Fudan-UC Rediscovering China

REDISCOVERING

CHINA FIRST ISSUE | NOVEMBER 2013

TABLE OF CONTENTS Message from the Director Richard MADSEN

About Fudan-UC Center on Contemporary China Click here for more information, or visit fudan-uc.ucsd.edu

Call for Contributions Cover Article “Reasonable Institution: Creator of China's Progress and Development” LIN Shangli………………………………………………………………………………………..…1

Feature Politics “The Current State of Defense Innovation in China and Future Prospects” Taiming CHEUNG…………………………………………………………….…….……..….……6 “Time for a New Beginning in Sino-U.S. Relations” WU Xinbo……………………………………………………………………………….….….......10 “Can China’s Leaders Harness Support for Change?”

Susan SHIRK………………………………………….............................................................17 “Security Dimensions of Leadership Change” XIN Qiang………………………………………..…………………………………….…….….…19 Economics “Impact of Shanghai's Free Trade Zone on China” Chinese Financier Club and School of Economics, Fudan University…………….……..…22 “The Second Coming of Zhu Rongji?”

ZHANG Jun……………………………………………………………………….…….………....26 “After the Asian Miracle: Problems, Challenges and Choices” HUA Min……………………………………………………………………….…….……….…....28 Social issues “The Society of Senior Citizens and Popular Protest in Rural Zhejiang” Kevin J. O’BRIEN/ Yanhua DENG…………………………………………..……….…….……30

“Citizenship in Urban China: The Case of Points Systems” ZHANG Li………………………………………………………………………………...…….….40

Shanghai Forum The Shanghai Forum (上海论坛) Shanghai Forum 2013 Consensus……………………………………………….…….…..…...71

Audio and Video on China……………………………………………….………..….…..…...73 “Toward a More Harmonious World: The Place of Humanities and Social Sciences Education in China”, YANG Yuliang “U.S. Pivot to Asia: What Does it Mean for the U.S.-China Relations?"

A Conversation between Kurt CAMPBELL and Susan SHIRK

PhD Dissertation “Consumer Switching and Competition Strategy in IT-enabled Markets” Xiahua WEI…………………………….…………………………….………………………..…...74 “Embeddedness and Conflicts: The Process and Logic of U.S. Military Institution Changes” ZUO Xiying…………………………….……………………….…………………….…….....…...77 “Cyberspace Romance in Translation: The Case of China's Email-Order Brides” Haiyi LIU…………………………….…………………………………………..………….....…...79

Scholarly Publications Books.……………………………………………………………………………………………...81 Barry J. NAUGHTON ed., “Wu Jinglian: Voice of Reform in China,” MIT 2013.

Zhang Jun ed., Unfinished Reform in the Chinese Economy, Singapore: World Scientific, 2013 Research Reports.…………………………………………………….………………………....82 FDDI, Driving by the "Two Engines": China’s Strategic Choice of Development in the Next 10 Years (双轮驱动：中国未来十年发展的战略选择), Fudan University Press 2012.

Message from the Director Richard MADSEN The Fudan-UC Center on Contemporary China got off to a very strong start last year. We have had a steady flow of distinguished speakers from both China and the U.S., and we hosted two conferences, one for the southern California region and the other for the UC system as a whole. This first issue of Rediscovering China presents highlights of our events and the academic contribution of distinguished scholars both from Fudan and UC system. It also reports on some of the fascinating dissertations being developed by graduate students who have been inspired, stimulated and modestly supported by our programs. We hope that this issue demonstrates the promise of new models for academic cooperation and cross cultural communication being developed through the Fudan-UC Center.

About Fudan-UC Center on Contemporary China The Fudan-UC Center on Contemporary China is the first academic institution to be established by a major Chinese university in cooperation with a leading North American university. It is based in the School of International Relations and Pacific Studies (IR/PS) at the UC San Diego. Under the directorship of Professor Richard Madsen, the Center serves to connect all ten campuses of the University of California system with Fudan University in Shanghai. It will bring together leading research scholars from both universities for conferences and lectures, and it will facilitate cooperative research. The Center will promote deeper mutual understanding between the U.S. and China.

Call for Contributions Rediscovering China is a platform for faculty and graduate students from throughout the UC system and Fudan University to publish research papers and exchange ideas together. It will draw contributions from a wide range of areas, including international relations, economic issues, population studies, social issues, the environment, law, governance, religion, etc.

Research findings, analysis, short policy articles, book reviews, and dissertation summaries are all welcome.

About Authors Kurt CAMPBELLl, former assistant Secretary of State, East Asian and Pacific Affairs, U.S. Tai Ming CHEUNG, professor of political science, University of California Institute on Global Conflict and Cooperation Haifeng HUANG, professor of sociology, University of California, Merced HUA Min, professor of economics, Fudan University LIN Shangli, professor of political science, vice president of Fudan University Haiyi LIU, PhD candidate in sociology, UC San Diego Richard MADSEN, professor of sociology, UC San Diego Kevin J. O’BRIEN, professor of sociology, UC Berkeley Susan SHIRK, professor of political science, UC San Diego WU Xinbo, professor, Dean of International Relation Institute and Director of Center for American Studies，Fudan University XIA Huawei, PhD in economics, UC San Diego XIN Qiang, professor of political science, Fudan University YANG Yuliang, professor of chemistry, president of Fudan University ZHANG Jun, professor of economics, Fudan University ZHANG Li, professor of sociology, Fudan University ZUO Xiying, PhD in political science, Fudan University

Editing Board Committee Editor: Haiyi LIU

Chief Editor: Na CHEN

CHEN Yinzhang, Fudan University CHEN Zhimin, Fudan University Christopher CONNERY, UC Santa Cruz Peter COWHEY, UC San Diego DAI Xingyi, Fudan University Lizhu FAN, Fudan University Tom GOLD, UC Berkeley Gail HERSHATTER, UC Santa Cruz HUA Min, Fudan University HAIFENG Huang, University of Central Missouri Lei GUANG, UC San Diego

LIN Shangli, Fudan University Victor LIPPIT, UC Riverside Richard MADSEN, UC San Diego MENG Jian, Fudan University Barry NAUGHTON, UC San Diego PENG Xizhe, Fudan University QIAN Xu, Fudan University Susan SHIRK, UC San Diego WU Xinbo, Fudan University YAN Yunxiang, UCLA ZHANG Jun, Fudan University

“Reasonable Institution: Creator of China's Progress and Development” LIN Shangli Two millennia ago, the ancient Greek thinker Aristotle wrote in his famous work Politics that political scientists must consider “… What kind of government is adapted to particular states. For the best is often unattainable, and therefore the true legislator and statesman ought to be acquainted, not only with that which is best in the abstract, but also with that which is best relative to circumstances.” Here, Aristotle was pointing out the most basic principle for constructing political institutions: a system of government must be based on reality and suited to national conditions. Two hundred years ago, in the process of formulating a constitution and political system, the founding fathers of the United States of America raised the profound question, “…Whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend for their political constitutions on accident and force”. The founding fathers of the United States showed that the former was possible, of course, which also showed that every country should carefully consider which political system is best suited to their needs before selecting one. Twenty years ago, Deng Xiaoping established three basic criteria for judging a country’s political system: “First, whether the country is politically stable; second, whether the system and policies help to strengthen unity among the people and to raise their living standards; and third, whether the productive forces continue to develop.” At the core of these principles is the need to consider whether or not a political system effectively promotes a country’s progress and development.

A system will necessarily be judged on whether or not it aids human development. But though wise men of different eras and different countries have differed in their opinions on the merits of various systems, a consensus exists on the assertion that a country’s progress and development is dependent on having in place a rational system.

A rational system has to be freely chosen by a country; the chosen system has to have a solid basis in reality; and the reality-based system has to be able to promote progress and development. China’s experience of development since reform and opening up began has sufficiently proved this point.

China’s Current System is a Product of its Modernization and Development China’s current institutional system has no historic links with and is entirely different from the traditional fully developed imperial system. This is because China’s current system is not endogenous but is a modern imported Western system. Nevertheless, this foreign institutional system was established in China and freely chosen and implemented under China’s specific historical conditions. Although invasions by Western powers ultimately lay behind its choice, the process that led to the old system being replaced and the selection and construction of the new system was the result of independent exploration and practice by the Chinese people aimed at extricating themselves from a national crisis, modernizing China and achieving national rejuvenation, and in this sense, therefore, the modern institutional system that China established and employed was Chinese. This differed from the situation in India, for example, where a modern institutional system was established and developed under British colonial rule.

Of course, China did not independently construct its modern institutional system overnight. It involved a difficult period of trial and error and careful choices. After the Revolution of 1911 brought an end to the millennia-old imperial system, China first considered establishing an American-style democratic republic. But the political reality in China quickly made it clear that there was little hope of constructing such a system, as the federal system of the US would not only most likely fail to solve the problem of China’s internal disunity, but exacerbate it. Moreover, American-style party democracy, in which two parties divide the political spoils, would be unable to guarantee the normal operation

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of democracy in China, and could even be a source of infighting. As a result, after Yuan Shikai failed in his attempt to proclaim himself emperor and the subsequent running battles between warlords brought the Democratic Republic 2

established by the Revolution of 1911 to a premature end, Sun Yat-sen and other members of the KMT moved beyond constructing purely democratic institutions and began constructing their own modern institutional system that integrated the institutions of a democratic republic into the framework of China’s modern nation building. This was accompanied by a marked shift from learning from the United States and Europe to learning from the Soviet Union. Sun Yat-sen then proposed the San-min Doctrine (Three People's Principles), Five-Powers Constitution, and Program for National Reconstruction to provide theoretical support for constructing a system with the Revolutionary Party as the leadership core and practitioners. The practice of constructing this system was different from previous efforts and was limited to using democracy to bring an end to the autocratic monarchy. It focused on how to restore order, unity, and development in China under a modern institutional system, and thereby effectively bring about democracy and modernization. However, Sun Yat-sen’s nation building was quickly thrown off course by Chiang Kai-shek’s one-party military dictatorship, and was ultimately abandoned due to the civil war started by the Kuomintang and the War of Resistance against Japanese Aggression. The Communist Party of China (CPC) continued the mission started by Sun Yat-sen of building China into a modern nation, but also sought to carry it forward in terms of the choice of system, as the CPC believed that the people should be the masters of the new society and state. To this end, on the basis of the New Democratic Revolution, the CPC established a new democratic political, economic, and cultural system that was modeled on Soviet Russia, based on their experiences from the revolutionary base area, and socialist-oriented. Following the completion of the socialist transformation in New China, the CPC gradually turned their attention to the construction of a socialist institutional system, and this historical process has continued to this day. It was through this historical process that China’s modern institutional system was gradually established, and though every effort involved in establishing it was connected to the reality of revolutionary tasks, they also had to overcome the three basic development problems facing modern China: how to achieve the smooth transition from the ancient traditions of imperial China to a modern state, including replacing autocratic rule with democracy and replacing the traditional with the modern; how to maintain the internal unity of such a large county in the course of a modern transformation following the collapse of the imperial system and prevent the European scenario from occurring in China (fragmentation leading to the establishment of a series of smaller nation-states); and how to rapidly modernize a once-powerful empire within the framework of a modern state system in order to achieve the rejuvenation of the Chinese nation.

It was the questions raised by these three problems that led to constant practice and exploration in the selection and construction of China’s modern institutional system, as well as unremitting efforts to find a new path and new practice in the face of every crisis. It was also the questions raised by these three major problems that closely tied the selection and construction of China’s modern institutional system to the problems faced in the modern transformation of Chinese society and to the national conditions and conditions of the people that were shaped by Chinese history, society, and culture, and ultimately led to a solution to the practical problems in China through the pursuit of ideals and learning from the examples of others.

It is clear that although the current institutional system in China has foreign roots, it was freely chosen and self-constructed; therefore, it has sufficient basis in reality and been fully adapted to China’s society, history and culture, as well as acquired strong Chinese characteristics.

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Yuan Shikai (袁世凯, 16 September 1859 – 6 June 1916), was an important Chinese general and politician, famous for his influence during the late Qing Dynasty, his role in the events leading up to the abdication of the last Qing Emperor of China, his autocratic rule as the first official President of the Republic of China, and his short-­‐lived attempt to restore monarchy in China, with himself as the Hongxian Emperor (洪宪皇帝), the "Great Emperor of China."

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Dr. Sun Yat-­‐sen (孙中山，12 November 1866 – 12 March 1925), was a Chinese revolutionary, first president and founding father of the Republic of China ("Nationalist China").

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Democracy Has Promoted China’s Transformation and Created Development in China China’s recent history shows that, despite struggles arising from choosing between the traditional and modern, reform and revolution, and a constitutional monarchy and democratic republic, completely dismantling the traditional imperial system in the process of modernizing it was ultimately unavoidable. It was inevitable due to the difficulties associated with transforming the traditional imperial system, as well as an inevitable requirement of the times.

Moreover, it allowed China’s modern institutional system with an intrinsic orientation toward democracy to be constructed on its ashes, and made it impossible to simply reconstruct the traditional absolute monarchy and create a refined modern authoritarian system. To avoid the latter, a democratic system was the inevitable choice from the outset when selecting a modern institutional system to achieve China’s transformation and development. Indeed, one can see from China’s development in modern times that democracy has helped bring about China’s transformation and development.

However, the epochal mission and real-world tasks involved in constructing a modern institutional system in China determined that China’s democratic practice would immediately have to focus on the central task of how to build a modern state on the rubble of the traditional imperial system. China’s starting point was therefore different from that of Western liberal democracies, different in the fact that China did not directly champion individual liberty, but rather emphasized the importance of the country as a political community of equal subjects. This starting point, which was adopted by both Sun Yat-sen in his San-min Doctrine and the CPC in its People’s Democracy theory, made achieving liberation of the people and making the people masters of the country the primary task and core value of China’s democratic practice.

In an article titled “On the People’s Democratic Dictatorship ” published in 1949, Mao Zedong clarified the similarities and differences between the efforts of the KMT and those of the CPC: In 1924 a famous manifesto was adopted at the Kuomintang’s First National Congress, which Sun Yat-sen himself led and in which Communists participated. The manifesto stated: The so-called democratic system in modern states is usually monopolized by the bourgeoisie and has become simply an instrument for oppressing the common people. On the other hand, the Kuomintang’s Principle of Democracy means a democratic system shared by all the common people and not privately owned by the few. Apart from the question of who leads whom, the Principle of Democracy stated above corresponds as a general political programme to what we call People’s Democracy or New Democracy. A state system which is shared only by the common people and which the bourgeoisie is not allowed to own privately -- add to this the leadership of the working class, and we have the state system of the people’s democratic dictatorship.

The key to achieving this democracy to be shared by the common people, or People’s Democracy, is guaranteeing that state power belongs to all of the people, and that the people operate this state power. To this end, both the system designed by Sun Yat-sen based on the separation of powers and the system designed by Mao Zedong based on People’s Democracy, they all built the system around the people operating state power: the former designed the system of national assemblies, and the latter designed the system of people’s congresses. These systems were designed so that China’s democratic practice and their institutional construction would differ from Western models and have distinctive Chinese characteristics.

Western democratic theory and system design stresses that power comes from the people and that it is the state’s job to protect the rights of the people. However, China’s theory of People’s Democracy not only stresses that power comes from the people, but also that the people should wield state power and be masters of the country. It has thus been asserted that People’s Democracy exceeds Western bourgeois democracy, and on this basis it goes as far as to ignore the individual and the protection and realization of the individual’s right to freedom for a period of 3

time. This situation has fundamentally changed in the process of the political construction and development that has taken place since reform and opening up began. The fundamental driving force behind this has been the basic changes that have taken place in people’s social existence due to reforms and the socialist market economy, from having communities under a system of institutions to individuals under a legal contract system. Individual independence and autonomy have meant that Chinese democracy, at the same time as it stresses state power belongs to all the people, is focused on the inherent mission of state power: to safeguard the individual’s right to freedom and to safeguard social equality and justice. It is under this new pattern that Chinese democracy has begun to move towards comprehensive institutionalization and a framework been created for building People’s Democracy based on the three-in-one of protecting human rights, civil rights, and the sovereignty of the people.

It is evident from this that, although the democratic design of China’s modern institutional system differs from Western models, its guiding principles are modern; it fundamentally meets the requirements for the people and society’s comprehensive development; and it is a form of modern democracy, all of which has creative value and significance for the civilized development of a modern system. Of course, greater theoretical and practical efforts are needed for it to mature and be perfected.

Rational System Choice and Construction Have Led to China’s Modernization From the above analysis, it is not difficult to conclude that the construction of China’s modern institutional system in recent times has, overall, evolved in a rational direction, and that China has maintained autonomy over the system’s construction, constructed it in a modern and democratic manner, and maintained its usability in the course of its construction. While in the process of modernizing, China constructed the basic institutional framework needed for modern nation building in the less than 40 years between 1911 and 1949, and having bid farewell to the imperial system, the state did not disintegrate, not only that, it rapidly strode onto the path of development and rejuvenation.

It can therefore be said that the rational choice and construction of an institutional system have led to China’s modernization.

Theory and practice have shown that the rational choice and construction of a system is not a one-time historical action, but an ongoing process of institution building, which requires successive institution builders to agree on the goals and value principles. In the course of constructing a modern institutional system in China, the CPC’s effective leadership has played an important role. The CPC did not possess an inherent ability to construct a modern institutional system in China. Rather, its ability in this area, on the one hand, has come from the worldview and methodology of Marxist historical materialism and, on the other hand, from effective practice in the Sinicization of Marxism, including the practice of building political power in a base area in accordance with the Russian experience. Although the modern institutional system constructed by the people under the leadership of the CPC has clear value orientations and institutional guidelines, it has primarily been based on reality and given an open structure. Being based on China’s realities has meant that the construction of the modern institutional system has not rigidly adhered to general principles, but instead adhered to practicing and making flexible use of the general principles for constructing a modern system by taking the actual requirements of development in China as the starting point. For example, when it came to the principles for creating a state structure for a large country, China did not copy the federal system of other large states, but implemented a unitary system of government, and used a creative system of ethnic regional autonomy to achieve the coexistence of multiple ethnic groups in one large country. Having an open structure has meant that in the course of constructing a modern institutional system in China it has been possible to learn from the experiences of other countries and actively absorb their achievements.

For example, in building a country based on the rule of law, developing a modern government, and constructing a market economy, China has studied and absorbed the advanced negatively affects the government’s legitimacy.

If

people are not aware of the selection process, they may suspect that promotion is based primarily on loyalty, guanxi, or corruption. But shedding light on the actual mechanism will help to dispel such suspicions. Once I heard from 4

Minister Li about the rigorous selection process for the Secretary General of the Organization Department of the CPC Central Committee, my respect for that successful candidate increased tenfold! I assume other people would have a similar reaction. Of course, the very fact that Minister Li told us about the process suggests that there is a decision to increase transparency, which is good sign.

Second, I wonder if constraints on freedom of speech, especially political speech, inhibit meritocratic decision making. The best political decisions, of course, need to be based on complete information, but fear of negative consequences may inhibit stakeholders from expressing their viewpoints. I realize that the CCP carries out internal polling to get as much information as possible, and that cadres are encouraged to constantly learn and improve, but fewer barriers to the freedom of speech may improve the quality of decision-making.

Third, I wonder if the rigorous, multi-year talent selection process discourages risk-taking. In other words, it is possible that relatively creatively and original minds may be weeded out early because they have offended people or challenged the “normal way of doing things.� In times of crisis, perhaps the Chinese political system allows for substantial change, but in ordinary times, there may be unnecessary attachment to the status quo long after it has extended its practical utility. Perhaps this problem (if it is a problem) can be remedied by allowing for one or two positions in important government posts to be reserved for talented people from other walks of life, such as business or academia.

Fourth, I wonder if the leadership selection process is biased against females. The process seems so time consuming that it seems hard reconcile with ordinary family life. Since females are often the main care-takers of family members, they may not have sufficient time to compete fairly with males for top government posts. This matters if we agree that leaders should have compassion. If compassion is mainly a female trait (perhaps this statement is controversial), then we should encourage more females in government. Perhaps half of the government positions at the highest levels of government should be reserved for females.

Fifth, I wonder if the leadership selection process allows for enough time for systematic reflection on ethical and political matters. Perhaps a few weeks at the Party School is not sufficient for leaders to read the great works in politics, history, and philosophy that deepen one’s knowledge as to possibilities of morally-informed political judgments. If political leaders were encouraged, say, to take six-month leave period with few obligations other than reading great works (especially the Confucian classics), the long-term effect on the ability to make morally-informed political judgments is likely to be positive.

Sixth, I wonder if there is a need for more international exposure in the selection process. The main task of the Chinese Communist Party is of course to serve the Chinese people. But China is now a great global power, and what it does also affects the interests of people living outside of China, and it needs to be as humane as possible in its dealings with other countries. It is a good sign that the children of government leaders are often educated abroad because they can serve as informal advisors, but nothing takes the place of personal exposure to foreign ways of doing things. Perhaps the selection process of high-level government leaders can also value experience abroad and even foreign language skills.

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“The Current State of Defense Innovation in China and Future Prospects” Tai Ming CHEUNG China’s defense economy has undergone a far-reaching makeover since the late 1990s to become one of the country’s leading dynamos for innovation today. Measured by the output of weapons platforms, profits, and patents, the aviation, aerospace, shipbuilding, electronics, nuclear, and ordnance sectors that make up the defense industrial base are flourishing. Strong and sustained leadership support, generous state funding, pent-up domestic demand, the emergence of new generations of well-trained scientists and engineers, and access to foreign technology transfers are some of the principal factors contributing to this rejuvenation.

