Victor Shih

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.

Dealing with Non-Performing Loans: Political Constraints and Financial Policies in China

The stagnation in banking sector reform is puzzling given the Chinese leaderships seeming resolve to reform other sectors of the economy. This article develops a political explanation of why reform oriented central bureaucrats have centralized financial power without liberalizing the banking sector. The starting point of this explanation is that top bureaucrats value political survival as much as other members of the Politburo. Thus, they make policies based on both political and economic considerations. This framework is tested on three cases related to Chinas non-performing loan (NPL) problem: the politicization of the NPL problem, policies designed to slow the creation of NPLs and policies aimed at decreasing the pool of NPLs. The findings strongly suggest that political considerations play a large role in shaping financial policies in China.

Interest Group Influence in Authoritarian States: The Political Determinants of Chinese Exchange Rate Policy

Why do countries keep their exchange rates weak and undervalued? This article argues that domestic politics is more important than systemic factors, but existing domestic political explanations do not fully explain how interest group preferences and political institutions influence exchange rate policy. The authors argue that tradable industries do not always demand an undervalued exchange rate, but do so only when they are unable to receive other compensatory policies. In addition, interest groups have a larger impact on exchange rate policy in nondemocratic regimes than is often recognized: Autocrats select exchange rate policies that correspond to the preferences of the most powerful interest groups because lobby groups have access to the political process and leaders are sensitive to their preferences. A case study of exchange rate policy in China supports these arguments. The major decisions to maintain an undervalued exchange rate in China were taken in response to demands for undervaluation from tradable industries. Second, the case study shows that exporters’ preferences for undervaluation ebb and flow with the policy mix: Tradable firms lobbied for an undervalued exchange rate when no other compensatory policies were implemented, but they did not insist on undervaluation in periods when they benefited from other state policies. The authors conclude that China keeps its exchange rate undervalued because the interest groups that support undervaluation are more powerful than those that oppose undervaluation. These findings indicate that interest groups influence exchange rate policy in authoritarian regimes, but their preferences for undervalued exchange rates are quite malleable.

Tools of Survival: Sovereign Wealth Funds in Singapore and China

The rise of sovereign wealth funds (SWFs) as major investors in the global economy has raised worries that they serve the geopolitical ends of owner countries. However, given the paramount importance of surviving domestic political competitions, SWFs are likely also tools of domestic political survival. In examining the corporate governance and underlying political environment in which SWFs in Singapore and in China operate, this paper further examines the role of political unity in directing SWF behaviour in authoritarian regimes. The main finding is that a highly unified autocracy is more likely to direct SWFs to maximise long-term profit, while a fragmented one like China is more likely to treat its SWF as an arena for domestic political and bureaucratic infighting. SWFs operating in a fragmented regime are unlikely to make long-term profit and foreign policy objectives top priorities, and their behaviour can be highly unpredictable.

“Nauseating” Displays of Loyalty: Monitoring the Factional Bargain through Ideological Campaigns in China

Autocrats, as factional patrons, only find out the true loyalty of clients during a serious political challenge, when they are least able to enforce the factional bargain. In autocracies with norms against cults of personalities, public, exaggerated praises may constitute an alternative way for clients to signal loyalty credibly. By suffering the social cost of being despised by others, sycophants credibly signal their affinity to a particular leader, thus deterring factional rivals from recruiting them into an alternative coalition. This article develops a measure of such “nauseating” displays of loyalty in China through content analysis of provincial newspapers between 2000 and 2004. OLS and PCSE estimations are used to inquire whether provincial faction members were more likely to echo an ideological campaign launched by their patron. Further analysis explores whether faction members in rich and poor localities echoed the campaign in different ways. The findings suggest that ideological campaigns function as radars that allow senior leaders to discern the loyalty of faction members.Autocrats, as factional patrons, only find out the true loyalty of clients during a serious political challenge, when they are least able to enforce the factional bargain. In autocracies with norms against cults of personalities, public, exaggerated praises may constitute an alternative way for clients to signal loyalty credibly. By suffering the social cost of being despised by others, sycophants credibly signal their affinity to a particular leader, thus deterring factional rivals from recruiting them into an alternative coalition. This article develops a measure of such “nauseating” displays of loyalty in China through content analysis of provincial newspapers between 2000 and 2004. OLS and PCSE estimations are used to inquire whether provincial faction members were more likely to echo an ideological campaign launched by their patron. Further analysis explores whether faction members in rich and poor localities echoed the campaign in different ways. The findings suggest that ideological campaigns funct...

Development, the Second Time Around: The Political Logic of Developing Western China

The Great Development of the West is no more than grand conferences held in the west (Xibu Dakaifa zhishi xibu dakaihui). — State Council officials in charge of developing the west On the surface, the Great Development of the West (GDW, Xibu Dakaifa) campaign seems like a classic maneuver by a developmental state to bolster the growth of an underdeveloped region. Even in 2002, GDP per capita in western China, which includes the provinces of Xinjiang, Tibet, Ningxia, Gansu, Shaanxi, Sichuan, Chongqing, Qinghai, Yunnan, and Guizhou, remained at U.S.

Partial Reform Equilibrium, Chinese Style Political Incentives and Reform Stagnation in Chinese Financial Policies

666, or just more than half of the national average (see Table 1). The poorest province in China, Guizhou, had a GDP per capita of only U.S.

Deficit Estimation and Welfare Effects after the 1994 Fiscal Reform in China: Evidence from the County Level

375, roughly equivalent to Haitis GDP per capita in 1999. The effort to develop western China, according to the official rhetoric, was aimed at shifting western Chinas developmental trajectory closer to that of the rest of China, thus decreasing regional inequality and bolstering overall growth.

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

Incomplete financial reform in China is puzzling because Premier Zhu Rongji, a seemingly promarket technocrat, was largely insulated from explicitly rent-seeking pressure and leftist ideology when he carried out a massive restructuring of Chinese banks in 1997. Yet at the end of his tenure as premier, the financial sector continued to channel the bulk of savings toward the state. Given the complexity of Zhus policies, we cannot begin analyzing them if we conceive reform as a neat, coherent policy shift. In this article, competing hypotheses of policy change are tested on Zhus financial “reform,” which is conceptualized as a bundle of discrete policies, each having different and at times contradictory impact on the economy. With this conceptualization, banking centralization, the Herculean efforts to digest nonperforming loans, and stagnation in interest rate and private banking reform can best be understood as a coherent political survival strategy.

Locking in fair weather friends: Assessing the fate of Chinese communist elite when their patrons fall from power

Using simple statistical analysis of county-level budgetary data from across all of Chinas counties, the present paper examines whether the post-1994 fiscal decentralization has affected redistribution at the county-level. The new fiscal system has been less able to narrow inter-county dispersion in fiscal imbalances than the old one, even after taking intergovernmental transfer payments into account. Although with the post-1994 system there has been a modest increase in per capita welfare spending in all counties on average, much of the new-found fiscal resources have been spent on salary and administrative expenses rather than spending on public goods. Therefore, it is imperative that the reform of Chinas tax system is intensified.