GEB 1305

China and the World

Lecture 9

Mainland China and Modern Societies in the World:

The Cultural, Political, Economic and Social Differences

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Introduction

• System of exchange

• If we are to understand the ways in which society is transforming as China

becomes more integrated into the global economy, we must begin with an

examination of the crucial social institutions that governed this society on the

eve of the economic reforms.

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Introduction
• [In the early 1980s] there were three institutions at the core of Chinese society: the family, the work unit
in the city and the collective farm in rural China, and the communist party-state.

• Each Chinese citizen belonged to a family, and every family had been a permanent member of a work unit
(danwei) or a collective farm.

• The party-state, accountable only to itself, penetrated and controlled every work unit and collective farm,
and thus also every family and every individual.

• Chinese social organization was rigid and hierarchic. Work units were isolated from each other—even
physically bounded by brick walls—with solidarity, loyalty, and collective identity encapsulating members
against outsiders.

(Oberschall,41996) 4
Introduction
• This set of institutional arrangements helped to create a type of dependence — a reliance by
individuals on the party-state system

à Individuals were forced to develop personal relationships that would mitigate their reliance on
the organizations and institutions that governed their lives.

• Individuals were engulfed by the institutions that governed their lives in Communist China, as there
was very little private space that was not shaped by these institutions in one way or another.

• As Oberschall put it, it was a “world of total institutions.”

• Look into party-state, systems of allocation (such as work units)

à some of the consequences of these institutional arrangements, such as the corruption and gift
economy.
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The State and State Allocation Systems

• In a state-dominated society such as China, on the eve of the economic reforms, the state is forever present,
setting the rules by which individuals live and finding more subtle ways to control behavior and command
loyalty.

• The role of the state in Chinese society has changed in critical ways over the course of three periods:

1. in the pre-Communist era, the state was an instrument of symbolic and cultural power, with some
limited elements of social control, but it was far removed from the private realm of individuals and
families;

2. in the Communist era, the state steadily penetrated down to the level of the individual; and

3. in the period of economic reform, the state’s control over society has been steadily receding.
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 The Communist State and the Work Unit System
• Economically, when the Communists came to power, one of the first things they did was eliminate
private ownership of economic organizations and establish different levels of state-owned industries in
urban areas.
• The work-unit system was developed to bring together a centrally planned economy with the
redistribution of social welfare benefits.
• It was through their work units that urban citizens could obtain housing, medical care, and job
opportunities.
• Moreover, the system allowed the party-state to directly monitor and supervise individuals within the
work unit.
• Work units established security surveillance and secret dossiers (danan) on individuals, thus playing an
important role in maintaining political stability in Communist China
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 The Communist State and the Work Unit System

• Through work units and neighborhood committees, Chinese Communist

bureaucracy permeated urban society, leaving few barriers between the individual

and the state.

• As Whyte and Parish put it, “Chinese urban residents [were] victims rather than

masters of their own fate” (1984, 295).

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 The Receding Role of the State in the Reform Era
• As of the early 1980s, individuals, collectives, and local areas were empowered to make their own
economic decisions.
• And with the re-emergence of the private sector, individuals increasingly had the freedom to pursue
their fortunes in the newly emerging markets of the Chinese economy.
• Through these two critical changes, the party-state removed itself as the key economic decision
maker, and, with the emergence of the private sector, it broke the dependence of individuals on the
state because it no longer held monopoly control over livelihoods.
• In today’s markets, individuals can access nearly all necessities in their everyday lives
àthe relations of authority based on the patron–client ties in the workplace have broken down, and
àthe organizational dependency of individuals on their work units and superiors has been largely
eliminated.
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 The Receding Role of the State in the Reform Era
• In rural areas, de-collectivization in the late 1970s transferred production decisions from the
commune to the family.
• The establishment of the “household responsibility system” afterward provided peasants with more
economic resources, opportunities, and choices than could be obtained through the party in the pre-
reform era.
• The collective industrial sector emerged especially in towns and villages in the 1980s, offering
peasants new job opportunities in the emerging rural industrial sector.

• Once peasants began to farm land rented from the state on a household basis, establish their

household enterprises, and make their own economic decisions, the bases of Communist power and
the grassroots mobility of the Communist Party in rural areas greatly eroded.
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Unintended Social Consequences - Corruption
• The declining role of the state in economic activities in the reform era has had unintended
consequences, official corruption is among the most serious crises with which the Chinese
government has had to deal
• China was rated one of the most corrupt countries in the world by Transparency International in the
1990s.
• Among the challenges China faces in dealing with official corruption is the very nature of its political
system.
• The CCP still holds enormous and exclusive political power in China, which provides many
opportunities for officials to abuse their power and trade favors for profitable deals.
• There is strong evidence that China is well on the way to rationalizing its rule by law, but during the
long-term transition toward that goal, there has been much room for abuse of the emergent system.
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Unintended Social Consequences - Corruption
• Lu (2000) argues that corruption among Communist cadres is not a phenomenon of the post-Mao reform
period, nor is it caused by purely economic incentives in the emerging marketplace.