However, the structural foundations upon which this technological progress is built have not kept pace with the changes. Entrenched monopolies, bureaucratic fragmentation, continued dependence on foreign technology, and the absence of a rules-based acquisition system are some of the problems that confront the defense economy. This begs the question of whether the Chinese defense economy will be able to continue to move up the innovation ladder and reach its goal of entering the top tier of global defense champions within another decade or find itself bogged down in a transition between state planning and marketization that leads to growing inefficiencies and stifles innovation.

Change and Innovation in Today’s Chinese Defense Economy China’s extensive efforts and investment in building its defense science, technology, and industrial capabilities have borne fruit since the second half of the last decade with the emergence of an impressive array of high-technology weapons systems. There are now so many projects under way that the Chinese defense industry appears to be on steroids. The aviation sector is simultaneously engaged in the development or production of more than half a dozen combat and transport aircraft, which is more than any other country in the world. They include fifth-generation low-observable Chengdu J-20 and Shenyang J-31 fighter aircraft and the Shenyang J-15 carrier-borne fighter, which is derived from Russian/Ukrainian technologies.

The shipbuilding industry is carrying out at least four active nuclear and conventional submarine programs along with R&D and construction of aircraft carriers, destroyers, and numerous other surface warships. The space industry is also pursuing highly ambitious across-the-board development, including manned, lunar, anti-satellite, and satellite projects. The enormous scale and intensity of this technological and industrial undertaking has not been seen since the Cold War days of intense U.S.-Soviet technological and military rivalry. The pace, breadth, and nontransparent nature of China’s activities is causing growing anxiety among its neighbors and the United States.

It is important, however, to distinguish between the expansive nature of China’s defense technological and innovative activities and their quality and effectiveness. While China has made considerable efforts since the late 1990s to revamp its defense innovation capabilities, the results so far are mixed. Although the space and missile industries have made impressive progress and are able to engage in mid-level forms of innovation, many other sectors, including aviation, shipbuilding, and ordnance, continue to engage in a mixture of high-end imitation and lower-end innovation activities.

A good example is the development of China’s aircraft carrier program and the J-15 fighter aircraft that will operate from the decks of these vessels. The PLA Navy’s first aircraft carrier, the Liaoning, is a rebuilt vessel purchased from the Ukraine in the mid-1990s. Chinese officials argue that the Liaoning should be viewed as a wholly indigenously developed product because all of the ship’s key systems, equipment, and armaments, such as engines, 6

radar, command and control facilities, and aircraft landing equipment, were sourced domestically. While the technological capabilities of the Liaoning and J-15 are likely to have been enhanced with Chinese subsystems and components, the Chinese shipbuilding and aircraft industries required the initial architectural platforms from Russia and Ukraine as starting points for developing their own variants.

The uneven state of development of the defense industry is likely to continue for the foreseeable future, with pockets of excellence existing in a broader landscape of technological mediocrity. However, more of these innovation clusters are likely to appear and to expand in size and capability, especially over the medium to long term.

Innovation and Economic Performance by the Country’s Defense Conglomerates The country’s ten state-owned defense corporations is a principal engine powering the Chinese defense economy’s transformation and a key source for innovation. Average annual revenues from these defense firms since the mid-2000s have expanded by around 20 percent. Total reported revenues from these firms, excluding China State Shipbuilding Corporation, came to an estimated RMB 1.412 trillion (US$233 billion) in 2012.

An important indicator of improving efficiency is the profitability of the defense corporations. Total industry earnings reached an estimated RMB 85 billion in 2012. This is a remarkable turnaround for an industry that was a chronic money loser before the early 2000s.

There is no breakdown to show how much of the profits flow from civilian versus military sales, but contractors have long complained that they struggle to make any profits on their defense operations because regulations dating from the central planning era limit profit margins on military contracts to a fixed 5 percent on top of actual costs.

Approximately one-third of defense budget expenditures go to covering equipment expenses, according to Chinese official explanations. This includes research and development (R&D), experimentation, procurement, and maintenance activities. This would mean that the 2012 equipment budget would be in the region of RMB 220 billion.

Financial data from defense corporations, however, suggest that the scale of the PLA’s acquisitions maybe significantly larger than these disclosed official figures. It is likely that around one-quarter of the income of the ten defense corporations would be defense-related business and the rest would be civilian output. Even accounting for modest levels of foreign arms exports, which is estimated to be US$1–1.4 billion annually, these figures suggest that Chinese military research, development, and acquisition (RDA) spending is at least 50 percent higher than the official figures would imply. Total estimated R&D corporate spending by the defense industry in 2010 would likely be around RMB 66–68 billion ($US10.4–10.7 billion).

This intensification in R&D shows the high priority that the defense authorities have placed on building up indigenous defense innovation capabilities over the last decade. A high-level review conference on the state of defense R&D in late 2011 noted that there had been a major enhancement of R&D capabilities during the 11th Five-Year Plan (1996–2000) with major breakthroughs in critical bottlenecks, higher rates of converting R&D into actual production, and an improvement in the level of research talent entering the defense science and technology (S&T) base.

Leadership Commitment to Defense Innovation China’s national leadership—civilian, military, scientific, and corporate—has provided strong support for the Chinese defense economy and its efforts to become more innovative since the late 1990s. This backing has been instrumental for much of the progress that has taken place, especially because it enabled access to large amounts of state resources and helped to overcome bureaucratic and other structural obstacles. If senior policymakers remain 7

committed to the goal of building a world-class defense S&T system, funding remains plentiful, and military end-user demand continues to be strong, the development of the defense economy’s innovation capabilities will continue on an upward trajectory and could even accelerate.

The fifth generation of civilian and military leaders that have taken charge of the country since the 18th Party Congress in 2012 appear to firmly subscribe to the vision defined by their immediate predecessors and enshrined in the various medium- and long-term S&T planning guidance issued since 2000 stating that having a world-class indigenous innovation capacity is critical to China’s long-term national security and economic competitiveness. An ideological theme that Party general secretary and Central Military Commission (CMC) chairman Xi Jinping highlighted shortly after he took office at the 18th Party Congress was the importance of “rejuvenation” and “revival of the Chinese nation.” These nationalistic sentiments suggest that Xi will embrace the techno-nationalistic philosophy that has been a cornerstone of China’s approach to defense S&T innovation since the 1950s.

External Security Threats and Innovation If China’s leaders were to view the country’s national security as coming under serious threat once again, as happened between the 1950s and 1970s, there could be another concerted drive to attain breakthroughs in critical defense technological capabilities. Several events since the 1990s have boosted the strategic priority of the development of the defense S&T system in the eyes of the Chinese authorities. Cross-strait tensions between Beijing and Taiwan beginning in the early 1990s led the PLA and the defense industry to ramp up their defense modernization efforts, amid fears that Taiwan was moving towards independence. This led to a concerted effort to develop ballistic missile and precision strike capabilities along with more regular conventional forces such as armored fighting vehicles, combat aircraft, and warships.

The next key event was the U.S. bombing of the Chinese embassy in Belgrade in May 1999. The Chinese leadership’s reaction was to sharply intensify efforts to develop strategic weapons systems. According to a biography by General Zhang Wannian, who was a CMC vice chairman during the Belgrade Embassy crisis, the CMC convened an emergency meeting immediately following the bombing, and one of the key decisions made at the meeting was to “accelerate the development” of advanced armaments. Zhang pointed out that Jiang Zemin was especially insistent on the need to step up the pace of development of asymmetric weapons projects.

A new major threat dynamic appears to have emerged since the beginning of the 2010s, with a sharp rise in maritime, especially territorial, tensions between China and several of its neighbors and with the United States announcing a strategic rebalancing back to the Asia-Pacific region, and in particular East Asia. A key plank of the U.S. pivot is the development of a new Air-Sea Battle doctrine that is designed to thwart China’s efforts to curtail the U.S. military—especially naval—presence through an anti-access/area denial strategy.

With China and Japan at loggerheads over the Diaoyu/Senkaku Islands in the East China Sea and rattling increasingly sharp sabers at each other, alongside standoffs between China and Southeast Asian countries over the Spratly Islands in the South China Sea, the Chinese leadership is calling for the PLA and the defense industry to step up their “preparations for military struggle, comprehensively improve deterrent and combat capabilities under informationized conditions, and safeguard the sovereignty, security, and development interests” of China. Under this new, more dangerous threat environment, the defense technological and innovation base may enjoy even greater access to resources and be encouraged to become more aggressive in pursuing technological breakthroughs and surprises, especially in areas such as asymmetric (cyber, space, missiles) warfare and long-range naval and air power.

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Critical Obstacles to Future Progress While the Chinese defense economy has taken important strides in transforming itself from a lower-tier military technological and industrial laggard, it still faces tough challenges that could impede continued progress. The fundamental problem is that large portions of the defense economy continue to operate according to the norms, operating principles, routines, and habits of the socialist central planning economy. This is not surprising, as the defense economy did not seriously begin to undertake market-oriented reforms until the late 1990s.

One major problem is the lack of competitive mechanisms for awarding contracts for major weapons systems and defense equipment because of the monopolistic structure of the defense industry. Contracts continue to be awarded through single sourcing mechanisms to the big ten state-owned defense corporations. Some PLA acquisition experts view this monopoly structure as the biggest obstacle in its long-term reform.

Bureaucratic fragmentation is another serious problem and affects a number of critical coordination and command mechanisms within the PLA and RDA systems. One serious gap at the top of the military RDA management pyramid is the truncated role of the PLA General Armament Department (GAD), which is only responsible for managing the armament needs of the ground forces, People’s Armed Police, and militia. The navy, air force, and Second Artillery have their own armament bureaucracies, and competition is fierce for budgetary resources to support projects favored by each of these services. This compartmentalized structure serves to intensify parochial interests and undermines efforts to promote joint undertakings.

The RDA process is also plagued by compartmentalization. Responsibilities for research and development, testing, procurement, production, and maintenance are in the hands of different units and under-institutionalization has meant that linkages among these entities are ad hoc in nature with major gaps in oversight, reporting, and information sharing.

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“Time for A New Beginning in Sino-U.S. Relations” WU Xinbo “A good beginning is half done”, the conventional wisdom says, yet this may not be true for China-U.S. relations during Obama’s first term. Although the Obama administration secured a smooth transition of Sino-U.S. ties from G.W. Bush administration and attached high priority to relations with China during its first year in office, bilateral relations began to take a downward curve in the second year, throughout the first Obama administration, it deteriorated “from a high start to a low ending,” leaving a legacy of growing mutual suspicion and rising competition between the two countries, especially in the Asia-Pacific region. In spite of the agreement reached 1

between the two sides on building a “positive, cooperative, and comprehensive relationship,” they missed opportunities for more cooperation while mishandling and even misguiding bilateral ties on some points.

The next several years are crucial for Sino-U.S. relations. China is now under a new leadership that is more self-confident and more attentive to its public opinion. The further narrowing of the power gap between China and the United States will generate more anxiety in Washington. The competition between two countries in the Asia-Pacific may pick up momentum. At the same time, the world’s two largest economies will be required to cooperate and coordinate to promote global governance in an era when regional and global challenges are just growing and more complicated.

Lessons From the Past Four Years In order to better manage bilateral relations in the future, both Beijing and Washington should draw lessons from the past four years. For China, as it is becoming a hub for regional economic links, it should also play a central role in regional security, therefore Beijing needs to demonstrate both the willingness and capacity to work with others, including the U.S., to effectively deal with security challenges to the region. Meanwhile, China should also assure others that it can peacefully manage and resolve maritime disputes with some of its neighbors, just as it did over land territorial disputes during the past two decades.

For the U.S., it should treat China as an

important global partner not just in rhetoric and diplomatic gestures, but also in actions, this requires Washington to adjust some of its long-held practices, such as arms sales to Taiwan, the U.S. President’s meeting with Dalai Lama, frequent and intrusive air and maritime surveillance on China in its vicinity, etc. Moreover, U.S. policy makers should adopt an enlightened view of China’s rising power and influence, and should avoid putting it in a zero-sum perspective and implementing a strategy aimed at checking China’s growing capability and international clout.

Developments of Sino-U.S. relations in the past four years also revealed some risks and challenges that should be overcomed by both sides. One is the lack of clear and strong political leadership in both countries, and as a result, bilateral relations fell victim to rivalry among various interest groups and bureaucratic institutions, thus lost both directions and momentum. Another is the gap in goals and expectations between two parties. When one’s efforts and expectations were not met by the other, a sense of frustration would arise, leading to a more negative view of the other. These developments impeded the release of potential for cooperation between two countries and left the emerging bilateral strategic competition out of control.

Opportunities For a New Beginning Fortunately, there exist opportunities for Sino-U.S. relations at the beginning of Obama’s second term.

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In the joint statement released during Obama’s visit to China in November 2009, two countries promised that “they are committed to building a positive, cooperative and comprehensive China-US relationship for the 21st century, and will take concrete actions to steadily build a partnership to address common challenges.” “China-U.S. Joint Statement”, November 17, 2009, Beijing, http://www.fmprc.gov.cn/eng/wjb/zzjg/bmdyzs/xwlb/t629497.htm

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China’s new leader Xi Jinping, who paid a successful visit to the United States in early 2012, feels comfortable in dealing with the U. S. He wants constructive and cooperative ties with Washington and proposed to forge with the 1

U.S. “a new type of major power relationship”, which sets the goal for China’s U.S. policy. On the U.S. side, without the pressure of getting reelected, President Obama can pay more attention to relations with China in his second term and provide necessary leadership to U.S. China policy. Secretary John Kerry understands China’s growing importance to U.S. interests and global affairs and supports the development of close and cooperative relations with China. From the Chinese perspective, his team appears more credible than “the Clinton-Campbell axis” during Obama’s first term.

As both sides want to reset bilateral ties, they have made serious joint efforts to bring bilateral relations back on right track. In June 2013, Xi and Obama held an informal meeting in Sunnylands in California. This unprecedented arrangement reflects first and foremost the overlapping expectation from both sides for better Sino-U.S. ties. In fact, this summit meeting, less formal but more substantive and candid, established a new type of interactions between Chinese and U.S. Presidents and is likely to continue in the future. Having spent 8 hours together in a more relaxed environment, Xi and Obama were able to communicate with each other face to face and get a better understanding of the other side. The fact that they expressed an interest in holding similar meeting in the future suggests that the first one is useful and contributes to the development of a working relationship between them.

With a positive tone set by two leaders for bilateral relations, the 5th Strategic and Economic Dialogue (S&ED) was held in Washington DC one month later, and the new diplomatic and economic teams from both countries met to discuss a wide range of issues. In spite of the unanticipated impact of the Snowden episode, the dialogue achieved many concrete agreements and results, while the two teams got to know each other through dialogue and began to build a working relationship. This attests to the significance of political leadership exercised by both leaders as well as high expectation from both sides for a more constructive and cooperative relationship.

Moreover, the concept of “a new type of major power relationship” put forward by President Xi offers both sides a useful intellectual framework in which bilateral relations should be contemplated and handled. From the Chinese perspective, the core elements of this relationship are “no conflict, no confrontation, mutual respect and 2

win-win cooperation”. Although the full policy implications have yet to be explored, the idea reflects an honest desire on the part of Beijing to avoid the tragedy of major power conflicts under the new circumstances featured by rapid development of globalization and deepening interdependence among countries. The U.S. side was initially cautious and even dubious with the idea, but during the meeting in Sunny lands, President Obama agreed to make joint efforts along with China to advance this goal. This agreement not only sends a good signal to the other side about their respective intentions, but also helps set a positive tone for internal policy making on both sides.

New Vision and New thinking The forging of a new model of relationship between China and the U.S. requires both new vision and new thinking. Without a new vision, both sides may lose direction in steering through a growingly complex bilateral agenda. Without new thinking, it is almost impossible to make breakthrough with so many difficult issues, old and new, in bilateral relations.

From a historical perspective, since Sino-U.S. reconciliation in early 1970s, bilateral ties have experienced 1

Xi first put forward this idea when he visited the U.S. in February 2012 as the Chinese Vice President, then in May 2012, during the fourth Strategic and Economic Dialogue held in Beijing, the Chinese side further explained this concept to the U.S. side, finally, in June 2013, during their informal meeting in California, Xi fully expounded this concept to Obama.

2

“Exploring the Path of Major-Country Diplomacy With Chinese Characteristics”, Remarks by Foreign Minister Wang Yi at the Luncheon of the Second World Peace Forum, 27 June 2013, http://www.fmprc.gov.cn/eng/wjdt/zyjh/t1053908.shtml

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several major changes. With Nixon’s visit to China, Beijing and Washington moved toward strategic cooperation to check Soviet expansion, two countries became strategic partners. With the end of the Cold War and acceleration of globalization, China sought to fully join international economic system and the U.S. welcomed and facilitated this process, two countries thus became major economic partners. In the early 21st Century, with developments such as China’s rapid rise, emergence of regional and global challenges, and multipolarization in international politics, Beijing and Washington are doomed to become global partners in enhancing global governance. This new vision of “global partners” provides the backbone to the new model of major power relationship as well as the direction as two sides try to move ahead.

The United States emerged as a major power in the early 20th Century and was also a winner of the Cold War, therefore, it takes for granted the realist thinking such as power balance, geo-politics, military alliance, zero-sum game, etc. As a hegemonic power, it manifests a proclivity for over-caring about national security, seeking superior military might, playing security card, and securing hegemony. It is these thinking and related practices that have caused many troubles in Sino-U.S. relations and given rise to Beijing’s distrust of Washington. To be sure, the U.S. is an established power, yet it should not be an obsolete one addicted to outmoded thinking and practices. Rather, it should cast itself as a progressive power embracing the thinking commensurate with the international politics of the 21st century.

China has emerged as a major power in the post-Cold War era, benefitting from economic globalization and international cooperation. Therefore, China values such liberal thinking as peaceful development, mutual trust, mutual benefit, equality and coordination.

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It repudiates forging military blocs and seeking military superiority as

obsolete Cold War mentality. On the other hand, as a country that suffered in the hands of the Western powers and Japan in “the era of humiliation”, China carries a bitter legacy of the past and possesses a mentality of the weak state. As a result, Beijing has insisted on a stricter adherence to the concept of sovereignty and the principle of non-interference in other’s international affairs, which constrains its role in promoting regional and global governance. This has from time to time frustrated Washington when its expectations of Beijing’s cooperation were not met. The challenge for China is, as its material power expands, so should its ideational power, thus allowing it to keep up with the times and play its role as a responsible power.

Mission Ahead The forging of a new model of major power relationship between China and the U.S. should start with the expansion of cooperation and management of differences over a couple of issues: the Korean issue, maritime disputes in East Asia, military-to-military ties, economic relations and cyber security.

The Korean issue North Korea’s third nuclear test in February 2013 indicated that Pyongyang continues to develop its nuclear capability, and the de-nuclearization of the Democratic People’s Republic of Korea (DPRK) thus becomes more urgent. However, the ultimate solution of DPRK’s nuclear issue depends on Pyongyang’s policy transformation on two fronts: domestically, from military-first to economy-first, and externally, from a posture of confrontation to one of reconciliation and cooperation. While external pressure may help prevent Pyongyang from conducting further nuclear tests aim at enhancing its nuclear capability, the de-nuclearization will only occur as a result of the above transformation. Evidences suggest that since Kim Jong-un’s accession to power, DPRK has been shifting its national agenda to economic development and improvement of people’s welfare. Meanwhile, as the international pressure (especially the pressure from China) mounted after the DPRK’s 3rd nuclear test, Pyongyang is softening its posture towards the Republic of Korea (ROK) and the U.S. At the same time, the new ROK President Park 1

“China's Peaceful Development”, Information Office of the State Council, The People's Republic of China, September 2011, http://www.gov.cn/english/official/2011-09/06/content_1941354.htm

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Geun-hye is pushing a process of “trust-building” on the peninsula. Under these circumstances, there seems to exist a good opportunity for Beijing, Washington and Seoul to work together to facilitate Pyongyang’s policy transformation.

From 2003 to 2008, China hosted the Six-Party Talks (China, the U.S. Russia, Japan, DPRK and ROK) to solve DPRK’s nuclear issue, yet it failed to prevent Pyongyang from developing its nuclear capability. Why? Because this approach didn’t effectively DPRK’s core security concern. It is time to try an alternative. Instead of restarting the 6-party talks aimed at solving the DPRK nuclear issue, the four parties to the Korean War—China, 1

U.S., and two Koreas— should restart the “4-party” process that ran from December 1997 to August 1999. The Four-Party Talks should focus on reducing the tension on the peninsula and replacing the truce treaty signed in 1953 with a formal peace mechanism. Such a mechanism, formally terminating the state of war and renouncing the use of force to solve disputes on the peninsula in the future, would provide Pyongyang the incentive to adopt a more reconciliatory posture and abandon its nuclear program. China and the U.S. have important roles to play in the process: from providing initiatives to restart the 4-party process to helping set the agenda and navigating the 2

negotiations through the turbulent water to finally signing up to the new peace treaty.

Maritime Disputes The flare-up of old disputes over Diaoyu Islands between China and Japan in East China Sea and over Nansha Islands among China, Vietnam, Philippines, Malaysia and Brunei in South China Sea posed challenges to Sino-U.S. relations. Some of the disputants, such as Japan and Philippines, are U.S. allies, and they expect U.S. support of their positions and have tried to drag the U.S. deeply into the disputes. On the other hand, against the background of China’s growing sea power and more active naval activities in the Western Pacific, as well as the Obama administration’s rebalance to Asia strategy, the U.S. may be tempted to make the use of these disputes to check China.

However, Washington should understand the limits of its role in these disputes. It can not get involved as a direct party to the disputes, not can it support the sovereignty claim of any side, while it also doesn’t want to see a military conflict over these disputed islands. Therefore, the U.S. should help calm down the situation in the East and South China Sea and facilitate a peaceful solution of the disputes by encouraging mutual restraint, dialogue, and creative diplomacy, while discouraging provocative rhetoric and actions as well as the use of force. Also, Washington has to be careful in extending support to Philippine and Japan based on their alliance relations as Manila and Tokyo may regard such support as a blank check that they can use randomly in those disputes.

