural divide.Continued urban—rural income disparity poses a serious policy challenge in China’s economic transition. As the Chinese economy booms and the state’s fiscal capacity grows, there should be a corresponding increase in the center’s capacity to redress urban—rural inequality. However, it seems that the stronger state extractive capacity since the mid-1990s has not translated into better urban—rural disparity outcomes. Based on a panel data set covering 270 prefectures in China between 1994 and 2003, the article evaluates the impact of local fiscal spending on urban—rural income disparity. Findings reveal a strong urban bias in China’s local fiscal system under an increasingly centralized fiscal system. The centralized fiscal model has in fact reinforced this tendency and ironically weakened the capacity of the central state in achieving the policy goal of reducing the urban—rural divide.

Guerrilla Capitalism: Revolutionary Legacy, Political Cleavage, and the Preservation of the Private Economy in Zhejiang

In this article, we propose a causal relationship between a regions communist revolutionary legacy before 1949 and the variation in private sector development after 1949. In the case of Zhejiang, the pre-1949 revolutionary experience led to the power struggle between two elite groups, the guerrilla cadre group and the southbound cadre group, in the province after 1949. As the weak side, guerrilla cadres were willing to protect local economic interests in exchange for local popular support, which improved their odds of political survival. As a result, in contrast with counties where the guerrilla forces were historically weak, counties with strong guerrilla forces before 1949 saw significantly more robust private sector development throughout much of the Mao and post-Mao periods. In this article we provide preliminary historical and statistical evidence to support this hypothesis.