• Rather, it is the result of a long process of what he calls “organizational involution,” which began as the
Communist party-state embarked on the path of Maoist “continuous revolution.”

• After the Anti-Rightist Campaign of 1957, Mao adopted an aggressive policy of revolutionary reform as a
way of furthering his Communist legacy.

• This period made it impossible for revolutionary goals to be routinized in organizational norms and
practices.

• The 1966–1976 Cultural Revolution nearly eliminated China’s bureaucratic system and made it very difficult
to develop institutionalized routines

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Unintended Social Consequences - Corruption

• The party unintentionally created a neo-traditional ethos, mode of operation, and set of authority

relations among its cadres that have fostered official corruption

• In order to institutionalize political control, the CCP established the dual institutional structure of

the state–society relationship in the Communist era: strong organizational control over the

society by the state (Whyte and Parish 1984), and the organizational dependency of the

individuals on socialist economic institutions (Walder 1986a).

• By monopolizing the resources for organizing private interests, the Communist state effectively

denied the legitimacy of any organized interests outside its control.

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Unintended Social Consequences - Social Networks and the Gift Economy

Social relations, or guanxi itself

• This concept is often used to denote some type of friendship, kinship, or other type of
social tie — as in, “I have a [good] relationship with him”

“The study of guanxi” (guanxi xue)

• Is the gift economy
• The gift economy is a concept that implies the use of social relations to “manufacture
obligation and indebtedness” in order to accomplish some set of future tasks (Yang 1994,
6).
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Unintended Social Consequences - Social Networks and the Gift Economy

There are two major theoretical orientations toward understanding guanxi in Chinese

society.

1. One is the cultural perspective, which views guanxi and guanxi xue as products of deep-

seated aspects of Chinese culture;

2. the second is an institutional perspective, which maintains that guanxi and guanxi xue

arise from specific types of institutional relationships and constraints.

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Unintended Social Consequences - Social Networks and the Gift Economy

Cultural Perspective

• The scholars adhering to this approach trace guanxi to its enduring significance in traditional
Chinese philosophy, in particular its stress on the centrality of social interaction in the formation
of the individual’s identity.

• According to this view, Chinese culture creates a deep psychological tendency for individuals to
actively cultivate and manipulate social relations for instrumental ends.

• In the context of China’s economic reforms, the cultural approach stresses the increasing roles of
guanxi and social networking in doing business and attributes the practices of guanxi xue in
contemporary China to the cultural characteristics of Chinese society.

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Unintended Social Consequences - Social Networks and the Gift Economy

Institutional Orientation

• It is the institutional structure of Chinese society at certain time periods that facilitates or
encourages the reliance on networks to accomplish tasks in Chinese society.

• Particularly during the Communist era, a shortage economy combined with a weak legal
infrastructure facilitated the reliance on networking and trust as fundamental parts of
transactions in Communist China.

• Andrew Walder’s (1986a) institutional analysis of the work-unit system illuminates the use of
guanxi in the form of patron-client relations as a response to a situation in which powerful
officials controlled access to scarce necessities and job opportunities during the Communist era.

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Guanxi and Guanxi Practice in the Urban Industrial Economy

• While managers often view social connections as important in business transactions, they view the
importance of guanxi in market relationships as secondary to the market imperatives of price and
quality.

• Increasingly today, managers will often say things like, “Guanxi only helps if you are competitive”
(Guthrie 1999)

• Currently, the Chinese government is engaged in the project of constructing a rational–legal system
that will govern the decisions and practices of economic actors.

à The state pushes actors — especially large-scale industrial firms — to approach economic
activities in ways that are sanctioned by the rational–legal system
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Guanxi and Guanxi Practice in the Urban Industrial Economy

• As the government continues to place economic responsibilities directly on the shoulders of firms,

organizations are forced to consider many factors that make economic sense, many of which often

lie in conflict with the use of social connections

• Empirical data indicate that the “art” of guanxi (i.e., guanxi practice) may in fact occupy a

diminishing role in China’s urban industrial and commercial economies as the economic transition

progresses.

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Guanxi and Guanxi Practice in the Urban Industrial Economy

Changes surrounding guanxi in the reform era vary with a firm’s position in the state

administrative hierarchy (Guthrie 1998b, 1999, 2002a).

• The higher a firm is in China’s administrative hierarchy, the less likely the general or vice

general manager of the firm is to view guanxi practice — that is, using connections to get

things done — as important in the economic transition.

• Attitudes toward guanxi practice also vary with a number of organizational factors, ranging

from the background of the firm’s general manager to whether or not the organization has a

joint venture with a foreign company.

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Guanxi and Guanxi Practice in the Urban Industrial Economy

• In the economic reforms, in many sectors, an open market increasingly controls the flow of

goods.

• This change has profound implications for the transition away from a focus on guanxi practice

to a more general focus on guanxi as business relationships.

• Industrial managers no longer need to curry favor with state officials to overcome bottlenecks

or gain access to resources, and, as a result, they do not view guanxi practice as an important

part of decision-making in China’s industrial economy.

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References

• Guthrie, D. (2006), China and Globalization. The Social, Economic, and Political

Transformation of Chinese Society. Routledge, Taylor & Francis Group.

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