Moreover, the growth of China’s naval power and the expansion of its activities do not mean China is competing with the U.S. for supremacy in the Pacific, therefore Washington should resist the temptation to turn East and South China Sea into a battlefield for Sino-U.S. strategic rivalry.

China has successfully solved most of its land border disputes through negotiation and has accumulated rich experiences in this regard. It should have the wisdom and capacity to prevent maritime disputes from becoming a hot-spot issue between China and some of its neighbors as well as in the region. On disputes over Nansha Islands, Beijing should further clarify its sovereignty claims over the area with regards to the nine-dash line. It should also conduct more flexible and creative diplomacy, for instance, instead of insisting on dealing with other claimants only bilaterally, Beijing should also resort to multilateral efforts to develop agreements and arrangements conducive to the management and solution of the disputes. Even if such a multilateral approach may not work ultimately, it can still demonstrate China’s willingness to find a peaceful and reasonable solution. On 1 2

C.S. Eliot Kang, “The Four-Party Peace Talks: Lost without a Map,” Comparative Strategy, vol. 17, no. 4 (1998), 327–344.

Wu Xinbo, "Forging Sino–US Partnership in the Twenty-First Century: opportunities and challenges", Journal of Contemporary China, Volume 21, Issue 75, 2012, pp.

397-398.

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Diaoyu Islands dispute, while it is understandable that China needs to assert its claim by maintaining regular boat patrol around the islands, it should help reduce the risk of inadvertent conflict with Japan. Meanwhile, it should work to secure an agreement with Japan that either re-freezes the disputes or pursue joint-development of the islands and resources in adjacent water.

Military-to-Military Ties Over the past several years, as Obama’s rebalance strategy gave more preeminence to the security dimension of the U.S. Asia-Pacific policy and the Air-Sea Battle Doctrine was formally adopted by Pentagon, the U.S. military posture in the Western Pacific took a strong focus on China. Also, in the face of defense budgetary constraint, the U.S. military (navy and air force in particular) is using China as a convenient pretext for securing resources. On the other hand, as the People’s Liberation Army (PLA) pushes forward its modernization drive, dealing with the U.S. military pressure in the Western Pacific is a major task, which is partially reflected in PLA’s pursuit of anti-access and area-denial capabilities. As a result of these developments, growing strategic rivalry in the Western Pacific has featured military relations between two countries in recent years. This bodes ill for overall bilateral relationship.

However, even though two militaries are preparing for a worst-case scenario, a major military conflict between China and the U.S. is highly unlikely. First, the Taiwan issue—the most likely source of serious military conflict between two countries—is well under control and relations across the Taiwan Straits are moving in the right direction. Second, the economic interdependence between two countries is so high that neither side can afford a rupture in bilateral ties. Third, the two sides have the political wisdom to control the negative strategic dynamics and avoid a major conflict. Given this, the real challenge is, how to secure a more positive and cooperative bilateral military relations, and how to reduce factors that gave rise to distrust and even confrontation between two militaries?

In an era when war between major powers is increasingly unlikely, Chinese and U.S. militaries should devote more resources to providing international public goods, such as protecting sea lanes of navigation, disaster relief, humanitarian assistance, etc, and as the rising non-traditional security challenges confront the world, they offer plenty of potential areas of cooperation between two militaries. Once the PLA and U.S. army pay more attention to expanding cooperation rather than preparing for a war with each other, the mood between two militaries will surly improve.

On another front, the lasting and frequent military surveillance on China by the United States from both air and sea in China’s vicinity stands as an irritant to bilateral military relations. For the Chinese, it is simply provocative and intolerable. In fact, it not only gives rise to the PLA’s suspicion of U.S. strategic intentions toward China, but also runs the risk of causing some incidents between two militaries in the air or on the sea, as have already occurred in the past. The U.S. political leaders should ask its military whether it really needs to conduct so many intrusive surveillances on China. Also, the insatiable thirst for information about China’s military developments should be balanced by a broad consideration of stable strategic relations between two countries. It is desirable that Washington exercise self-restraint and curtail such activities in China’s adjacent areas―especially as Sino-U.S. military exchanges grow and increase the transparency about China’s military development.

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Economic Relations In a time when both China and the U.S. are working to promote their economic transformation so as to

1

Wu Xinbo, “Beijing's Wish List: A Wiser China Policy in President Obama's Second Term”, http://www.brookings.edu/research/opinions/2012/12/11-china-obama-wu

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secure robust and sustainable growth, cooperation between the world’s two largest economies is all the more important. To ensure that economic ties will steadily grow and continue to underpin overall bilateral relationship, several things should be addressed over the next several years. First is about trade. The Chinese side has long complained about the discriminatory treatment it received in U.S. technology export control. Although the Obama administration signaled over the past several years its intention to lessen controls of high-tech exports to China, so far there has been no real progress. Although China is America’s third largest export market and also the fastest growing one, it is not treated as equally as many of other U.S. trading partners, such as India, in high-tech trade. At the 5th S & ED held in Washington in July 2013, the U.S. side committed to “give fair treatment to China during its export control reform process and to consider China’s concerns seriously by promoting and facilitating 1

bilateral high-tech trade with China of commercial items for civil end uses and civil end users”, but how far and fast the Obama administration will move forward is a question. If Washington can deliver something substantive on this issue in the years to come, it will not only enhance U.S. exports to China and reduce the bilateral trade imbalance, but will also send a positive signal to China regarding America’s intention. China, for its part, should do a better job in protecting the intellectual rights, hopefully this will facilitate the adjustment of U.S. policy regarding technology control.

Second is investment. As Chinese direct investment in the U.S. grows, so does the Chinese concern over the political and security influence behind the U.S. opposition to Chinese investment, or so-called investment protectionism. Such concern is deepened not only by often unreasonable and irrational voices from the Capitol Hill, but also by the lack of transparency of the review process of The Committee on Foreign Investment in the United States (CFIUS). At the 5th S & ED, both sides agreed to start the negotiation for Bilateral Investment Treaty (BIT), which should help address the Chinese concern. Yet, this negotiation may take time, and before the conclusion of the BIT, Washington should do its best to not allow unwarranted security concerns to block Chinese investment; otherwise it will not only discourage the inflow of Chinese direct investment which is important to U.S. economic growth and job opportunities, but will also provoke Chinese retaliation against U.S. investment in China.

For the Chinese side, it is important to overcome the local protectionism as well as monopoly of State Owned Enterprises, and improve the environment for foreign direct investment, including those for the U.S. The third is about Sino-U.S. economic interactions in the Asia-Pacific. As the U.S. pushes the Trans-Pacific Partnership (TPP) while China continues to promote East Asian cooperation such as Regional Comprehensive Economic Partnership (RCEP), it seems two countries are engaging a geo-economic competition in the Asia-Pacific, in addition to their geo-political rivalry in the region. Given their economic importance to each other as well as to the entire region, it is crucial that China and the U.S. conduct serious economic cooperation in the region while pushing separately for their respectively favored FTA arrangements. And the Asia-Pacific Economic Cooperation (APEC) forum is the right venue. Fortunately, at the 5th S&ED, China and the U.S. agreed to “further strengthen coordination and cooperation in the APEC forum, in order to jointly promote economic growth and prosperity in the Asia-Pacific region.” As China is going to host the 2014 APEC Economic Leaders Meeting, both sides committed to “seek a closer partnership” at the forum so as to promote trade and investment liberalization and facilitation, strengthens regional economic integration and coordination, and carries out capacity building.

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Should concrete and effective Sino-U.S. cooperation occur along this line, it would send an encouraging message throughout the Asia-Pacific region, which has witnessed the most vibrant economic growth over the past several decades.

1

“Joint U.S.-China Economic Track Fact Sheet of the Fifth Meeting of the U.S.-China Strategic and Economic Dialogue”, July 12, 2013, http://www.treasury.gov/press-center/press-releases/Pages/jl2010.aspx 2

Ibid.

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Cyber Security The U.S. has long accused China of launching cyber-attack against its national security as well as commercial targets, while China has repeatedly denied such accusations and claims itself also a victim of cyber-attacks from other countries, among which the U.S. ranks first. The Snowden revelation suggests that the 1

U.S. National Security Agency (NSA) conducted many cyber-attacks against Chinese targets, confirming the Chinese complaints. While neither Beijing nor Washington would openly acknowledge their cyber espionage on each other, the Snowden episode provides an opportunity for both sides to engage a dialogue on a more equal footing.

In July 2013, China and the U.S. held the first meeting of bilateral Cyber Working Group. The two sides discussed issues of mutual concern and decided to take practical measures to enhance dialogue on international norms and principles in order to guide action in cyber space and to strengthen CERT (Computer Emergency Response Team) to CERT coordination and cooperation. With the first meeting being described as “candid, in-depth, and constructive”, two sides agreed to hold sustained dialogue on cyber issues.2 Given the fact that cyber space is a new field in which there does not exist international rules and international oversight mechanism, many state and non-state actors have taken advantage of the situation to pursue their respective goals, this not only hurts the national interests of many countries, China and the U.S. alike, but also undermines the stability of the cyber space—a new but increasingly important global commons in the 21st Century. It is therefore desirable that Beijing and Washington not only exercise self-restraint in their respective cyber activities, but also help promote the establishment of international rules and international oversight mechanism in the cyber space.

1

Te-Ping Chen, “Snowden Alleges U.S. Hacking in China”, http://online.wsj.com/article/SB10001424127887324577904578562483284884530.html; Barton Gellman and Greg Miller, “U.S. spy network’s successes, failures and objectives detailed in ‘black budget’ summary”, http://www.washingtonpost.com/world/national-security/black-budget-summary-details-us-spy-networks-successes-failures-and-objectives/20 13/08/29/7e57bb78-10ab-11e3-8cdd-bcdc09410972_story.html 2 “U.S.-China Strategic and Economic Dialogue Outcomes of the Strategic Track”, July 12, 2013, http://www.state.gov/r/pa/prs/ps/2013/07/211861.htm

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“Can China’s Leaders Harness Support for Change?”

Susan Shirk All eyes are on Premier Li Keqiang and the economic team that is drafting the proposals for a new set of economic reforms to be rolled out at the Third Plenum of the 18th Chinese Communist Party (CCP) Central Committee, convening in October 2013.

The individuals designing the reform package are well-respected market-oriented economic experts, and the central authorities are sending signals of resolve. Hopes are stirring that the reforms will be serious and substantive.

Yet scepticism remains about whether China’s political leaders have what it takes to actually implement the reforms. Analysts argue that today’s leaders lack the authority that Deng Xiaoping had in the 1980s when he was the moving force behind the first wave of China’s market reforms. This is certainly true. But to attribute the success of those reforms to Deng alone is to misunderstand the Chinese system of that time. Deng was not a dictator. He and his reformist lieutenants had to formulate a strategy to get different powerful groups on board Many people also predict that the vested interests in the current state-dominated economic system will thwart a new round of market reforms. But are the vested interests of today — state owned enterprises, corrupt officials and their families — any more entrenched than the vested interests in the command economy that existed in China in 1979 — central planners, government bureaucrats, heavy industry?

The greatest challenge to economic reform is always the political one: How to overcome the resistance of powerful groups favoured under the current system and build constituencies for reform? What kind of strategy will Xi Jinping and Li Keqiang adopt to create a reform coalition? Who are the groups that might potentially support the reforms? The logical first place to look is the private business sector. Private business is frustrated by the systemic bias toward state owned companies in obtaining bank loans and other preferential treatment. In the absence of a functioning domestic capital market and legal system, private businesspeople have to invest much of their effort in cultivating relationships with government officials. They also reduce their risk by sending their wives and children, and their fortunes, overseas. But private business has no voice in the Chinese Communist Party or the central government and therefore can’t serve as a political counterweight to the powerful state sector.

What about provincial and local officials? The officials who run China’s 33 provinces are a very important potential constituency in China — they constitute the largest bloc in the CCP Central Committee. Where do provincial and local officials stand today? Are they a vested interest in the status quo or a potential constituency for a new reform drive?

The 1980s reforms succeeded because Deng Xiaoping and his lieutenants counterbalanced the political weight of the central bureaucracy by the power of provincial leaders within the Central Committee – a strategy that at that time, I called ’playing to the provinces’. They won the support of provincial officials by making the decentralisation of economic decision-making and fiscal revenue a key component of the reform package.

Decentralisation created incentives for provincial and local governments to promote growth through the market.

Some provincial and local officials also were rewarded with special economic zones and other targeted preferential policies, which greatly benefited them and their regions. Special zones and opportunities to access the market were allocated selectively only to some particular regions, not to everywhere across the country. Once local officials started envying those regions that had been granted special treatment, they clamoured to get some 17

of these lucrative market opportunities for themselves. Over time this strategy of playing to the provinces built a bandwagon of support from provincial and local officials for the market reforms, which subsequently overwhelmed the vested interests in the command economy that were once so strong in the central planning bureaucracy and the heavy industrial ministries.

Of course fiscal decentralisation had a serious downside. The central government became very poor because most of the revenues were left at the local level. Beijing lacked the funds to build the infrastructure, social safety nets and modern national defence that China needed. To increase the central government’s share of total government revenue, fiscal reforms were introduced in 1994, whereby value-added tax was shared between the central and local governments. While these reforms were an important and necessary readjustment for increasing central revenues, they left local governments without an adequate revenue base as the tax-sharing scheme was enormously skewed in favour of the central government.

How will this imbalance be addressed in the 2013 reforms? Local governments face a severe mismatch between revenue and expenditure. They are responsible for providing pensions, education and health care, and addressing environmental concerns, but do not have the adequate fiscal revenue to pay for them. They adapted as best they could by depending on earnings from land development — many local officials are making good money privately and for their localities from land development. But this dependence on land development is unhealthy and distortionary.

After the 2008 global financial crisis, Beijing stimulated the economy by ordering the banks to open the spigots of credit for local projects; as a result, local governments started relying once again, as they had under the pre-1994 system, on a blank cheque from local banks. A new wave of fiscal reform could introduce new local revenue sources such as property taxes, a value added tax on services, and a higher share of the total value added taxes. Another approach would be to relieve the financial burden on local governments by increasing transfer payments from the central treasury and shifting responsibility for education, health, and pension spending to Beijing. Another crucial issue is whether local officials will be left holding the bag for repaying these past bank loans.

As they design the reform package, Xi Jinping and Li Keqiang have to be thinking about what would constitute an effective political strategy of reform. What kind of fiscal changes would turn provincial and local officials into a powerful constituency for the overall market reform?

Where will provincial and local governments stand on the new reform proposals? Will they find the plans a better solution than the status quo in which they rely on land development and cozy relations with local bankers?

Or will they worry that the reforms will leave them in a tighter, more financially constrained situation than the situation they are living with today?

Given the limited options of other groups who could help build a reform bandwagon to overwhelm the vested interests in the status quo, won’t China’s central leaders decide to once again ‘play to the provinces’?

Susan Shirk is Chair of the 21st Century China Program and Professor of China and Pacific Relations at the School of International and Pacific Relations, University of California, San Diego. She is the author of The Political Logic of Economic Reform in China.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Leading China where?’. http://www.eastasiaforum.org/2013/10/23/can-chinas-leaders-harness-support-for-change/#comments

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“Security Dimensions of Leadership Change1” XIN Qiang The year of 2012 is important, not because it is the year of the end of the world, but because it is a year of campaign and leadership transition. President Xin Jinping will lead China in the coming 10 years, while President Obama will have 4 more years to lead US. In my presentation, I will discuss what are the greatest security challenges facing the two countries, and suggest how to deal with those challenges through mutual efforts.

For China’s leadership, first security challenge is how to maintain and promote the peaceful development across the Taiwan Strait? It sounds cliché, but Taiwan issue is always the top security concern of China. In the past 4 years, the cross-Strait relations witnessed a great progress exemplified by 3 consensus and 18 agreements, including the historical Economic Cooperation Framework Agreement (ECFA). However, there are still a lot of problems for mainland China, including how to strengthen “One China” identity among Taiwan people, prevent the DPP from regaining power in next election, cripple and contain pro-independence momentum.

Nothing can impose a worse impact upon mainland China’s security interests than a turbulent cross-Strait relation.

Second is how to establish a real positive and cooperative relations with US？Although President Obama and President Hu has reiterated to build a cooperative partnership based on mutual respect and mutual benefit, the US arms sales to Taiwan, constant intelligence reconnaissance along China’s east coast, strict control of high-tech exportation to China etc., make China cast great suspicion upon the strategic intention of US. In addition, it is widely believed that China is the target of US’s “pivot strategy” to Asia. China is paying attention with cautiousness and vigilance to the military maneuvers and deployment of US in East Asia.

Third is how to create a friendly regional environment conducive to economic development concurrent with the territorial disputes? China has been trying to shelf those sensitive disputes with its neighboring countries for several decades, including the Diaoyu Island with Japan and Nansha Islands disputes with some of ASEAN countries. However, China’s unilateral policy of self-constraint has not invited reciprocity. With regard to current disputes in East and South China Sea, China is neither a provocateur nor a changer of the status quo, but a reactor to provocation. Despite of its growing power, China has not taken advantage of its superiority to resolve those disputes by force or threaten of use of force. In the near future, under ever-increasing domestic pressure, China must strike a delicate balance between safeguarding its sovereignty interests and maintaining a stable regional security environment.

For US, I think President Obama also faces three serious security challenges in the coming 4 years.

First is how to strike a balance between Asia-Pacific and Middle East area within a global strategic context?

Middle East is, as always, the key to American’s global strategy. After the “Arab Spring”, the geopolitical and security structure of Middle East is undergoing a profound transformation, which may possibly turn this region into a “powder barrel”. Against the “pivot to Asia”, US must avoid strategic misjudgment and misallocation of its limited military and economic resources to these two areas.

Second is how to strike a balance between the economic dimensions and military dimensions in its “pivot strategy”. Hit by the recession resulted from the financial crisis, US’s economy is recovering slowly and difficultly.

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This article was presented in the conference on “U.S.-China Relations After the U.S. Election and the 18th CCP Congress”, held in

December 3, 2012 at UCSD.

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One of the major goals of President Obama’s pivot strategy is to reinvigorate a slumping economy by promoting exportation to Asia-Pacific countries and initiate Trans-Pacific Partnership (TPP) agreement. There is no doubt that US’s pivot to Asia is not for war game or conflict. Unfortunately, the economic dimensions of this strategy are overshadowed by US’s much more striking and exciting military actions which are causing imminent suspicion from China and some other countries in this region.

Third is how to strike a balance between the responsibility for allies and the necessity to advocate US-China cooperation? There is no need to explain the significance of a cooperative US-China relation, not only for the two countries, but also for coping with regional and global challenges. However, some of US allies, including Japan and Philippine, are eagerly trying to drag US to stand behind them in their territorial disputes with China, and urging US to shoulder its treaty responsibility for defense and protection while China is watching intently and prudently at their sides.

For China, first of all, in terms of Taiwan issue, mainland China will endeavor to promote current momentum of economic and social exchanges. More functional agreements ranging from financial, economic, trade to judicial fields will be negotiated and signed, including service trade agreement, commodity trade agreement , disputes resolution mechanism, customs cooperation agreement, currency clearing mechanism , banking supervision cooperation mechanism, and bilateral investment protection mechanism, etc..

Mainland will further enhance collaboration through more institutional platforms and semi-official or quasi-official channels, not only with KMT, but also with some practical factions in DPP. On April 27, 2012, the third meeting of the Cross-Strait Economic Cooperation Committee declared the economic and trade entities from the two sides will soon set up mainland-based and Taiwan-based representative offices. It is also expected that the Association for Relations Across the Taiwan Straits（ARATS）and the Straits Exchange Foundation (SEF) will establish branches respectively in Beijing and Taipei in the next four years. In order to deepen people to people exchanges and understanding. Some new cultural and educational agreements are expected to be reached. The areas of cooperation will be widened and the institutionalization of the cross-Strait relations will be strengthened in the next four years.

More importantly, I think mainland should confidently display more flexibility to address some imminent concerns of Taiwan people involving military and political issues which are much more sensitive and complicated.

For example, to “make reasonable arrangements” for Taiwan’s “international space”, reconsider its military deployment in Fujian Province, establish military confidence-building mechanism, start political negotiation and try to reach a peace agreement through consultation, etc..

Second, China must watch carefully but should not overreact to US’s pivot strategy. US’s pivot to Asia has its inherent rationality and necessity. As the fastest developing area in the world, Asia-Pacific region is playing an ever-increasingly important role in global economy. Giving more attention to Asia is a reasonable choice for US for its economic recovery and development. On one hand, China should deepen its economic, trade and financial cooperation with US, as well neighboring countries; on the other hand, China should more actively conduct security exchanges, and cooperation with US on both strategic and tactical levels. Such as space security and cyberspace security dialogue, naval cooperation in distant waters, and institutional high and middle-level officer exchanges. It will be helpful for these two powers to enhance mutual trust and prevent miscalculation.

Understanding from and cooperation with US will also make it easier for China to address various traditional and nontraditional security threats listed by President Hu in his recent report, including maritime, space, cyberspace, food and energy security, etc..

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Third, China should not allow territorial disputes define its relations with ASEAN countries and Japan. In order to establish a stable environment conducive to economic modernization, China will deepen its economic cooperation with those countries and promote the ever-increasing regional economic integration process. With regard to the disputes, China will continue to encourage all claimer to shelf the disputes and adhere to common exploration and peaceful settlement. Furthermore, China should be more open-minded to shoulder responsibility in addressing regional security challenges. China should play bigger role as an initiator of regional security mechanism, promoter of security cooperation, provider of regional security public goods, so as to decrease the tension and suspicions, win and strengthen the confidence and trust from its neighboring countries.

As the most important “outside” player in East Asian security issues, US also need to adjust its policy in accordance with the ever-changing regional power structure. First, US should be more self-constrained in Taiwan issues. Arm sales to Taiwan is regarded by mainland China as the most provocative behaviors to China’s vital national interests, a symbol of US’s hostility towards China, and a great obstacle for China’s final reunification.

US’s continuous intervention in Taiwan issue is the deepest and biggest root causes of China’s mistrust towards US. Such mistrust can easily spill over into other areas and weaken China’s motivation to cooperate with US. Second, US should realize that a positive and cooperative US-China relations is an indispensable part of its Asia-Pacific and global strategy. Friction or conflict between US and China will damage regional security and economic prosperity. Tactically, US should at least decrease or stop its intelligence reconnaissance against China, promote bilateral military exchanges, invite China to take part in multilateral military exercises, discuss with China to set up the norms and rules in some emerging security fields such as space and cyberspace through consultation etc.. Strategically, US should pay more respect to China’s legal and reasonable interest concerns, welcome China to play a bigger role in regional security arrangement commensurate with its rising power, and cooperate with China in the establishment of a changing Asia-Pacific security architecture.

Third, US must interact with its allies carefully and should not unduly militarize its “pivot strategy”. After declaring to deploy 60% of its navy and air force to Asia-Pacific area in June 2010, US has been busy in conducting military maneuvers with its regional allies and partners, selling advanced weapons, strengthening military cooperation and exchanges, stationing marines and littoral battleships in Australia and Singapore respectively, and so on so forth. It has not only triggered off the concerns from China that US is trying to “trap” China and constrain China by establishing a multilateral military network, but also stimulated some of the countries, especially those who have territorial disputes with China, to be more assertive and provocative in dealing with China since they assume, the “Big Daddy”, will take care of them. The suspicion of China and “confidence” of those countries can easily lead to unexpected escalation of any friction into a conflict, even a crisis. Because of its treaty responsibility and the ambiguity in its policies, it is not impossible for US to be dragged into a conflict with China by its allies’ imprudent behaviors. US must be careful to prevent the tail from wagging the dog!

In sum, the interaction between China, the rising power, and US, the status quo power, will shape the future of geopolitical structure of Asia-Pacific area, which is vital for regional security, stability and prosperity. Both sides must learn how to engage with each other constructively while handling their contradictory interests and expectations with great care, because a zero-sum security dilemma will be a disaster for both of them and the whole region.

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“Impact of Shanghai's Free Trade Zone on China” Chinese Financier Club and School of Economics, Fudan University China opened its 1st pilot free trade zone in Shanghai on September 29, 2013. China's government has billed FTZ as a major step for financial reforms and economic experimentation. The China (Shanghai) Pilot Free Trade Zone is a nearly 29-square-kilometer (11-square-mile) district that covers four existing special trade zones in the Pudong district, including one at the airport. The Chinese Financier Club and the School of Economics at Fudan University jointly organized a forum on “What China (Shanghai) FTZ Will Bring to China” on September 28, one day before the FTZ kicked off. The participants of the forum focused on the mission and potential contribution of the FTZ in the coming years.

Participants of this forum include: Zhou Hanmin, Vice Chairman of the People’s Political Consultative Conference of Shanghai Municipality; Yuan Zhigang, Dean of the School of Economics at Fudan University; Shen Jianguang, Chief Economist from Mizuho Securities; Shao Yu, Chief Economist from Orient Securities; Jia Jifeng, Chairman, the Board of Supervisors of Lujiazui Group; Yang Dehong ,Vice President, Shanghai International Group Co., Ltd., Joint President, China Financiers Club; Zhao Dingli ,Chairman, HSBC Bank (Group, Shanghai) Co., Ltd.; Vice President, Fudan University Alumni Association; Liu Hongzhong, Professor and deputy director of Financial Research Center, head of the International Finance Department at School of Economics Fudan University; Rao Chengfang, transportation industry analyst, UBS Securities.

Chosen to Reform: the Mission of the Shanghai FTZ Zhou Hanmin, Vice Chairman of the People’s Political Consultative Conference of Shanghai Zhou pointed out that the pilot FTZ is the 4th wave of reform and opening-up. The mission of the Shanghai FTZ is to enable further reform and opening-up. In the past 35 years, the most valuable experience is promoting reform through opening-up. The establishment of the Shanghai FTZ can be regarded as the fourth wave of China’s reform and opening-up, following the setting-up of the five SEZs and the opening-up of 14 coastal cities, the development of the Pudong New District in Shanghai, as well as China`s entry into the WTO. Shanghai has always been at the forefront of these reforms. Unlike the previous three waves, which may last for over a decade, now we are facing much more urgent reform calls. In fact, the pilot FTZ as an experiment has only three years during the first phase.

The Shanghai FTZ will achieve three objectives in the coming three years: the FTZ will be reproducible, transferable and scalable. Here, we emphasis highlight reform, making possible breakthrough. Breakthrough is the core. As a middle-income country, China is feeling its way in the "deep water" of reform, moving toward a more open, market-oriented economy. The new reform needs its top- end institutional design. Thus, the FTZ, will serve this main strategy. Being the bridgehead of China`s integration with the world’s innovation industry chain, the Shanghai FTZ shall become a window through which the world may find an opening China. Meanwhile, China may also accelerate its reform by learning from the world. Let’s pay attention to three ongoing international negotiations: the Trans-Pacific Partnership (TPP) negotiation that has been intensively pushed forward since 2009, the Transatlantic Trade and Investment Partnership (TTIP), and the Plurilateral Services Agreement (PSA) negotiations.

Those three

multilateral partnerships are working on resetting the rules of the global economy and trade investments led by United States. Under the reform calls from both home and abroad, China has to be competent and persistent enough to turn pressure into motivation. Lastly, breakthroughs in policy-making are also of crucial importance to China. Though China`s FTZ just made its debut, its counterparts can be found around the world. The New York & New Jersey Foreign-Trade Zone 49, the Port of Hamburg's Free Trade Zone in Germany, the Dubai Free Trade Zone in UAE, and the Rotterdam Free Trade Zone in Holland are all similar to Shanghai’s in their general outline and basic 22

principles. That means China could learn from the world and forge ahead in the fourth wave of its reform and opening-up with its studious modesty and unyielding ambition.

New Trends in Globalization & the Construction of the Shanghai FTZ Yuan Zhigang, Professor and Dean of the School of Economics at Fudan University.

He pointed out that the new trend of globalization has brought China to a stage of economic transformation and upgrading. The construction of the Shanghai FTZ should serve the national strategy during the globalization period by taking part in the restructuring of the global value chain and investment rule, propelling China’s upgrade from a conventional economy to a new economy.

The ever-deepening globalization has degraded the practical significance of conventional globalization that largely relies on commodities trade and tariff cut. Currently, capital globalization has become the most prominent characteristic of contemporary globalization, and capital flows carried by multinational companies has turned into a major dynamic mechanism of the new round of globalization. All these preconditions prompt China to facilitate trade and investment, and more importantly, to develop trade in services. As the favorable terms granted by the WTO gradually expire, China urgently needs to achieve new international trade framework agreements and reestablish its status within the international trade system. Thus, China may build its identity as a responsible great power and take part in the making of international free trade rules. Therefore, after enjoying 12 years of WTO membership, China has to face the arduous task of “re-entering” the WTO. China is facing the challenge of a distorted economic structure due to its troublesome factor inputs and regional economic structures. Though remarkable achievements have been made in its commodity market reform, China does encounter difficulties in its reform in its factor markets such as its financial market, land market, and labor market. As such, China needs to focus on and probe into the factor markets in the following reforms to finish its reforms on its financial and land markets, and more importantly, to achieve urbanization for the rural people by rebuilding a united labor market. With the waning of China`s demographic dividend, the adjustment of economic growth model should focus on factor markets construction, governmental function transformation, and the reform of state-owned enterprises, etc.

The first target of the FTZ is the management of the “negative list” and pre-establishment of national treatment.

Investment in the FTZ shall be free and facilitated for outside world. More significantly, it should open up to the domestic market. Regarding trade in the future, the Shanghai FTZ would develop into an international hub for trade settlement and order fulfillment that values financial innovation and opening in the high-end service sector. Given that the urban economy is a pivotal knot in the global economic currents, he noted in particular that China would find it difficult to accomplish its economic transformation without global metropolis. Shanghai aims to become a global metropolis. In order to situate itself at the forefront of the world economy, China would have to build around 10 to 20 global metropolises or metropolitan areas.

Boosting the Internationalization of RMB is the FTZ`s Core Mission Dr. Shen Jianguang, Chief Economist from Mizuho Securities.

He pointed out that the FTZ should play the role of a pioneer in the financial sector and take the Internationalization of the RMB as its core mission. Making the yuan a convertible currency is the preliminary step for RMB`s internationalization. Only by then would the conditions be ripe for RMB’s ascend into the world reserve currency. To make RMB fully convertible, however, China has to streamline its regulatory and allow the free flow of capital. However, the marketization of interest rate and the deepened reforms in financial market should to be pre-installed prior to the release on capital control. Moreover, China has to emphasize on scheming against any financial crises or fluctuation. Besides, the floating of exchange rate can be another crucial factor. If the curbs on capital were loosened, the levering of interest rate and the overall deepening reform in the financial system would 23

transit into key issues. Hence, only with all these factors well-tackled could RMB attain full convertibility. The reform in the Shanghai FTZ, which signifies China’s unprecedented opening, can be regarded as an major trial to push forward the internationalization of the RMB, and the experience gained within the FTZ would also boost China`s financial reforms and RMB’s rise into the global reserve currency. The FTZ is not just a gift to Shanghai. It is an “experimental field” for the country’s reform and opening drive in various sectors. The genuine significance of the FTZ lies in shaping a model that can guide China’s future reform and opening-up, with the experiences so gained to be replicated and popularized throughout the country in the future.

Financial Globalization is the True Essence of the Shanghai FTZ Dr. Shao Yu, Chief Economist from Orient Securities.

The Shanghai FTZ has four great missions. First, Shanghai has to realize trade liberalization and become a hub for switch and offshore trade. That requires Shanghai to attract multinational company headquarters (including management of capital, operation and marketing); on the other hand, Shanghai must build up a large scale commodity trading platform. Second, the liberalization of investment --- fully implement pre-establishment national treatment and manage the “negative list”. So that, FTZ could serve as a platform for the global expansion of Chinese capital and a strong impetus for China`s “going out" strategy. Thirdly, the FTZ should take financial globalization as its final mission and the internationalization of the RMB as its ultimate objective. With the prerequisites of bringing risks under control and improving efficiency, Shanghai could fully loosen its capital account control and finally develop as a real global finance center similar to London, with all-around infiltration and internal & external integration. Fourth, streamline its administration. The FTZ will apply an innovative supervision mode, namely “first line: opening up gradually and fully; second line: having safe and highly efficient control over free flow of goods within the zone.” The Shanghai FTZ as a comprehensive test ground of full-around economic, regulatory and administrative reforms would offer an open and innovative market environment with international practices. In terms of trade, new global rules would affect the entire manufacturing process, and the rules developed in the Shanghai FTZ would affect the entire Chinese manufacturing industry. Regarding finance, Shanghai, fueled by its huge capital market and ever-increasing property management opportunities, could rise from the oriental horizon and ascend into a real global financial center with these new opportunities and missions.

New Cycle, New Preference Mr. Jia Jifeng, Chairman, the Board of Supervisors of Lujiazui Group.

The new cycle refers to a new round of reform, opening, and industrial transformation. As a great dividend policy for Shanghai, the establishment of the FTZ would significantly propel the economic transformation of Shanghai by accelerating the trading and high-end service industries gathering. The FTZ is a perfect “experimental field" for the country to launch new opening campaign and raise its capacities by adjusting to the new competitive situation.

The Pilot FTZ & the Transformation Development of Enterprises Mr. Bian Jie, General Manager, Orient International Logistics (Holding) Co., Ltd. The establishment of the FTZ would remarkably improve trade facilitation, investment liberalization, financial opening, and administrative legislation in Shanghai. Through introspection on the status quo of his company, which, as he said, is at a critical moment of transformation development, he encouraged enterprises to blaze a new trail and embrace transformation with audacity. By participating in the construction of the FTZ, an enterprise may follow a development strategy of offering extended or supply chain services and grow into an international one on this cross-border trading platform.

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Regional Characteristics & Development Models of FTZ Ms. Rao Chengfang, transportation industry analyst, UBS Securities.

She compared the FTZ models and policies of various regions including South Korea, Dubai, Singapore, etc., and probed into their respective geographic features, economic endowments and development paths. Shanghai was selected to launch China’s first FTZ for it accords with the central government’s deployment of deepening reform and possesses prerequisite advantages such as: economic competitiveness, industrial basis, geographic edge, and institutional innovativeness. In the future, Shanghai would establish a comprehensive FTZ and boost a diversified industrial structure ranging from shipping, logistics, aviation, finance, emerging strategic industries, IT, to pharmaceutics. Shanghai has been putting efforts on constructing shipping centers. Shanghai is a very important container port around the world. In the future, Shanghai should develop its capability on shipping finance service, maritime litigation, and shipping price setting, etc., which will help the Chinese industry develop a stronger voice in the shipping market and finance market.

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“The Second Coming of Zhu Rongji?”

ZHANG Jun The recent release of a book of speeches by former Chinese Premier Zhu Rongji has refocused attention on his bold – and often highly controversial – economic reforms of the 1990’s, which included reining in state-owned enterprises (SOEs) and overhauling the banking system. But the discussion has taken an unexpected turn, with Chinese media adopting a far less critical stance than that which has prevailed for the last two decades.

Given the apparent parallels between the challenges that Zhu faced and those that current Premier Li Keqiang is now attempting to address, not to mention their shared commitment to economic transformation, this shift could signify rising support for structural reform. But are Zhu and Li really so much alike?

Today, as in the 1990’s, China is experiencing skyrocketing local-government and commercial-bank debt, rising fiscal and financial risk, uncertainty over institutional reform, and declining central-government revenue. According to Bloomberg, Li will be the first Chinese premier not to fulfill the official annual growth target since Zhu. Despite these apparent similarities, however, China’s situation today is fundamentally different from 20 years ago.

In the 1990’s, Zhu’s core mission was to address the consequences of former Premier Zhao Ziyang’s flawed fiscal-decentralization efforts. By pursuing fiscal reform one sector at a time, Zhao left room for local governments to form alliances with SOEs, which provided subsidies to local bodies and enabled them to withhold income from the central government. This led to the build-up of national public debt, which, in turn, compelled the central bank to over-issue currency, fueling inflation.

In this context, Zhu’s reform strategy was aimed primarily at reestablishing a sound fiscal relationship between the central and local governments, rather than at increasing the GDP growth rate. In fact, though Zhu’s reforms were piecemeal, they could easily have led to double-digit GDP growth. But Zhu recognized that allowing such rapid growth probably would have done more harm than good, given persistent inflation and macroeconomic instability.

Critics assert that Zhu’s 1994 tax reform led to the current real-estate bubble, because it drove local governments to use land sales to boost their incomes. But the fact is that replacing the income-sharing system with a tax-sharing system stabilized China’s economy and reversed the relative decline of central-government revenue.

Indeed, it was essential to China’s economic development.

By weakening the alliances between local governments and SOEs, Zhu’s tax-sharing system facilitated the strategic restructuring of the state-owned economy. And, by galvanizing local governments to privatize local SOEs (as well as housing and some public services), Zhu’s reform hastened China’s incorporation into the global economy.

China’s state-owned economy is far less bloated today; the central and local governments have fewer compatibility problems; the country’s fiscal position is strong; and relative macroeconomic stability prevails.

Zhu’s success means that Li must focus on a different challenge. Li must ensure that China’s economy, which still boasts significant growth potential, does not sink into lethargy and fall into the so-called “middle-income trap.” A developing economy may slow prematurely when external factors alter the conditions supporting growth. Wages continue to rise, reducing competitiveness vis-à-vis low-income economies, but the growth model is not yet equipped to support competitiveness in high-skill industries, leading to stagnation.

In order to avoid such an outcome, Li must adapt China’s growth model to current conditions, which include intensifying trade friction with the European Union and the United States, greater pressure to allow the renminbi to 26

appreciate, an aging population, slowing urbanization, and rising labor costs. The “new normal” that has emerged from the global financial crisis, characterized by sluggish GDP growth and diminished import demand in the West, makes reform even more urgent.

Li should begin by redistributing industrial capital from high-productivity coastal areas. This would instantly augment growth in less-developed regions and boost overall productivity. But, with competition in the global supply chain fiercer than ever, China will need more than capital transfer to achieve high-income status. It will need policies and mechanisms that encourage and guide technological and industrial upgrading.

Fortunately, Li seems to understand this. Indeed, industrial and technological upgrading forms the core of “Likonomics.” But significant uncertainty remains over how to achieve it within the constraints of China’s state-led economy.

Over the last decade – especially since 2008 – China’s central government has been tightening its grip on industrial policy, while enhancing the State Council’s dominance over local governments. By contrast, Li seems intent on returning power to local governments and the market, transforming vertical control into horizontal coordination. Thus, instead of trying to control technological and industrial upgrading with central mandates, Li is giving local governments and the market the space to drive China’s economic transformation.

Zhu and Li do have one thing in common: they both came to power at a critical juncture in China’s development.

But, whereas Zhu had to grapple with local officials to increase the central government’s authority and revenue, thereby stabilizing the economy and unleashing China’s growth potential, Li must cooperate with local governments to create a system that fosters and protects new sources of innovation and economic dynamism at all levels. Just as Zhu’s reforms two decades ago laid the foundation for today’s growth, whether Li succeeds may well determine China’s economic trajectory for the next 20 years.

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“After the Asian Miracle: Problems, Challenges and Choices” HUA Min Asia was once the world's most impoverished continent, however, since the second half of the 20th century, pioneered by Japan and followed by NIEs, ASEAN countries, and so on, numbers of Asian economies have embarked on the path to prosperity. Especially after 1979, China, Vietnam and other transition economies have been committed to the reform and opening up, the Asian economies appeared hitherto unprecedented high economic growth, and quick poverty reduction. However, in Asia, while economy grows quickly, various frustrating crisis also frequently occur, such as the Japanese economic bubble burst in 1989, Southeast Asian financial crisis in 1997 and the economic growth shadowed by 2008 crisis, and so on. All kinds of crisis raised a question to us, namely given the economic globalization today, what kind of development strategy is still effective and proper for Asian economies? At this point, the World economy sub-forum of Shanghai forum in 2013 will focus on the following three topics: First, why the Asian growth story will end? It will be centered on internal problems and dilemmas after the Asian growth miracle. Second, the external mechanisms fade the Asian miracle. It will be centered on external constraints and challenges after the Asian growth miracle. Third, the paths and strategies re-engine the “Asian Miracle”. Generally speaking, Asia is an economy lack of resources, innovation abilities and internal demands, which in all lead to extremely high external dependence. Due to the irreversible trend of globalization, the financial integration and division network of production are inevitable accordingly. In this case, the Asian development strategy will directly affect not only the Asian economy but also the world economy.

Has the Asian Miracle Come to an End? Whether the Asian growth miracle is over? Is Asia including China facing a "lost 10 years" just like Japan 10 or even 20 years ago? To answer these questions, reflections on what kinds of internal problems confronted by current Asia are in need. Firstly, we should recognize the pattern of division of labor in Asia. In essence, the Asian "flying geese" mode of division of labor is driven by Japanese manufacturing, and the US dominated global division mode is driven by America's innovation. So, the Asian economy is characterized with openness, which cannot be closed up but should have a global vision to be actively integrated into the international division of labor system. Secondly, the current and the future economic growth in Asia are fettered by four main "asymmetric" problems. (1) Asymmetry between supply and demand sides. (2) Asymmetry between rigid cost (exchange rate appreciation and wage rigidity) and inadequate innovation. (3) Asymmetry between the growth of productivity and wage. (4) Asymmetry between industrial policy and market orientation. In short, the past Asian growth miracle is brought by the incremental expansion, under the conditions of relatively low labor cost advantage, exchange rate stability, export-oriented development strategy, and ordered Asian industrial division and transfer. However, what is the reason to cause this kind of incremental expansion to end so early? Obviously, the answer does not root in the market, but in the policy of the government.

There has been a lot of debate over the existence of the Asian miracle. If there's any kind of miracle, what are the main factors in making it? Over the long time research and discussion in academia, some of the main reasons are reached a high degree of consensus, such as the serialized industrialization, export-oriented policy and the industrial transfer triggered by FDI, etc. However, along with the rapid take-off of China, who enjoys a very large economic size, the Asian growth miracle is constantly shackled by the external bottleneck which refers mainly to the resources and environmental constraints, as well as the exchange rate valuation constraints. According to the industrialization experience of the developed countries, the resource constraint had an prominent effect during the take-off phase, while for those Asian industrializing countries at present, not only the supply of resources constraints, more serious is the environmental constraints. How to realize high-speed economic growth on one hand and environment friendly strategy on the other hand becomes a dilemma for those Asian economies. Traditionally, high performance East Asian economies tended to sustain a competitive and moderately underestimated exchange rate, 28

but subject to dollar hegemony in international monetary system, the weak dollar policy continued over the years, and an unconventional quantitative easing monetary operation taken by US Fed after the 2008 financial crisis, Asian exporters represented by China are no longer allowed an undervalued exchange rate, this becomes a new challenge for the success in Asia. In addition, due to historical, political and many other reasons, Asia has never been very keen on the regional economic integration. This also resulted in the serious difficulties confronted by FTA roadmap in Asia even under the stagnation of multilateral trade negotiations worldwide.

Recreating the "Asian Miracle" To sum up, Asia's economic growth excessively depends on external demand while domestic demand is still limited. The reasons behind are various. Firstly, Asian markets display with different maturity, the polarized labor force quality due to the defects of domestic and international system, and a widening income gap with the society, and so on. Secondly, the deepening of international division of labor including both value chain and industrial chain, accompanied by wage inflation pressure. Therefore, once the external demand shrinking, it is easy to fall into the dilemma in which the low level equilibrium is broken, but the upper level equilibrium is still unreachable. Therefore, given the limited domestic demand, the key step can only be through the real per capita income growth. In order to achieve this goal, firstly, Asian economies still need to work jointly with developed countries in EU and America in promoting the international trade and investment rules to ensure the further deepening of international division of labor between Asia and other regions in the world. Secondly, to strengthen the economic efficiency, optimize the factor allocation and increase the export competitiveness through domestic institutional reform and financial system integration. Thirdly, in the integration of value chain division of labor, achieve different levels of wage deepening through the upgrade of industrial chain driven by efficiency. At the same time, Asia should also develop domestic market by promoting the comparative advantage of low skilled labor force, expanding industrial scale to increase employment opportunities, generalizing the wage and advancing the urbanization.

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“The Society of Senior Citizens and Popular Protest in Rural Zhejiang1” Kevin J. O’BRIEN/ Yanhua DENG Societies of Senior Citizens (laonian xiehui) in China are often thought to be non-political organizations mainly focused on community traditions and services for the elderly.

And this picture has some truth in it.

To keep their

members busy and happy, many SSCs arrange trips, offer a place to chat, play games and study current events, hand out gifts during festivals, and provide financial assistance to members in need (Dong, 2003; Huang and Yuan, 2006; Deng and Ruan, 2008; Gan, 2008; Hu and Wei, 2011). heritage and traditions.

Most Societies

also pay attention to preserving local

They often, for instance, compile lineage histories, organize events to commemorate

ancestors, and host temple fairs (Mu, 2006; Wang, 2009; Yang, 2009).

SSCs can also be more political.

Especially in better-off communities, SSCs have become involved in promoting

economic growth by weighing in on land use decisions and development projects (Qinghua Daxue Keti Zu, 2004; Chen, 2012).

They have also gone beyond service provision to look out for the rights of the elderly, with some

SSCs setting up “legal aid stations” (falü yuanzhuzhan) and “rights-protection teams” (weiquan dui) (Cdngo.gov, 2012).

Some societies have built on their experience mediating intra-family conflicts to take on community-wide

issues (Xindu Qu Sifaju, 2012), including disputes over land boundaries.

In their role as political brokers (Hansen,

2007), SSCs are playing a growing part in “social management” (shehui guanli) (Ma, 2011) and “maintaining stability” (weiwen) (Liu and Ding, 2011).

SSCs in some locations have also begun to tiptoe into collective action.

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In rural Jiangxi, Societies have called

on villagers to challenge questionable expenditures by village committees and party branches (Xiao, 2003, p. 17).

In Jinhua city, Zhejiang, they have frustrated attempts by local authorities to handpick an SSC leader (Ding, 2005).

SSCs in Hunan and Shanxi have launched petition drives against officials who shortchanged retired rural workers on their pensions and health benefits and against an airline that failed to pay dividends on investments SSC members made (Voc.com, 2011; Bai and Wang, 2012). collection of unlawful fees (Pang, 2010).

In Guangdong, Societies have led demonstrations against the

SSCs in Fujian have staged protests when factories polluted farmland or

water supplies and when land was requisitioned with inadequate compensation (Gan and Zhang, 2010, p. 59).

For

their actions, some SSC leaders have been detained (Bai, 2011; Voc.com, 2011) and Societies in parts of Zhejiang have been referred to as “an important organization impeding construction of a harmonious society” (Yiwutequ, 2012).

Elderly activism in China has received some attention (Shi, 1997, pp. 219-20; Hurst and O’Brien, 2002; Michelson, 2006: Hurst, 2009, Kuang and Göbel, forthcoming), but few have considered who mobilizes older protesters and how the authorities react to seniors’ organizations that promote protest.

3

In this article, we examine

the role that SSCs in Huashui town, Zhejiang played in closing down a chemical park by addressing four questions: How did Huashui’s SSCs bring older villagers together and deploy them for action? mobilize protest?

What factors enabled SSCs to

How did county and town officials attempt to rein in Societies that led the contention?

How

successful were the authorities in checking the influence of Huashui’s SSCs?

Opposition to the Zhuxi Chemical Park Dongyang county is located in Jinhua municipality, Zhejiang about a two-hour drive from Hangzhou. is one of the less well-off towns in a prosperous region and is known for its plastic recycling.

Huashui

The Huashui town

1

This article was presented in the Fudan-­‐UC Annual conference (2013) on “China’s Domestic Challenged China”, held in March 24, 2013 at UCSD. 2 This can include organizing petitions, demonstrations, marches, sit-ins and other types of contention.

3 On the suppression of Falungong and its many older practitioners, see Tong (2009).

30

government oversees 18 “administrative villages” (xingzheng cun), most of which are further divided into “natural villages” (ziran cun).

Huaxi, an administrative village whose SSC played a central role in the contention examined in 1

this article, is composed of six natural villages, each of which has its own SSC.

In early 2001, Dongyang county opened the Zhuxi Chemical Industrial Park on land belonging to Huaxi and Huangshan villages, and announced it would relocate a pesticide factory there. placing a plant notorious for its pollution in the park.

From the outset, villagers opposed

On 20 October 2001, a group of Huaxi and Huangshan

residents sought a “dialogue” (duihua) with the Huashui town party secretary, which led to the secretary being cursed, beaten and dragged to the park, where he was made to walk a lap around the grounds barefoot.

Windows

and doors of three chemical plants were smashed, and phones and computers in factory offices were vandalized or taken.

Following this incident, twelve villagers were prosecuted for disturbing social order and ten were jailed for

one to three years. This deterred additional protest for two and a half years and cleared the way for relocation of the pesticide plant and a large expansion of the park, which soon came to occupy 960 mu (about 64 hectares).

At its

peak, the park contained 13 factories, mainly producers of chemicals, pesticides, dye, and pharmaceuticals.

Nearly all the factories generated a substantial amount of water and air pollution.

On 16 April 2004, Zhejiang province published a notice in Zhejiang Daily announcing that industrial parks that had not been lawfully established should be shut down.

The Zhuxi Chemical Park was on the list because the

county had not followed the appropriate procedures to secure land for the park.

The activists jailed following the

2001 protest were encouraged by the announcement and decided to take the government and the polluters to court, but their efforts to pursue a lawsuit and a wave of petitioning that followed did not produce any redress.

On 24 March 2005, elderly residents of Huaxi No. 5 village, the most seriously affected site, turned to more confrontational tactics.

They put up a tent at the entrance to the chemical park and began a round-the-clock vigil.

Their hope was to block delivery of supplies, thereby forcing the factories to shut down.

Huashui town officials and

police dismantled the tent the next evening, but the protesters immediately erected a second one.

Over the next 10

days, despite the local authorities’ effort to pull down the tents, the size of the encampment grew, as residents from about ten other villages joined the protest, with each village erecting its own tent. turn to a more forceful approach.

County leaders then decided to

At about 3am on April 10th, the county leadership sent in over 1,500 local cadres

and public security personnel to put an end to the encampment.

During their efforts to clear out the protesters,

violence broke out and over 100 officials or police officers and more than 200 villagers were injured; sixty-eight government vehicles were also burned or damaged.

In the wake of the “April 10th Incident,” the protesters still

refused to withdraw and the number of tents grew to about 30, representing 22 villages.

Meanwhile, the violence

had attracted media attention and higher levels of government, including Beijing, sent a team of investigators to look into the protest and the county’s response.

Under mounting pressure from above and below, Dongyang county

agreed to close 11 of the factories in the park, and on 20 May the protesters allowed their tents to be taken down.

2

Two years after the encampment ended, the first author conducted semi-structured interviews about the events leading up to the closure of the park and the role SSCs played in mobilizing protest.

The interviewees ranged from

protest leaders to village cadres, township cadres, municipal officials, and ordinary villagers. selected in a snowball fashion owing to the sensitivity of the topic.

The interviewees were

With exceptionally good access to both local

leaders and protesters, it was also possible to collect archival materials, including petition letters, leaflets, and posters penned by villagers, work diaries and reports written by local officials, official regulations, meeting records, and an internal “Daily Report” (Meiri Yibao) that meticulously traced what happened each day.

1

As of 2010, Zhejiang had 28,213 SSCs, 98% of Zhejiang’s administrative villages had an SSC, and 4.1 million older villagers were members of SSCs (Zhejiang sheng laolingban, 2010). Nationwide, nearly 44 million people were members of over 400,000 SSCs, and 60% of villages and 50% of urban communities had an SSC (Chang, 2011).

2

In places where protest did not occur, most of the industrial parks that the province ordered shut down stayed open under a new name. In Huashui, many of the 11 closed factories were relocated outside the county. For example, the plant that produced the most pollution (Maikesi Chemical), was moved to Nantong city, Jiangsu (Fu and Zhang, 2007).

31

Mobilizing Protesters Huashui’s SSCs were a major player in the effort to close the factories. In June 2004, three of the activists who had been imprisoned for opposing the opening of the chemical park in 2001 sought to hire a Beijing law firm to sue the polluters and Dongyang county, but they were told that legal fees could reach 500,000 yuan. they turned to the SSC in Huaxi No. 5 village to secure donations from villagers.

Lacking this sum,

The SSC held two meetings to

discuss the request, agreed to help, and promptly launched a fund-raising campaign.

A government report

described what happened next: SSC members went door-to-door to solicit contributions. have collected 40,000 to 50,000 yuan.

Each donation should be over five yuan.

Receipts were provided, which noted the amount of money contributed,

who made the donation and who received it. The receipts also had an illegal seal Citizens in Huaxi No. 5 village.”

1

affixed reading “Society of Senior

However, they didn’t indicate the purpose for which the donation was sought (R1).

Despite a month of soliciting, the money raised amounted to far less than the 500,000 yuan needed. activists thus could not afford to hire the Beijing law firm.

The

Local lawyers were unwilling to take the case, so the

three men, with the SSCs in Huaxi, Xishan and Huangshan behind them, changed their strategy. petitioning higher levels.

Now they

They started

Over the next year, several SSC members and a young leader of the 2001 protests went

to the prefecture and provincial capital numerous times to submit petitions.

They even travelled to Beijing twice to 2

ask the Centre to look into the pollution and the terms under which the land for the park had been requisitioned.

Meanwhile, groups of SSC members were dispatched to Huashui town and Dongyang county to urge officials to increase oversight of the factories.

Yet another SSC member, on his own, sent hundreds of petitions to

government offices from the county up to Beijing (Int. 20).

All these efforts failed to produce the hoped-for results.

The Huaxi No. 5 SSC was especially active during the petition drive.

According to the work diary of an SSC

member (R7), it held meetings almost every day to discuss the environmental crisis and what to do about it.

Sometimes, the SSC convened several times in a single day to study laws and regulations, elect petitioners’ representatives, and craft strategies. dozen to about 500.

The number of participants at these sessions typically ranged from several

Attendees were mostly Huaxi No. 5 SSC members and a handful of younger villagers,

sometimes joined by SSC activists from other villages.

As a second round of protests against the chemical park took shape in 2005, the Huaxi No. 5 SSC and Societies from other villages became even more involved in political mobilization. The SSCs played five main roles. First, they drew up schedules for SSC members to staff the tents (Ints. 19, 23). A police officer from Huashui town said: “SSC activists campaigned door-to-door to call on older people to fight for their descendants against the toxic chemical factories.

They discussed duty schedules with seniors during their door-to-door work” (Int. 7).

telephoned seniors to assign shifts and to make sure they appeared on time (Int. 13).

SSC members also

Through the Societies’ efforts,

vigil maintenance was tightly organized and tents were seldom left unmanned (Int. 10).

Second, SSCs offered compensation to villagers who stayed in the tents.

One reason that the encampment

persisted for two months is that activists received 5 yuan per night for tent-sitting (Ints. 7, 23).

A Huashui town

1

The director of the SSC in Huaxi No. 5 village had reservations about having a seal carved. But an SSC member steeled his nerve by telling him it was “no problem” (meishi) to make one for a Society branch, since it was supported by over 300 SSC members in Huaxi No. 5 village and also by the SSCs of the five other Huaxi villages. This seal was prepared mainly to back up protest activities. After using it to seek donations, it was stamped on all the petitions that followed. To legitimize their petitions, activists in Huaxi, Xishan, and Huangshan had planned to certify them with their village’s official seal, but after only Xishan’s village committee agreed to do so, they used SSC seals for the other two villages (Int. 17).

2 Claims about land acquisition can be easier to pursue than those related to environmental damage because it is difficult for villagers to obtain evidence about the source of pollution and to establish a causal link between pollution and its consequences. On demonstrating environmental harm, see Stern (2011). On broadening claims from personal grievances (e.g. the protesters’ imprisonment) to larger, community-wide issues, see Li and O’Brien (2008). On using land-related grievances to pursue environmental claims, see Deng and Yang (forthcoming).

32

cadre believed that although villagers first erected the tents because they opposed the pollution, the length of the protest had much to do with the “salaries” (gongzi) paid by SSCs (Int. 21).

The compensation mainly came from

contributions placed in “donation boxes” (juankuan xiang) that SSC members strategically located around the encampment.

Spectators from nearby Yiwu county were said to be especially generous, because they were more

well-off and their drinking water was polluted by factories in the park (Int. 8). of prosperous villagers to solicit donations. tents.

SSC members also went to the homes

They would say things such as: “we older people are suffering in the

At the very least, you could donate some money to buy tent-sitters fruit and drinks” (Int. 7).

During the

protest, SSCs generated more than 100,000 yuan in donations, with over 30,000 yuan remaining after the park closed (Int. 14).

All the money received was managed by an SSC member from Huaxi No. 2 village who served as

the movement’s accountant (Int. 23).

Third, SSCs provided logistical support for tent-sitters.

As a town cadre put it: “They were sitting there, with

others sending them food, serving them, and giving them money” (Int. 8).

The party secretary of Huashui

commented, with an equal measure of disdain and frustration: Why was the encampment sustained for so long?

Because they [the tent-sitters] could get five yuan per night and

they ate quite well. . . . Perhaps those old ladies had never eaten instant noodles before or had these tasty drinks.

So they were quite happy camping there, regarding the tent area as a nursing home and an entertainment centre (Int. 4).

Fourth, SSC members applied pressure on elderly villagers who were reluctant to join the encampment.

Throughout the protest, the local government sent cadres who knew or were related to the protesters to persuade them to stand down (Deng and O’Brien, forthcoming).

Some tent-sitters were “transformed” (zhuanhua) and gave

up protesting, but others continued “going on duty” (zhiban) at the encampment.

An officer from the Huashui police

station explained: When we learned that some older villagers were about to begin their shifts, we had to go do “thought work” (sixiang gongzuo) on them.

We begged them not to go and told them that the local government was solving the

environmental problem.

Some older villagers said, “I have to go on duty.

traitor when I go to the senior centre to play mah-jongg. me.

1

Today is my time to sit in the tents and I have to go.

Otherwise I will be accused of being a

The activists will blame me for doing nothing and isolate But I promise not to say anything or to engage in other

activities” (Int. 7).

To all appearances, protesters occupied the tents voluntarily, but in fact it was hard to resist calls to participate in vigil maintenance.

A retired town cadre even claimed that the Huaxi SCC drew up “regulations” (guiding)

describing how to punish those who failed to fulfil their duties (Int. 19).

Finally, SSCs drew nearby villages into the protest.

SSCs in Huaxi, Huangshan and Xishan played a crucial role

spurring participation of villagers from nearly two dozen neighbouring communities.

SSC in these three

highly-polluted villages contacted members of Societies in less-affected areas and urged them to mobilize new activists (Int. 17).

If a person answered the call, SSC members from Huaxi, Huangshan or Xishan would help the 2

recruit put up a tent, an action which sometimes attracted more participants from the new activist’s village (R10).

People from several natural villages that lacked SSCs were much harder to mobilize.

3

A Huashui town cadre said

there were no residents of one village he supervised at the encampment, mainly because there was no SSC there (Int. 10).

1

On ostracizing those who do not participate in protest, see Li and O’Brien (2008, p. 7) and Kuang and Göbel (forthcoming).

The local authorities were well aware of this strategy. They even issued an open letter opposing it: “The masses in Huaxi demand that the government solve the environmental problem and we support this. But a handful of people go to some villages, randomly find a villager, gain his or her consent, and then erect a tent to represent that village. We are against this and will not recognize such tents. After all, one person or several individuals cannot represent a village” (R11).

3 About 50 natural villages in Huashui town did not take part in the protest, mainly because they were far away from the chemical park and their residents had fewer environmental grievances.

2

33

In the end, almost all our interviewees, both officials and villagers, emphasized the contribution SSCs made to mobilizing opposition to the chemical park. In reference to the 2005 protests, a Huashui police officer called the Society “the commander-in-chief at the front” (Int. 7). A Huashui town cadre noted that “SSCs played the role of ‘charging forward’” (chongfeng xianzhen) (Int. 11) and managing activities in the encampment. The party secretary of Huaxi No. 5 village, who sympathized with the tent-sitters and was ousted because he failed to convince them to stand down, gave full credit for closing the chemical park to “older people and their organizations” (Int. 13).

How SSCs Are Able to Mobilize Protest In rural Zhejiang, SSCs are often significant actors owing to the resources they control (Ints. 7, 14).

According

to The Law for Protecting Senior Citizens’ Rights (1996), more developed villages may use the income stream from collectively-owned assets to fund pensions and other expenditures.

Most communities in rural Zhejiang are

reasonably well-off and village leaders often assign SSCs revenues from village fish ponds, forests, markets, buildings, and farmland.

In Huaxi, the SSC has the right to operate the local market.

By the mid-2000s, the SSC

received about 130,000 yuan annually from leasing vegetable, fish, meat, and clothing stalls.

After remitting 20,000

yuan to the Huaxi village committee and 7,000 yuan to the Department of Urban Management (Ints. 14, 15), it still earned over 100,000 yuan in rental income every year.

1

In Xishan, another village that produced a large number of

tent-sitters, the bulk of the SSC’s income derived from membership fees paid by residents over the age of 60, donations from local entrepreneurs, and rent from 12 collectively-owned fish ponds (Int. 18).

SSCs in Huashui use these revenues, in part, to offer services to their members.

At the time of the chemical

park protests, the Huaxi Society was the best-funded and largest SSC in Huashui, with about 1,600 members (Int. 15).

It owned a spacious three-story building, which housed its offices and an entertainment centre.

had television sets and DVD players, as well as numerous mah-jongg and poker tables. established study groups. discuss current affairs.

The Huaxi SSC also

Older villagers routinely came to the centre to read books and newspapers, and to

Every spring the SSC organized trips to tourist sites.

small gifts, such as towels, cooking oil, and moon cakes. to visit them.

The centre

On holidays it gave its members

When elderly villagers fell ill, the SSC sent representatives

When members died, it dispatched staff with a funeral wreath to mourn them.

Every year, to

celebrate the birthday of the villagers’ common ancestor, the SSC allotted 20,000 yuan to hire a theatre company to perform a series of Wu operas; the festivities surrounding this continued for three days and four nights (Ints. 15, 16).

In addition to robust finances, Huashui’s SSCs enjoyed substantial autonomy.

Compared to organizations

such as the Women’s Federation, the Communist Youth League and the Public Safety Committee, which were treated as departments of the village party committee (Int. 2), Huashui’s SSCs received little oversight prior to the 2005 protests.

According to a Dongyang leader: “SSCs included all kinds of people.

government] didn’t pay enough attention to guiding them.

(Int. 2).

At that time, we [the county

They were expected to ‘control themselves’ (ziji guan ziji)”

The Principles of Grassroots Societies of Senior Citizens in Zhejiang (2004) gave village committees and

party branches responsibility for supervising SSCs, but in practice village cadres rarely intervened in SSC affairs.

Especially for Societies that had their own sources of income, SSCs were basically left on their own to draw up budgets, select activities, and choose leaders (Int. 7).

Most Huashui SSCs also had strong leadership.

More often than not, Societies in Huashui elected their own

directors and deputy directors (Int. 3), a practice which led to the selection of energetic and resourceful individuals who kept a close eye on villagers’ interests.

Retired cadres and workers were common choices (Int. 7), owing to

their educational level, work experience, and social ties in the community.

Such leaders, according to a Huashui

town official, possessed “prestige, a good head, and a clear mind” (you weixin, you tounao, you silu) (Int. 7). typically “enjoyed mass support” (you qunzhong jichu) (Int. 6) and were the sort of people others trusted.

1

They

Finally,

By 2012, revenue from the market had increased to about 200,000 yuan per year (Int. 24).

34

retired cadres, in particular, were experienced at negotiating with political and economic elites and were willing to stand up to them if the community was being harmed.

Skilful SSC leadership eased the fears of protesters and encouraged others to join the encampment. effective tactics, in particular, went a long way to keep the movement going and the authorities at bay.

Devising

For example,

Huaxi SSC leaders came up with the idea of having tent-sitters kowtow to local officials, police, and thought workers who approached the encampment.

To encourage elderly protesters, often donning white mourning clothes and

hats and burning incense, to kowtow while chanting “we beg you to save us” was a powerful way to frighten off anyone who dared confront the tent-sitters, not least because it was threatening for younger people to be kowtowed to by the elderly (Ints. 7, 9).

1

These tactics, and others like them, kept the authorities off balance and promoted

popular mobilization by showing potential recruits that tent-sitting was safer and more effective than they might have thought.

SSCs also benefited from a large pool of people who were “biographically available” (McAdam, 1986) to join the protest.

SSC.

At the time of the 2005 contention, about 20 percent of the village’s population were members of the Huaxi

In Huaxi No. 5 village, according to the party secretary, very few seniors were not SSC members (Int. 14).

2

Older villagers generally had spare time and limited family responsibilities and were free to take part in tent-sitting.

3

SSC leaders also had fewer worries than leaders of other organizations about the safety of people they mobilized.

A 2005 law that lays out penalties for disrupting public security grants those aged 70 and above certain

privileges when protesting.

Article 21 of the law stipulates that individuals over 70 years old can only be detained

for the most serious disruptions of public order.

According to a Dongyang county leader (Int. 1), Huaxi villagers

knew this clause well and this was one reason why SSCs mobilized tent-sitters who were mostly in their 70s or 80s.

Ironically, some protesters who were actually 69 years old thought they had reached 70 and thus faced detention (Int. 1).

4

Finally, the physical vulnerability of older protesters facilitated SSC mobilization.

Although some older villagers

were of course too feeble to take part in the protests, others could take advantage of the fact that it was unseemly 5

for representatives of state power to use force on the elderly.

As one town cadre who participated in efforts to

break up the encampment put it: “Those older people could hit me, but I couldn’t hit them back” (Int. 8). The director of the Dongyang Public Security Bureau reportedly felt handcuffed when dealing with dozens of elderly tent-sitters and complained: If I arrest those gray-haired 70-80 year-olds, how could I shoulder the responsibility? I cannot afford to feed them, since their eyesight is poor and they cannot work. The responsibility would be greater yet if one of them died during detention (Int. 17).

The vulnerability of the elderly made it more difficult to use force to end the encampment, which emboldened the early tent-sitters and helped draw in new recruits.Strong finances, organizational autonomy, good leadership, and a deep pool of biographically-available, unafraid protesters all served SSC mobilization.

1 2

As might be expected,

Kowtowing, when done by the elderly to younger people, is thought by many to “cut a person’s lifespan” (zheshou).

In Zhejiang, 73% of older villagers were members of SSCs in 2010 (Zhejiang sheng laolingban, 2010) 3 On retirees from state-owned enterprises and their “biographical availability” to participate in pension protests, see Hurst and O’Brien (2002, p. 354).

4 In rural China, most people keep track of their “nominal age” (xusui), which is one year older than their actual age. We do not have information on whether any 69-year old protesters were actually detained.

5 This was especially true after the violence of 10 April 2005 led to injuries. Even before that, elderly protesters were not detained and on the night of 10 April the 1,500 cadres and public security officers dispatched to deal with several dozen elderly protesters were instructed to remove the tents but to avoid striking tent-sitters. On local authorities being in a “morally weak position” and fearing intervention from above if they use force on elderly protesters, see Cai (2010, pp. 124-25).

35

however, the ability to manage a petition drive, turn out tent-sitters, and keep protesters at an encampment for nearly two months concerned local authorities greatly and led to efforts to check the influence of Huashui’s SSCs.

Efforts to Control Huashui’s SSCs Local authorities had long planned to rein in Huashui’s SSCs.

On 6 September 2004, according to the work

diary of the Huashui party secretary, “Town leaders met and discussed how to prevent persistent petitioning by SSC activists in Huaxi No. 5 village” (R8).

On 4 March 2005, Huashui’s party secretary presented a report about SSC

petitioning to county leaders, and a deputy director of the county people’s congress proposed reorganizing Dongyang’s SSCs.

The deputy director recommended: “village-level SSCs should be shut down; towns should

establish general assemblies of the elderly; seals from disbanded SSCs should be confiscated; ‘activity sites’ (huodong changsuo) should be set up at the administrative village level and [SSC] activities in natural villages should cease” (R2).

Five days later, in the midst of a wave of collective petitioning led by SSCs, the director of the Huashui

people’s congress suggested: “For SSC petitioners, doing thought work is far from enough. methods be used” (R3)?

Could harsher

On 22 May 2005, shortly after the encampment ended, a deputy party secretary of

Dongyang county, at a meeting attended by town officials, village cadres, and SSC leaders, reminded listeners: “SSCs are mass organizations.

They must be subject to party leadership” (R8).

Two days later, the Huashui party

secretary began a rectification of social organizations at the village level, with particular attention to SSCs (R8).

Before the chemical park protests, there were almost no county-level regulations concerning SSCs and very few of them were registered with the Dongyang Bureau of Civil Affairs.

1

After local officials witnessed how adept SSCs

were at mobilizing protesters, they decided to bring SSCs under tighter supervision by restructuring them and assigning them new superiors.

A retired town cadre explained the thinking behind this: “The Dongyang county

government has drawn lessons from the protests.

They are afraid of SSCs becoming stronger.

That’s why they

reorganized the SSCs” (Int. 18).

In early 2006, the county initiated a comprehensive reform of SSCs. registered with the county bureau of civil affairs.

Town SSCs were established and

Town SSCs and a county “Committee of Senior Citizens” (laoling

wei) were granted supervisory responsibility over Societies in administrative villages.

Town cadres were appointed

directors of town SSCs and these organizations were made departments of town governments.

SSCs in

administrative villages became branches of town SSCs and were placed under their leadership.

This meant that

village committees and party branches were no longer in charge of village SSCs.

2

Finally, SSCs in natural villages

(e.g. the Society in Huaxi No. 5 village) were converted into “small groups of the elderly” (laonian xiaozu) and these groups and all SSC branches were prohibited from having their own seals.

In accord with these reforms, the Huashui town SSC was established on 31 July 2006. deputy party secretary.

Its first director was a town

The Huashui party secretary and town head served as honorary directors (R5).

later, a town leader explained that this SSC was established to “guide” (yindao) SSC activities in villages.

“Most active SSC members are either retired cadres or workers. directed, they are very ‘tractable’ (tinghua).

Most of them are capable.

A year He said:

If they are well

Otherwise, they can be very stubborn” (Int. 3).

Spearheading petition drives and mobilizing tent-sitting led to efforts to rein in village SSCs.

Town SSCs were

established to supervise village SSCs, SSC seals were confiscated, and Societies in natural villages were instructed to shut down.

1

Nationally, only 12% of SSCs were registered with the bureaus of civil affairs in 2006 (Huang and Yuan, 2006). Most of these were in cities.

According to The Organizational Principles of Grassroots Societies of Senior Citizens in Zhejiang (2004), rural SSCs are subject to the leadership of village committees and party branches.

2

36

The Resilience of Huashui’s SSCs The reorganization only had a limited effect.

1

Most of our interviewees did not believe that local authorities

gained much control over village-level SSCs as a result of the 2006 reforms. far as to say that the restructuring was a complete failure:

One retired town cadre even went so

“Nothing has changed!

This approach is totally

unrealistic, because the organizations are still there, whether they are called ‘activity centres’ or ‘activity groups’. . . .

2

They can still oppose the government” (Int. 19).

The reorganization changed little for three main reasons.

First, local officials had come to depend on SSCs to

assist and manage senior citizens and they needed SSCs to deliver services that the local government did not provide.

So, though Societies in natural villages were instructed to shut down, none were actually closed.

Second,

the skill of SSCs in organizing contention made the authorities hesitant to cut off their funding out of fears it would trigger further protest.

SSC revenues were left unaffected by the reorganization.

As long as SSCs had their own

funding sources, they retained considerable autonomy and an ability to intervene when community interests were at stake.

Third, the reforms did not alter how village SSC leaders were chosen: they continued to be elected by SSC

members (Int. 3).

The restructuring did not grant town SSCs the authority to appoint either directors or deputy

directors of village SSCs and this left village Societies with substantial leeway to take on activities of their choosing.

Despite efforts to rein them in, Huashui’s SSCs have built on their successes mobilizing protest and have become more important players in local politics.

They have taken on a bigger, more assertive role in village affairs,

including approving development plans and land use decisions.

SSCs have also kept a close watch on village

factories and have even flexed their muscles in local elections.

After the closing of the chemical park, Huaxi’s SSCs became more actively engaged in village development projects.

For example, in May 2007 several Yiwu county businessmen proposed to turn an open lot belonging to

Huaxi No. 5 village into a holiday resort. The village committee signed off on the plan, but the SSC opposed it.

To

block ground-breaking, SSC members went to the proposed site, put up a tent, and maintained a vigil for ten days (Int. 5). This led the village committee to renegotiate the terms of the investment.

Ultimately, a new contract was

drawn up that provided the village with more benefits. SSC leaders, however, were still dissatisfied, because the village committee received the land rent from the Yiwu investors. have been given to our SSC. (Int. 16).

An SSC leader complained: “The money should

We older people fought on the frontlines, but they [village cadres] reaped the benefits”

Since the 2005 protests, village cadres have shown greater respect for SSCs and have often sought their

advice on development initiatives.

And SSCs have seized the opportunity to provide input.

One former party

secretary from Huaxi No. 5 village claimed, most likely exaggerating somewhat: “Village projects can only be fulfilled now with SSC support.

Without the SSC’s nod, nothing is possible” (Int. 13).

3

The Huaxi SSC also gained some say over what was to be done with the land the factories vacated. According to a protest leader, “SSCs ran the protests. What SSCs contributed should be repaid. So how to dispose of the land in the old chemical park should be decided by the SSC” (Int. 23).

From 2005 to 2010, the county sought to

place new plants on this site several times, but failed on every occasion, mainly because SSC members from Huaxi and Huangshan did not believe that the factories would be as environmentally friendly as the county claimed.

4

1

Confiscating seals, which are symbols of organizational power, did hamstring village-level SSCs and make it more difficult for them to organize contention and give it an official imprimatur (Int. 8).

2 According to a village party secretary, “The 2005 protests encouraged an unhealthy tendency: many older people think that the government is unable to deal with them. Now they want to “participate in politics” (canzheng) and believe that it should be up to them to decide on village affairs. Though they don’t say this aloud, they often ‘go their own way’ (ling gao yitao) when the village committee has made a decision on an issue” (Int. 14).

3

A protester who later became a cadre noted that the elderly no longer feared village leaders. He continued: “When SSC members don’t agree with what we do, they are happy to incite villagers to act against us” (Int. 12). At this point, the village cadre’s wife chimed in: “There is no point in being a village cadre nowadays. The SSC has final say over almost everything” (Int. 25).

4 In December 2010, the authorities finally succeeded in placing several low-pollution, craft goods factories in the former chemical park (Jiang, 2010).

37

SSCs also closely monitored the environmental impact of two factories that survived the 2005 protests and were allowed to stay in their original location.

1

SSC attention was so relentless that one of the factories, the

Shunda Dye Corporation, submitted a report to the county complaining: Since this May, the Senior Citizens’ Society in Huaxi No. 5 village has been sending members to our company, checking and supervising.

Sometimes it’s two or three villagers, sometimes it’s larger groups. We once received

three delegations in a single day, with one of them exceeding 70 people (R4).

Intense oversight frightened away several potential investors and reduced the number of local entrepreneurs willing to consider putting a factory on the site (R4; Int. 18).

Assertive SSCs have also become a force in local elections.

During county people’s congress balloting in

January 2007, SSC members campaigned for candidates who stood with them during the 2005 protests. the village committee director was elected with strong backing from the village SSC.

In Huaxi,

In the same county election, a

leader of the 2001 protests was encouraged by SSC members to stand as an independent candidate in Huangshan village.

He later recounted how he decided to put his name in the ring: “Older folks asked me to run.

had been imprisoned for the people and therefore had made my contribution” (Int. 21).

They said I

Though the ex-protester did

not win, he drained votes away from the party secretary of Huaxi village, a man who was disliked by most SSC members and a favourite of the local government.

As a result, the party secretary failed to be elected, too.

Aware of the growing influence of Huashui’s SSCs, many candidates in the 2008 village committee elections sought their endorsement and one even hired a former SSC director and a prominent tent-sitter to canvass for votes (Int. 22).

At the same time, candidates also tried to win over older voters by promising to assist SSCs and represent their members energetically.

One candidate in Huangshan promised in an open letter: “I will try my best to solve the

SSC’s difficulties and take good care of the elderly. societal management.

In particular, I will work to increase SSC income and improve

I will also draw on good practices from other places, providing living subsidies for older

people and organizing their travel” (R9).

Conclusion Societies of Senior Citizens are often thought to be sleepy, apolitical organizations that mainly focus on preserving community traditions and providing services to the elderly. mobilizing protest and causing 11 factories to be closed.

In Huashui, however, SSCs took the lead in

From 2004 to 2005, SSCs helped fund a lawsuit,

engineered a petition drive, and organized tent-sitting at a chemical park known for its pollution.

During the

encampment, SSCs drew up schedules for tent-sitters, offered compensation to protesters, provided logistical support, applied pressure on those reluctant to participate, and drew nearby villages into the protest.

Huashui’s

SSCs were effective mobilizing structures owing to their strong finances, organizational autonomy, effective leadership, and the presence of biographically-available, unafraid older villagers.

Skilful mobilization led to government efforts to rein in village SSCs.

Town SSCs were established to oversee

them, SSC seals were confiscated, and Societies in natural villages were instructed to shut down. reorganization, however, only had a limited effect.

This

Since the 2005 protests, Huashui’s SSCs have played a larger,

more assertive role in village affairs, including approving development plans and land use decisions.

SSCs have

also kept a close watch on village factories and have even become a force in local elections.

How often do SSCs mobilize protest and are the achievements of Huashui’s Societies likely to be replicated elsewhere?

As a case study, this article is not well-suited to address these questions.

Moreover, there are factors

specific to Huashui that helped its SSCs overcome obstacles that may exist in other locations.

Clan ties linked

1

Although 11 factories were closed as a result of the 2005 protests, two operated by local entrepreneurs survived. The Shunda Dye plant managed to stay open, mainly because the owner was a local entrepreneur who was highly respected by older villagers. Each year he also bought small gifts for all those aged 70 or over in Huashui town (R6). The other factory that remained open was owned by villagers from Huaxi.

38

1

many protesters and eased coordination in villages where SSCs already played a large role in lineage activities.

SSCs in Huashui also had big budgets, owing to Zhejiang’s booming private economy and local entrepreneurs who provided generous support for SSCs.

Finally, efforts to rein in Huashui’s SSCs were ineffective.

If village SSCs

had been deprived of their funding and autonomy, their ability to mobilize contention and build on their initial victories would have been diminished.

It is possible that the successes of Huashui’s SSCs may not be readily

reproduced elsewhere.

Still, there is evidence that SSC-led protest is growing (Chen, 2012, p. 84; Luqiao Qu Laolingban, 2006). there are reasons, beyond rising discontent and well-situated SSCs, that this trend may continue. “mission drift” can be a mechanism by which SSCs become more significant organizations.

And

For one,

Protest often

addresses widely-held grievances and, especially when it is successful, can empower SSCs in an environment where other non-state organizations are few and weak.

Becoming a force that stands with the community against

officials or companies that misbehave is undoubtedly a high risk strategy for organizational development, but not an unreasonable one.

Demographics also favour SSCs and offer them room to grow.

As migration empties the countryside of

younger men and women, SSCs are becoming a vehicle for the people who are left—the elderly—to participate in politics, even contentious politics.

2

Compared with the young, who might depart at any time, the elderly have

become the primary stakeholders in many villages and the most dogged defenders of community interests. are well-placed to take on new roles when the younger men who typically dominate politics are absent.

3

SSCs

With

numbers and resources behind them, SSCs can be a factor in local politics, especially if 1) local entrepreneurs back them, 2) they have former cadres leading them, and 3) lineage ties and respect for the elderly make it difficult to clamp down on them.

As was evident in Huashui, SSCs may resist government pressure and efforts to depoliticize

them, and it may not be easy to re-route Societies back toward harmless service activities.

The events in Huashui also speak to our understanding of mobilizing structures and the potential for sustained protest organization, even across villages. how the authorities respond to it.

We need to learn much more about cross-community cooperation and

How and how often do SSCs communicate with each other?

Why are some

types of coordination permitted, while others are harshly repressed?

Finally, this analysis suggests an understanding of protest outcomes that goes beyond the success or failure of a given episode to examine long-term consequences for the organizations involved.

Bringing time into the

discussion reminds us that building protest capacity is a long game and that we must pay attention to legacies and organizational traces: the consequences of repeated challenges and responses that settle a matter at hand, but even more importantly change the terrain on which state-society relations unfold the next time grievances mount.

An

organizational perspective on outcomes suggests that the resolution of an episode of contention matters, but leaving an organization behind that can mobilize future protest is equally significant.

1

For more on “strong ties” and protest mobilization, see Kuang and Göbel (forthcoming).

When SSCs grow in status and influence, are older men or women the main beneficiaries? Further research is needed to determine if SSCs are commonly patriarchal organizations led by men, which use women for protest, but do not allow them to benefit proportionately. Thanks to Tamara Jacka, 27 September 2012, Workshop on Agrarian Politics in China, Chinese Agricultural University, Beijing, for suggesting these questions.

3 This contrasts with the elderly in some countries, who are known for close attention to their own well-being, but less so for long-time horizons and acting on behalf of community interests.

2

39

“Citizenship in Urban China: the Case of Points Systems1” ZHANG Li Introduction Urbanization is one of the most significant developments in China over the past three decades. Official statistics have revealed that, in 1980, 19% of 975 million China’s population lived in the areas that were officially designated as urban. By the end of 2010, almost half of the total population (49.95%) was counted urban (National Bureau of Statistics 2011). Urbanization has grown so rapidly in many cities that actual urban population tends to exceed in just a few years the planned population target set out for the entire span of the city’s socioeconomic development plan (usually 20 years). Most of rural-to-urban migrants are opportunity-driven, whose choices of destinations are highly conditioned by an income disparity between the city and the countryside.

While massive economic migration has reshaped the geographic distribution of the country’s population, the overwhelming majority of urban immigrants fall under the category of “non-hukou” migration (without local household registration, also known as “floating” population) in the Chinese household registration (hukou) system (China Development Research Foundation 2010). The hukou system, which has been established for over a half century, stipulates that each citizen must register only one regular residence in only one place of permanent residence. A conversion of regular hukou from one locale to another requires official approval, a process subject to 2

conditions stipulated by a plethora of regulations. The locality of one’s regular hukou registration is the only place where one can claim all attainable entitlements. Many conventional dimensions of citizenship (namely access to government-funded welfare and other prerogatives) are, in effect, not operative for those without the local regular 3

hukou. Because of its role in entitlement exclusion and social stratification, the urban hukou is commensurate with citizenship in any given city. The existence of non-hukou migrants in cities, who appear as an army of “undocumented” workers in their own country, has been criticized, within and outside China, for obstructing the development of a harmonious society that the ruling party envisages (Chan 2010).

Admittedly, there are many official attempts at the central level to improve migrants’ citizenship over years. The trend is to gradually lift some restrictions that prevent rural migrants from gaining urban permanent residence rights.

The central government’s call for the opening of urban hukou registration to migrants is now crescendo. This is evident in a recent proposal for formulating the 12th Five-Year plan for China’s economic and social development (2011-2015), issued by the Central Committee of Chinese Communist Party on 16 March 2011. The Party has proclaimed that accelerating urbanization is an important solution to sustain economic growth and to reduce rural-urban inequality for the next five years. To facilitate urbanization, the proposal has rhetorically pledged to expedite the task of integrating rural migrant workers into the city harmoniously by offering them with urban hukou.

1

This article was presented on the Fudan-­‐UC Annual conference (2013) on “China’s Domestic Challenged China”, held in March 24, 2013 at UCSD. 2 The hukou regulations allow applications for the hukou conversion to be made through two schemes, social (marriage and family reunion) or economic (business/employment). Under the social scheme, the qualified applicant is a dependent child under the age of 18 whose parent is a local hukou holder, or the spouse of a local hukou holder. Those who have set up business or have taken up employment in the city are considered under the economic scheme. The eligibility under any scheme is dictated by specific requirements. Quotas are also introduced to regulate the number of qualified people assigned a local hukou. Requirements for hukou granting for social migration in some cities can be found elsewhere, such as Zhang (2010). They are not, however, part of this analysis.

3

While not being barred from employment, non-­‐hukou population cannot enjoy the same entitlements as those with the hukou in a wide range of areas in host cities. For examples, they are not entitled to unemployment allowance. They are ineligible for the minimum livelihood guarantee when facing economic hardship. They are not entitled to low-­‐rent public housing which is provided for local low-­‐income groups.

They are not entitled to employment-­‐related training sponsored by the city government. They cannot benefit from local preferential policies supporting the establishment of new enterprises when they start their own businesses. They have to pay school fees much higher than those paid by the hukou holders for the nine-­‐year compulsory education of their children. They face a higher income threshold when applying for bank loans.

40

City governments are asked to take effective actions and supply most of the funding for the pledge made by the central government.

The center’s rhetoric has not been translated into the commitment of local governments in a meaningful way under the country’s current decentralization reform, which the highly centralized power structure has experienced a transformation alongside significant devolution of administrative powers and social responsibilities to city governments. City governments perceive economic immigrants as both a reward that promotes local growth and a problem that places a burden on local public finance. The huge influx of migrant workers makes cities enjoy 1

demographic dividends and be low-cost production sites and dynamic economic spearheads. Nonetheless, city 2

governments also concern the liberty of urban hukou could overwhelm their capacities to provide public goods. At the city level, government narratives on citizenship policies often convey a tension between the cost of services consumed by migrants and the shortage of necessary funds. Considering the fiscal burden of urban hukou and taking note of international experience, several cities have recently launched their migrant-selection systems, which are functions very much as international borders would do, to deal with the dilemma of immigration.

Numerous studies acknowledge that urban citizenship in the Chinese context is centered on the hukou system (Cheng and Selden 1994; Mallee 1995; Chang and Zhang 1999; Wang 2005). However, few offers significant empirical content to update what is happening to the selection of economic migrants in Chinese cities and to elucidate how the notion of urban citizenship is now interpreted in reality. Drawing on policy documents recently 3

issued by city governments, this paper focuses on the actual workings of economic migration selection. Taking the newly introduced points systems in several cities as an informative case, the paper explores the following questions which are generally overlooked in the literature. What are the working criteria used by city governments for assessing an economic migrant’s qualifications for the urban hukou? What are important features of those criteria? To what extent is the newly implemented migration-selection system linked to the liberalization of urban hukou for economic migrants? In answering these questions, the paper demonstrates the new architecture of the Chinese hukou system at the city level for managing immigration. It shows that government-designated urban hukou emphasizes eligibility rather than entitlement. The points systems can be seen as an exclusionary strategy for inclusion of selected few but, in effect, exclusion of many to urban citizenship. Policies of urban citizenship are intertwined with two functions of the urban hukou: as an aggressive means of competition for talent and investment which are regarded as crucial development resources, and as a “planning” instrument for controlling the number of beneficiaries who may share the outcome of development.

The Chinese Points System: Several Samples As early as 2004, Shanghai city took the lead in drawing talented migrants and excluding low-skilled migrants by introducing its points system. Table 1 details the specifics. A migrant who secures a long-term regular employment in the city can be awarded the Shanghai hukou if her/his qualifications can pass the point test. Those who fail in the test are tied to temporary, renewable residence permits (RP, 居住证), which are official permission for 4

conditional stay. By regulations of migration management, RP holders are not considered as having gone through 1

One study estimates that today the urban economy generates about 75 percent of China’s GDP (McKinsey Global Institute, 2009).

2

For instance, one noteworthy study, based on the case of the country’s most populous city-­‐-­‐Shanghai, estimated that allowing all migrants currently residing in the city to stay on as urban hukou holders (meaning the government commitment to provide migrants with the same benefits of the locally registered population) would lead to fiscal deficit up to 5 per cent of the city’s GDP, the level that was hardly affordable to the city government (The State Innovative Institute for Public Management and Public Policy Studies at Fudan University 2010).

3

Those policy documents have their law-­‐like characteristics. They are issued using common legislate terms such as regulations (条例).

Administrative authorities rely on such documents for enforcement and implementation of policy.

4

Currently, Shanghai enforces three types of the residence permit under two administrative distinctions (one for professionals and the other for ordinary migrant workers) to manage different populations. By regulations, people of age 16 and over who have no Shanghai hukou and intend to stay in Shanghai for more than three months are required to apply for a residence permit (RP). Under the category of professional importation, type A of the RP is used for domestic professionals and business people and type B is issued to those from overseas. Migrants outside the professional category are issued type C of the RP. All three types of the RP are valid for a specified period and are renewable.

41

the process of hukou conversion and are not treated as bona fide residents. As a supplementary policy of the points system, those, who are holding Shanghai RP for some years can apply for Shanghai hukou since 2009, if they can meet additional requirements such as paying taxes and social security fees for seven consecutive years, possessing at least a middle-level professional title or technical certificate, and having criminal-free record (Shanghai Municipal Government 2009). Though the requirements are stringent and the cases of hukou conversion under the new initiative are subject to the control of annual quotas, this initiative has opened an avenue for RP holders to change their residence status through qualification fulfillment. Shortly after its introduction, Shanghai’s model generates a national impact, as it serves as a template of migrant selection that other cities have used.

(Table 1 about here) On 7 June 2011, the authority of Guangdong province in southern China, a home of 30 million non-hukou migrants (about a quarter of the province’s total population) from various parts of the country, promulgated a policy guideline of the points system that institutionalized the conversion process through which a non-local hukou holder could acquire a local permanent hukou in any cities of the province. This policy guideline provided a predictable path to an urban hukou via entry conditions. Under the proposed points system (Table 2), which was piloted first in Zhongshan city of the province in 2009 (Table 3), a migrant worker was qualified for urban hukou once he or she earned sufficient points. Unlike the Shanghai’s policy which opened only to highly-educated migrants (particularly university graduates), Guangdong’s policy was said to be applicable to ordinary migrants (particularly rural migrant workers). Following the provincial guideline, several migrant-receiving cities of the province, including Shenzhen, Guangzhou, and Dongguan, unveiled their points systems as the routine mechanism of recruiting wanted migrants and restricting unwanted migrants (Tables 4-6).

(Tables 2-6 about here) Under the points systems, urban hukou granting is subject to simultaneous “qualification” and “quota” controls.

Qualifications are connected to the eligibility criteria, whereas quotas regulate the number of qualified people. The eligibility is assessed by a number of variables under multi-tiered categories in a quantitative manner. It appears that some cities use more variables than other cities, and some variables are more common than other variables. The variables employed are an indication what city governments have prioritized in terms of the assessment of an applicant’s attributes and what attributes have deemed the most valuable for local development. The applicant has to furnish necessary information/documents to satisfy the city government that (s)he has accumulated sufficient points to pass the qualification mark. The qualification mark is the total points that the applicant can score for all items listed in the point-test sheet. If the annual quota of new hukou space, set by the city government and adjusted each year, is available, a qualified applicant will be granted an urban hukou. All qualified applicants will be ranked based on their maximum scores. The available hukou quotas will be assigned to those with the highest scores. If the annual quota is surpassed, an application will deem to fail even though the applicant can reach the points beyond the qualification mark. Unsuccessful applicants can re-lodge their applications in other rounds of application if they score enough points again.

By one nature, the points systems provide a remedy for under-registration of temporary migrants. With massive rural-to-urban migration, migrant management becomes a routine, but also a challenge for city governments. For the purpose of better management, migrants are required to register with the local police within a month after moving in and apply for a RP. However, migrants come and go, following job opportunities. A substantial number of migrants do not exist in the official registration. A low registration rate of non-hukou migrants is regarded as a perpetuated problem that frustrates the authorities of urban governance who always confuse the exact size of migrants under their administration. The situation is expected to be improved with the introduction of points systems. All RP holders (except for those from overseas) are put into a point-based management scheme that can lead to the path to the urban hukou. Contributions, merits and obligations of RP holders are linked to point accumulation. As they are offered the possibility of conversion to the host city’s hukou after serving in the temporary category for some years – 42

provided that they accumulate sufficient points, RP holders are treated more like “preparatory” or “probationary” citizens in cities. The convertibility feature accruing from the possession of the RP, an official proof of documented residence, serves as elicitation and a stimulant for migrants to register as temporary residents.

Points systems in different cities are likely to have different categories and different requirements, but similarities exist. Several common intriguing observations can be drawn from those points systems. First, quality attributes (素质) of the applicant are rated significantly. The qualities are ranked in terms of the educational credentials (the type of degree granted) or the level of professionals (the type of professional certificate awarded).

Table 7 lists the ratio of a variable to the qualification mark (RVQM) – a measure that quantifies the relative importance of each variable in the various structures of points systems proposed by Papademetriou et al. (2008).

The ratio comprises the maximum number of points a variable can contribute as a percentage of the qualification mark. As shown in Table 7, applicants who score maximum points in the variables of education and job skill will garner a significant portion of points toward the qualification mark. As an extreme case, under the Guangdong’s guideline, an applicant can pass the qualification mark simply by gaining the maximum score for education (80) or job-skill variables (60). This is unique to the Guangdong’s guideline: no points systems at the city level have a RVQM over 100 percent. Judging from the weights of major variables in different points systems, it can be sure that all systems focus on selecting talented migrants. By contrast, demographic attributes of the applicant are a vague desirable factor. Only in certain cases, age and marital status bear some credits, but are not particularly salient in the selection formula.

(Table 7 about here) Second, the merit-based imperative is prominent. This can be seen most directly in the relative importance of certain variables that are used to calculate an applicant’s contribution. The contribution can be calculated in terms of the amount of investment capital, awards from national/regional competitions or from outstanding work performance, participation in charity activities (e.g. donations made to local communities) and voluntary services (e.g. being volunteers to assist the operation of mega-events organized by local governments). Under the Guangdong’s provincial guideline, an individual who receives a national-level award can sufficiently qualify. While variables under the contribution category serve as a reward for those who have made significant contributions to the locale as interpreted by the city authorities, the variables also provide applicants with an incentive and opportunity to purchase points. For instance, the Zhongshan system has placed no score cap on translating the amount of investment capital and tax payable into point terms. An individual who demonstrates to invest to the city totaling over 10 million Chinese yuan (roughly equivalent to US$1,470,000) or pay tax amounting to over 1 million Chinese yuan (equivalent to US$147,000) can be awarded sufficient points to satisfy the qualification mark. In cities like Shenzhen and Zhongshan in a case that an applicant has a marginal deficit of enough points required to qualify for the application, (s)he can make up the deficit by simply donating a certain amount of money to the city.

Third, obligation requirement is considerably evident. In order to qualify for the application, applicants usually need to meet a number of requirements, including the proof of consecutive registration of temporary residency, evidence of employment formality, demonstration of house ownership, and participation in the social security program.

1

This amounts to saying that applicants must have adequate means of living in the city and fulfill their

social responsibility that is articulated and disciplined by government. For example, in almost all points systems examined, the points assigned to participation in the social security program account for nearly one third of the VQMR. House ownership comprises about a fifth of the qualification points. Moreover, successful applicants are

1

Employment formality refers to the requirement of authorization by the appropriate city government departments for the employment contract signed by both the employer and the employee. It also means the conditions and procedures which must be observed in making the employment contract in order to render the contract valid. In the case of self-­‐employment, the formality means that all business certificates/licenses required must be authorized.

43

asked to give up their claim to social and welfare rights (such as land-use right) in their native villages.

Notwithstanding, obligation variables are the least likely, on average, to singly assist an applicant to qualify under any of the points systems discussed here. Conversely, one can immediately lose his/her eligibility status by violating laws/regulations or committing crimes. Obviously, observation of coercive family planning regulations is an important part of the calculus in Guangdong’s cities. Offending convictions will lead to deficit in points. Apparently and intentionally, the urban hukou will not open to low-income people and regulation-breakers.

Fourth, the employer’s role is incorporated into the points systems in relation to labor demand in particular industrial sectors. Unlike the explicitly employer-led selection systems in some countries, employers on paper are not delegated power to determining the selection in the Chinese points systems. However, the Chinese systems do to some extent engage employers in the process of application. As shown in Table 1, for those wishing to obtain a Shanghai hukou, both applicants and their employers must satisfy a number of specified criteria. In addition to the applicant’s qualifications, the qualifications, reputation and social responsibility of the applicants’ employers are also rated, and the employer’s points constitute part of the applicant’s total points. The government may not process applications that are not sponsored by employers. The employer’s sponsorship should take two forms: (1) provision of relevant certifications for the applicant; (2) dispatch of a representative to accompany the applicant to submit the application in person (there is no facility for postal or on-line submission). By awarding points for employer’s role, the city government can ensure the selection of highly skilled applicants to serve in critical industrial sectors and enterprises in the city, and enable the Shanghai hukou to support important projects in the area of competitiveness building and in the implementation of political tasks mandated by the upper-level governments. In our Guangdong samples, certain points are allocated to applicants who have secured a job offer or sponsorship from the employers whose businesses are in the government-stipulated list of industry/occupation in demand, indicating that labor 1

shortage in specific areas is addressed in the points systems.

Fifth, like most of the selection systems effective elsewhere, Chinese points systems produce a “signaling effect” to affect the aspirations and behaviors of potential applicants. Requirements under points systems essentially serve as an announcement to prospective applicants about the relative weights attached to a variety of personal attributes, the critical threshold of qualifications, as well as various ways that they can meet the qualification mark. For some, the deciding factor in admissions may be their educational credentials, for others it may be the level of a specific skill.

Migrants may secure some points by gaining diplomas and certificates, investing businesses, or purchasing property.

As indicated in “contribution” variables, one can even pay for up to 10 points, or earn 10 points as a blood donor or by offering 250 hours of voluntary services. Overall, the qualification requirements would serve as a guideline for migrant workers to plan for the next seven or so years in terms of place of work and residence.

2

Despite offering migrants a leeway through which the urban hukou is granted, first and foremost the points systems have placed the interests of city governments front and center in a number of ways. Under the points systems, city

1

All cities introduced points systems have their industry/occupation in demand lists, which include labor shortage industries/occupations and industries/occupations have potential development.

2

The following two applications, taken from the application files, illustrate how the points system works in Guangzhou city. Mr. Li, a maintenance worker from Guangxi province, desires to settle permanently in Guangzhou city where he has worked in years. He has a senior secondary education certificate and a junior-­‐level technician title (20 points), is 52 years old (1 point), owns a residential apartment in the city (20 points), has paid for four social insurance programs for 8 years (32 points), and has received two awards from the city government for his excellent job performance (120 points). With a total of 193 points, he has already met the minimum (131 points) required to apply for the city’s hukou in year 2011. After his qualifications are verified, the city government approves his application. Because of the quota constraint in Guangzhou city, the eligible applicants whose score was below 164 in that year were not successful in their hukou applications.

Mr. Yang, came from Hubei province 10 years ago, now intends to become a permanent resident in Guangzhou city. He has completed college education (60 points), works in a state-­‐owned enterprise ranked AAA (10 points), and owns a residential apartment in the city (20 points). He is at age 37 (2 points). His participation in social security program gains him another 20 points. A total of 112 points put him 19 points deficit for the threshold mark (131 points). Over the next year or more, he plans to gain enough points by donating blood and contributing to voluntary services (possibly 20 more points).

44

governments possess paramount power to manipulate and control both the quality and quantity of migrants who are entitled for urban hukou within their jurisdictions. The desire to build the city’s human-capital infrastructure by accruing talented workers and professionals from a large pool of migrants is at the heart of all points systems. City governments can tailor their choices by altering relative weights of variables. City governments also have a flexibility to adjust the inflow valve of newcomers by imposing a quota constraint for qualified applicants. Currently, the annual quotas under the points systems are exceedingly small, compared to the number of migrant population in cities. In 2010 when is the first year to implement the points systems in Guangdong province, Guangzhou, the city with 7.26 million migrant residents in aggregate, offered 3,000 hukou spaces for qualified applicants. Shenzhen, which had over 10 million migrants, provided 4,600 quotas. Judging from a high threshold of requirement and stringent quota, only a fairly small number of high-income migrants who can contribute to the city’s fiscal revenue and help fund the city’s social services can obtain urban hukou. Therefore, the points systems will not entail more local budget burden.

As such, the points systems seem rather hollow at the current stage and provide no immediate solution to urban citizenship associated with non-hukou migration. Fundamentally, the points systems allow city governments flexibility in addressing their vested interests: in part as a means for securing human capital accumulation and in part as an instrument for avoiding social obligation to those who deem invaluable for city development from a government perspective.

Concluding Remarks One paradoxical dynamic of China’s urbanization over the past three decades is the massive flow of rural-to-urban migration concomitant with the exclusion of the bulk of migrants from urban citizenship through the hukou system. While rural migrants are no longer barred from urban employment, they suffer from the denial of many entitlements supposedly to be associated with their relocation within the same country. The existence of such overt discrimination has already evoked voluminous calls to change. In response, several cities have enforced their points systems that are analogous to what typically happens in the case of international migration. More cities will likely be 1

part of this trend soon. Perhaps in the foreseen future, millions of “undocumented” urban residents are expected to be “naturalized” through the local points systems.

The Chinese points systems provide an illuminating window through which one can understand changes in migration control and citizenship granting in a socialist country undertaking economic marketization and experiencing fast urbanization. One is that the hukou system, as one of the major tools of social control employed in the early 1950s, no longer impedes individual physical movements but still matters for defining citizenship. In the centrally planned period, hukou regulations were intrusive in preventing rural people moving into cities. Reforms of the centrally planned economy, characterized by decentralization and marketization, have set in motion a variety of dislocation forces that stimulate rural-to-urban migration. Urbanization has become one of the most visible features of China’s development. However, the hukou registration remains an official identity of a person’s access to government-provided welfare and other prerogatives in a given city. At the local level the hukou system is still strong in producing the exclusionary effect on citizenship on those who have moved to the city but are not deemed as qualified for urban hukou.

The introduction of points systems has signaled that hukou reform has entailed the localization of urban citizenship within a unitary state in the process of decentralization of administrative and fiscal powers as well as the devolution of social responsibility for public goods provision. On the municipal finance side, the local budget constraint is hardened by a fiscal regime in which local expenditures depend more on local incomes than on redistribution of national revenues. Financial pressures lead to the preference for development strategy that maximizes short-term revenue over long-term needs and that pays too little attention to distributional and welfare 1

While I am writing this study, Beijing is going to introduce its points system. Shanghai is considering expanding the scope of its points systems to all categories of migration.

45

priorities (Saich 2008). The assignment of health care, education, public housing, low-income assistance, and pensions to city governments hinders their provision to a large number of migrants. In terms of administration, the central government has deregulated management of hukou registration to a city level of government. Under current practices, city governments possess discretionary power to endorse the numbers of additions to the eligibility of local citizenship in their administrative jurisdictions. Localization of urban citizenship views processes of entitlement and exclusion as accomplished locally rather than through national-level institutions. This forms a potent barrier to the introduction of more liberal citizenship policies that allow socioeconomic rights of rural migrants to be transferable from one of rurality to one of urbanity.

The Chinese points systems also demonstrate that the granting of urban citizenship has been justified as promotion of growth at a cost of equity. The points systems, used primarily to trade urban hukou with human resource and capital, translate urban citizenship into commitment to urban prosperity. Using the points systems, city governments tend to prioritize talent and capital, which are the key to economic prosperity, over social objectives.

Note that the cities that have introduced the points systems are those ranking top in terms of GDP per capita on the 1

China Urban Competitiveness Report. This suggests that the wealthier the city, the more stringent restrictions they impose onto the acquisition of local citizenship. This observation is supported by the finding of one study on the city’s entry barrier, which demonstrates that an increase in fiscal capacity of a city does not necessarily reduce its resistance to admitting more low-skilled migrants (Wu and Zhang 2010). The points systems reflect the government-induced conflict on the competing values of economic growth and equality at the local level. The majority of migrants, who can participate in urban employment without official citizenship, are treated as necessary contributors of the economy but not as qualified beneficiaries. On this account, the hukou system not only survives during the China’s transition to market-based economy, but also retains an equal, if not more, important control role in the materialization of urban citizenship. The introduction of points systems has not been sufficient to assure the liberalization of urban citizenship. It remains to be seen, with a wider application of points systems among Chinese cities, how the hukou system evolves to make urban citizenship less exclusive and more accommodating.

References Chan, Kam Wing and Li Zhang. 1999. “The hukou system and rural-urban migration in China: processes and changes,” The China Quarterly 160: 818-855.

Chan, Kam Wing. 2010. “The household registration system and migrant labor in China: notes on a debate,” Population and Development Review 36(2): 357-364.

Cheng, Tiejun and Mark Selden. 1994. “The origin and social consequences of China’s hukou system,” The China Quarterly 139: 644-668.

China Development Research Foundation. 2010. China Development Report 2010: Promoting People’s Development as China New Urbanization Strategy. Beijing: People Publishing House.

Dongguan Municipal Party-Government Joint Conference. 2011a. 东莞市积分制入户暂行办法 (Provisional regulations for the point-based hukou granting in Dongguan city), issued on 25 April 2011.

Dongguan Municipal Party-Government Joint Conference. 2011b. 东莞市积分入户管理实施细则 (Detailed guidelines for the implementation of point-based hukou granting in Dongguan city), issued on 25 April 2011.

General Office of Shenzhen Municipal Government. 2010. 深圳市外来务工人员积分入户试行办法 (Provisional implementation of point-based hukou granting for non-local workers in Shenzhen city), issued on 12 August 2010.

Guangzhou Municipal Government. 2010a. 广州市农民工及非本市十城区居民户口的城镇户籍人员积分制入户办法（试行） (Provisional regulations for the point-based hukou granting for migrant workers and urban residents without Guangzhou hukou), Municipal Government Document [2010] no.82, issued on 4 November 2010.

1

The report is published annually by a think-­‐tank of the central government, the Chinese Academy of Social Science.

46

Guangzhou Municipal Government. 2010b. 广州市农民工及非本市十城区居民户口的城镇户籍人员积分制入户办法实施细则（试行） (Tentative detailed guidelines for the implementation of provisional regulations for the point-based hukou granting for migrant workers and urban residents without Guangzhou hukou), issued on 4 November 2010.

Luo, Jiwei and Shuilin Wang. (Eds.) 2008. Public Finance in China: Reform and Growth for a Harmonious Society. Washington DC: The World Bank.

Ma, Laurence J.C. 2005. “Urban administrative restructuring, changing scale relations and local economic development in China,” Political Geography 24(4): 477-497.

Mallee, Hein. 1995. “China’s household registration system under reform,” Development and Change 26(1): 1-29.

McKinsey Global Institute. 2009. Preparing for China’s Urban Billion. www.mckinsey.com/mgi, accessed on February 2, 2010.

National Bureau of Statistics. 2011. China Statistical Yearbook 2011. www.stats.gov.cn/tjsj/ndsj/2011/indexch.htm, accessed on April 8, 2012.

Shanghai Municipal Government. 2009. 持有《上海市居住证》人员申办本市常住户口试行办法 (Provisional regulations on the application for the hukou conversion for residency card holders), issued on February 12, 2009.

Shanghai Municipal Human Resources and Social Security Bureau, Shanghai Municipal Reform and Development Commission.

2008. 非上海生源进沪就业评分办法 (The point-test scheme for employment of college graduates without Shanghai hukou).

Internal Document.

The General Office of Guangdong Provincial Government. 2010. 关于开展农民工积分制入户城镇工作的指导意见 (Suggestive guidelines for the implementation of point-based urban hukou granting), document no.〔2010〕32, issued on 23 June 2010.

The State Innovative Institute for Public Management and Public Policy Studies at Fudan University. 2010. An Economic Analysis of Issues of Floating Population and Hukou Reform. Unpublished Internal Research Report.

Wang, Feiling. 2005. Organizing through Division and Exclusion. Stanford: Stanford University Press.

Wong Christine. 2010. “Paying for the harmonious society”, China Economic Quarterly June: 20-25.

Wu, Kaiya and Li Zhang. 2010. “发展主义政府与城市落户门槛：关于户籍制度改革的反思 (Developmentist government and urban hukou threshold: rethinking hukou system reform)”, 社会学研究 Sociological Studies 25(6): 58-85.

Zhang, Li. 2010. “The right to the entrepreneurial city in reform-era China,” China Review 10(1): 129-156.

Zhongshan Municipal Government. 2009a. 中山市流动人员积分制管理暂行规定 (Provisional regulations for the point-based administration of floating population in Zhongshan city), Municipal Government Document [2009] no.113.

Zhongshan Municipal Government. 2009b. 中山市流动人员积分制管理实施细则（试行） (Tentative detailed guidelines for the implementation of provisional regulations for the point-based administration of floating population in Zhongshan city).

47

Table 1 The rating scheme for qualifying for Shanghai hukou for college graduates 1 Qualifications of candidate’s employer 2

Qualifications of candidate Category

Point

Highest academic qualification earned

Category

Points

Basic qualification



Ph. D.

27





Master’s degree

24

observing regulations for



Bachelor’s degree

21

recruitment of university

An excellent track record for

5

graduates Reputation of universities and institutions which awarded a candidate’s degree 

Requirements with regard to the 15

importation of talents in key areas 

Key universities and institutions designated by the Ministry of Education, universities

graduates whose specialties

located in Shanghai and on the “Project 211”

are listed in the Directory of

list, research institutes affiliated to the

Development of Manpower for

12 

Shanghai and with the right to award master’sdegrees



3

Non-Shanghai universities on the “Project

3

3

Key Areas

Chinese Academy of Sciences but located in



Employers recruiting

Employers recruiting graduates whose specialties are listed in the Directory of

8

211” list, institutions directly under the

Development of Manpower for

administration of the central government and

Key Areas and who graduate

with the right to award master’s degrees,

with master’s degrees from

universities and research institutes under

key universities and

the administration of the Shanghai

institutions designated by the

government

Ministry of Education or by

Other universities and research institutes

the Shanghai government

Academic ranking of the principal subject during

Considerations for undertaking key

the period of university study

8

projects or meeting urgent needs



First rank (top 25%)

6

for qualified graduates



Second rank (top 26% -- 50%)

4





Third rank (top 51% -- 75%)

2



Fourth rank (76% -- 100%)

3

Employers undertaking key projects in socio-economic development contracted by the state or the Shanghai government, and recruiting

1--10

graduates with high qualifications for those projects 

Employers who are institutes or social organizations bearing responsibility for serving public sectors such as education and public health in remote suburbs of the city

Foreign language proficiency 

Passed College English Test Level 6 with a

8

48

Qualifications of candidate’s employer 2

Qualifications of candidate Category

Point

Category

Points

score over 425 or Professional English Test Level 8 

7

Passed College English Test Level 4 with a score over 425 or Professional English Test

7

Level 4 

Passed foreign language courses for those specializing in foreign languages, arts, and sports

Computer competence 

Post-graduates

7



Science graduates with advanced level

7

computer competence (exemption for those specializing in mathematics, e-information, electronic information, management science

7

and engineering) 

Arts and social science graduates with

6

intermediate computer competence (Grade 2 in the provincial-level test) 

6

Science graduates with intermediate computer competence (Grade 2 in the

6

provincial-level test) 

Arts and social science graduates with elementary level computer competence (Grade 1 in the provincial-level test)



Pass in computer-related courses for those specializing in foreign languages, arts, and sports

Awards and honors  

Awards and honors granted by national-level

10

authorities

5

Awards and honors granted by

2

provincial-level authorities 

Awards and honors granted by university (one point for each award, 2 points maximum)

Awards from national competitions such as the National Undergraduate Electronic Design Competition, China Undergraduate Mathematics Competition in Modeling, National English Competition for College Students, and National Undergraduate Challenge Cup during the period of university study (15 points at maximum)

10

（1）Certified international competitions or the

8

49

Qualifications of candidate’s employer 2

Qualifications of candidate Category

Point

above national competitions

Points

6



First prize



Second prize

5



Third prize

3

（2）Local qualifying heats for the above national

Category

1

competitions 

First prize



Second prize



Third prize

Scientific inventions 

Holding a patent for an invention

5



Holding a patent for a utility model

3



Holding a patent for product design

3



Submission of an application for a patent for

1

invention (An acknowledgement letter from China Patent & Trademark Office is required) Establishment of own businesses （1）Establishing scientific firms with a grant from the City Fund for University Graduates to Set Up Scientific Enterprises

5



As a legal representative

2



As a member of a founding team

（2）Establishing other firms

5



As a legal representative

2



As a director

Participation as a graduate volunteer in

5

government-led projects serving Western China Notes: 1.

The scheme applies to college graduates who have no Shanghai hukou and who have job offers in Shanghai.

2.

Qualifications of employers are certified by the relevant authorities and are reported to the Office of Shanghai Joint Conference for Employment of College Graduates for confirmation.

3.

“Project 211” refers to the central government’s plan to strengthen a number of tertiary institutions and key disciplinary areas for the twenty-first century.

4.

The qualification mark is the total accumulated points for all relevant items and is the score essential to qualify for application for the Shanghai hukou. Those with accumulated points below the qualification mark should apply for a residence permit.

5.

The annual qualification mark will be decided by the Office of Shanghai Joint Conference for Employment of College Graduates in accordance with the city government’s plan for regulating the increase of the Shanghai population.

Source: Shanghai Municipal Human Resources and Social Security Bureau, Shanghai Municipal Reform and Development Commission (2008).

50

Table 2 A guideline for the rating scheme for qualifying for urban hukou , Guangdong province Category/indicator

Point

Note for the category/indicator

Part I Province-wide common assessment A. Personal quality Educational attainment

Professional qualification

Junior secondary school

+5

Senior secondary school or vocational school

+20

College

+60

An undergraduate degree or above

+80

Junior-level technician title

+10

Middle-level technician title

+30

Senior-level technician title

+50

Professional title equivalent to the associate professor level

+60

The applicant can score in only one of the indicators in the category of educational attainment.

The applicant can score in only one of the indicators in the category of professional qualification.

B. Contribution to social security program Participation in

Number of years to

+1 for one-year

(1) Plans in this indicator include

social security

contribute to social

contribution to

urban basic pension insurance,

program

security plans

one plan

urban basic medical insurance, unemployment insurance, work injury insurance, and maternity insurance. (2) The maximum score in this indicator is 50 points.

C. Contribution to the local community Participation in

Donation of blood

+2 per donation

community services in the past 5 years

The maximum score in this indicator is 10 points.

Participation in voluntary services

+2 per reference unit

(1) 50 hours of service is taken as one reference unit. (2) The maximum score is 10 points in this indicator.

Philanthropic donation

+2 per 1,000 yuan

(1) The beneficiary must be a philanthropic organization authorized by government. (2) The maximum score is 10 points in this

51

Category/indicator

Point

Note for the category/indicator indicator.

Award and honor

An award or honor granted by governmental

+30 per award/honor

The maximum score is 60 points in this indicator.

authorities at the county-level An award or honor granted by governmental

+60 per award/honor

The maximum score is 120 points in this indicator.

authorities at the prefecture-level or above D. Punishment Violation of family

Any case of unpermitted

planning regulation

birth

-100 min.

(1) A 5-year ineligibility period for application is applied if the applicant receives any family-planning related punishment. (2) Upon the expiration of the ineligibility period, 100 points are deducted for the first case of violation and double points are deducted for the subsequent cases.

Crimes in the past 5

A record of reeducation

years

through labor camp A record of imprisonment

-50

-100

sentence Part II Locality-specific assessment Subject to stipulations by individual cities Source: The General Office of Guangdong Provincial Government (2010).

52

Table 3 The rating scheme for qualifying for urban hukou in Zhongshan city, Guangdong province Category/indicator

Point

Note for the

Required

category/indicator

document

Part I Essential requirements A. Personal quality Educational

Senior secondary

attainment

school

+15

The certificate of degree and the

Part-time college

+40

Full-time college

+55

Undergraduate

+80

Post-graduate and

+100

certification letter from the educational authorities at the province-level or above

above Professional qualification

Junior technician title

+10

Professional title

+15

The certificate of professional title and the certification

equivalent to the

letter from the

assistant professor level Professional title

government who issues the

+55

certificate

equivalent to the associate professor level Professional title

+90

equivalent to the professor level B. Employment formality Status in

Contribution to local

social security

social security program

program

+2 for one-year

The maximum score in this

The documentary

indicator is 20 points.

proof by the relevant

contribution

department of the municipal government

Period of

Number of years of

employment

continuous employment

+2 for one year

(1) The continuous

(1) The original

employment refers to the

employment

employment without a

contract with the

break of more than 3

employer’s stamp.

months in a consecutive

(2) The employer’s

contract after the

declaration for

termination of a previous

satisfaction of the

53

Category/indicator

Point

Note for the

Required

category/indicator

document

contract. (2) The maximum

applicant’s

score in this indicator is 10

fulfillment of the

points.

contract

The family’s living space

(1) The certificate of

per capita cannot be less

property ownership.

than the threshold

(2) The certificate of

requirement of application

land-use right

C. De facto residency Regular

Ownership of residential

dwelling

property

+10

for low-income housing (10 sq. meters).

Period of

Number of years of

abode

continuous residence

+2

Continuous residence

The temporary

refers to the continuity in

residence certificate

the residence period

or the residence

without a break of more

permit

than 3 months.

Part II Incentive offers D. Personal particular Age

Over aged 16 and under

+5

The personal

aged 35 Marital status

Single

identity card +5

The documentary proof from the Department of Civil Affairs in the place of the applicant’s

hukou registration E. Personal competence Talent

Possession of skills

+50

The list of

The

which are in the list of

industry/occupation in

acknowledgement

industry/occupation in

urgent demand is

letter from the

urgent demand

announced by the

relevant

municipal government and

departments of the

is updated annually.

municipal government

Invention or

Possession of one

patent

national-level patent

+30

There is no maximum

The patent

score in this indicator.

certificate

within the past 5 years

54

Category/indicator

Point

Note for the

Required

category/indicator

document

F. Personal contribution Award and

An award granted by

honor

(1) The awards must be

The certificate of

authorities at the city

granted by governmental

award

level

departments within the

An award granted by

+10

+20

authorities at the

of the award-granted authority refers to the

provincial level An award granted by

past 10 years. (2) The level

authority’s administrative +30

ranking. (3) For multiple

authorities at the

awards of the same case,

national level

the applicant can score only one award. (4) Points can be accumulated for awards of different cases.

Honor for

A honor granted by

action in the

authorities at the city

cudgels for a

district level

just case

A honor granted by

+10

The certificate of honor

+20

authorities at the city level A honor granted by

+30

authorities at the provincial level A honor granted by

+50

authorities at the national level Participation

Number of years of

in

voluntary services in

philanthropic

the municipality

+1 for

(1) One-year service is

The

one-year

defined as 100 hours or

acknowledgement

service

more of service within a

letter from the

calendar year. (2) The

relevant organization

services

maximum score in this indicator is 10 points.

Donation of money

+2 per 10,000 yuan

(1) The beneficiary must

The

be a philanthropic

acknowledgement

organization authorized by

letter from the

the municipal government.

beneficiary

(2) The maximum score in

55

Category/indicator

Point

Note for the

Required

category/indicator

document

this indicator is 10 points.

Donation of blood

+1 per 200

(1) The donation must be

The

milliliters

made to the organizations

acknowledgement

of the municipality. (2) The

letter from the

maximum score in this

relevant organization

indicator is 5 points.

Donation of marrow

+2 per

(1) The donation must be

The

donation

made to the organizations

acknowledgement

of the municipality. (2) The

letter from the

maximum score in this

relevant organization

indicator is 10 points.

Investment

Amount of investment

and tax

+1 per

There is no maximum

(1) The business

100,000 yuan

score in this category.

license; (2) The

payable

documentary proof of investment Amount of tax payable

+1 per

The tax receipts

10,000 yuan

issued by the municipal taxation department

G. Honesty and abidance by law Obedience of

Holding a

family planning policy

The certificate must be

The certification

national-standardized

issued by the family

letter from the

certificate of family

planning authority in the

relevant family

planning for non-hukou

place of the applicant’s

planning authorities

population

hukou registration.

of the municipality

Voluntary

+2

+3

Long-term contraceptive

implementation of

measures include

long-term contraceptive

intrauterine device,

measures

vasoligation, and ligation of oviduct.

Regular participation in

+1

maternal examination

The applicant has participated in no less than 3 examinations organized by relevant family planning authorities each year.

Participation

Voluntary participation

in the program

in the national immunity

+1

The specifics of epidemic

The official record of

control program must be in

56

Category/indicator

of epidemic control

Point

program for children Voluntary participation

Note for the

Required

category/indicator

document

line with the relevant +1

in the mother & child

national and provincial regulations.

care program Participation in the

The documentary proof issued by the authorized hospitals or medical

+1

organizations of the

pre-marriage medical

municipality

examination Qualification for

inoculation

+1

The health

employment in

certificate issued by

businesses that have

the authorized

special requirements for

hospitals or medical

personal health

organizations of the municipality

Residence

Registration for

registration

co-residing children

+1

Relevant residence cards

under 16 Personal

Good track records in

reputation

financial matters

+5

The letter of credit record issued by an authorized bank

H. Criminal convictions Punishment

Surveillance under the

for criminal

law authority

-40 min.

(1) Points deducted are calculated by the number

activities

of months of surveillance multiplied by 3. (2) The minimum deducted points are 40.

Detention sentence

-60 min.

(1) Points deducted are calculated by the number of months of detention multiplied by 12. (2) The minimum deducted points are 60.

Imprisonment sentence

Points deducted are calculated by the number of months of imprisonment multiplied by 12.

57

Category/indicator

Violation of

Custody sentence

Point

-5 per case

Note for the

Required

category/indicator

document

Points deducted are

state or

accumulated by the

municipal

number of cases.

regulations

Reeducation through

Points deducted are

labor camp

calculated by the number of months of reeducation multiplied by 2.

Violation of family

-200 per

Points deducted are

planning regulation

case

accumulated by the number of cases.

Violation of the city’s

-2 per case

sanitary regulation and the guides of epidemic prevention Sources: Zhongshan Municipal Government (2009a; 2009b).

58

Table 4 The rating scheme for qualifying urban hukou in Shenzhen city, Guangdong province Category / indicator

Point

Note for the indicator

Aged 18-35

+5

Number of years in participation in social

Aged 36-45

+2

Aged 46-60 for males,

+1

A. Essential requirements Age

security program in Shenzhen municipality can be used for lowing the equivalent years of the applicant of a given age. For example, if the applicant

aged 46-55 for females

has 5 years of participation in social security program and is aged 50 in the time of submitting the application, the applicant can score 2 points rather than 1 point.

Status of health

Good condition of

+3

health

The status of the applicant’s health must be complied with the municipal regulation on the health requirement for recruiting technical workers.

Registration of abode

Possession of the

+2

The applicant without registration or

Shenzhen residence

without holding a valid residence permit

permit

cannot score any points.

Notes for the category (1) Relevant certified documentary proofs are required. (2) If the applicant cannot score any points in this category, she or he cannot score in the subsequent categories.

B. Personal quality Educational

Junior secondary

attainment

school Senior secondary

+5

The applicant can score in only one of the indicators in this category.

+20

school Part-time college

+30

Full-time college

+40

Part-time

+50

undergraduate degree Undergraduate degree

+60

or above Professional

Junior-level technician

qualification

title

+10

The applicant can score in only one of the indicators in this category.

59

Middle-level technician

+20

title Senior-level technician

+30

title Professional title

+60

equivalent to the associate professor level Skill competence

Awards from national

+30

skill competitions

In the case of multiple awards, the applicant can score only one award.

organized by relevant authorities of Guangdong within the past 3 years Scientific invention

Granting of a

+5

(1) If the patent is granted to a team in

national-level patent for

which the applicant is a member, the

invention

points assigned to the applicant will be calculated as 5 divided by the number of team members. (2) The maximum score in this indicator is 30 points.

Award and honor

Awards and honors

+60

granted by the

In the case of multiple awards, the applicant can score only one award.

municipal government or the Guangdong government within the past 5 years Awards and honors

+5

(1) The applicant who holds a Guangdong

granted by other

agricultural hukou and who scores some

prefecture-level

points in the above award cannot score

municipal governments

any points in this indicator. (2) The

within the past 5 years

applicant who holds an agricultural hukou of other provinces rather than Guangdong cannot score any points in this indicator.

(3) The maximum score in this indicator is 10 points.

Notes for the category (1) The applicant can score only in one of the following sub-categories: professional qualification or professional title, skill competence and scientific invention. No points can be accumulated across these sub-categories. (2) Relevant certified documentary proofs are required.

60

C. De facto residency Ownership of the

Number of years owning

property

the property

+2 per year

(1) The issuing date indicated in the property certificate is used as the starting point to calculate the number of years. (2) If the applicant owns more than one property, only one property will be considered for score. (3) The maximum score in this indicator is 20 points.

Period of abode

Number of years holding

+1 per year

(1) The issuing date indicated in the

the Shenzhen residence

applicant’s residence permit is used as

permit

the starting point to calculate the number of years. (2) The maximum score in this indicator is 10 points.

Notes for the category (1) The applicant can score only either in the sub-category of ownership of the property or in the sub-category of period of abode. (2) No points can be accumulated across the sub-categories. (3) Relevant certified documentary proofs are required.

D. Contribution to social security program Participation in

Number of years to

Shenzhen social

contribute to social

security program

security program Number of years to

+3 per year

The maximum score in these two indicators is 30 points.

+1 per year

contribute to commercial insurance program Participation in social

Number of years to

+1 per year

security program in

contribute to social

10 points. (2) The applicant who holds an

other places of

security program

agricultural hukou of other provinces

Guangdong

(1) The maximum score in this indicator is

rather than Guangdong cannot score any points in this indicator.

Notes for the category (1) The maximum score in this category is 30 points. (2) Relevant certified documentary proofs are required.

E. Incentive offers Social contribution to

Donation of blood

+2 per case

Guangdong within the past 5 years

The maximum score is 6 points in this indicator.

Participation in voluntary services

+2 per

(1) 50 hours of service are taken as one

reference unit

reference unit. (2) The maximum score is

61

6 points in this indicator.

Philanthropic donation

+2 per 1,000

yuan

The maximum score is 6 points in this indicator.

Notes for this category (1) The maximum score in this category is 10 points. (2) For the applicant who holds an agricultural hukou of Guangdong, social contribution must be made to Guangdong province. (3) For the applicant who holds an agricultural hukou of other provinces rather than Guangdong, social contribution must be made to Shenzhen municipality. (4) Relevant certified documentary proofs are required.

F. Punishment Violation of family

Each case of

planning regulation

unpermitted birth

-100 minimum

(1) A 5-year ineligibility period for application is applied if the applicant receives any family-planning related punishment. (2) Upon the expiration of the ineligibility period, 100 points are deducted for the first case of violation and double points are deducted for the subsequent cases.

Each case of

-50

non-marital birth or unregistered adoption Crimes

A record of reeducation

-50

through labor camp within the past 5 years A record of

-100

imprisonment sentence within the past 5 years Participation in illegal

-100

organizations or illegal activities Immoral record

One immoral record of

-20

personal credit in financial matter Notes for this category Points deducted in this category must be accumulated.

Source: General Office of Shenzhen Municipal Government (2010).

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Table 5 The rating scheme for qualifying urban hukou in Guangzhou city, Guangdong province Category/indicator

Point

Note for the category/indicator

A. Basic point Age

Education and skill

Under 35

+5

Aged 36-45

+2

Aged 46-55

+1

Professional title equivalent to

+100

the associate professor level

The applicant can only score in one of the indicators in this category.

or above Ph.D.

+100

Master degree with a

+100

professional title equivalent to the assistant professor level Master degree

+90

Undergraduate degree with a

+90

professional title equivalent to the assistant professor level College education with a

+80

professional title equivalent to the assistant professor level Senior secondary school or

+80

vocational school education with a senior-level technician title College education

+60

Middle-level technician title

+60

Junior-level technician title

+50

(grade 3) Junior-level technician title

+30

(grade 4) Senior secondary education or

+20

equivalent Junior-level technician title

+10

(grade 5)

63

Junior secondary school Social security

Housing

+5

Urban basic pension insurance

+1 per year

Urban basic medical insurance

+1 per year

Unemployment insurance

+1 per year

Work injury insurance

+1 per year

Maternity insurance

+1 per year

Ownership of residential

The maximum score in this category is 50 points.

+20

property in the city B. City-oriented point Special industries

Industries and occupations in

and occupations

high demand

Sectors

Key development sectors

+10

+10

designated by the city government Regions

Key development regions

+10

designated by the city government C. Bonus point Reputation of

Key universities and

universities and

institutions designated by the

+10

The “project 211” and the “project 985” refer to the central

institutions which

Ministry of Education, or

government’s plan to strengthen a

awarded an

universities on the “project

number of tertiary institutions and

applicant’s degree

211” list, or universities on the

key disciplinary areas for the

“project 985” list, or key

twenty-first century.

universities under the administration of the Guangdong government Harmony of

Employees of the enterprises

employment

ranked AAA

relationship

Employees of the enterprises

+10

undertaken by the Municipal Bureau +5

ranked AA Employees of the enterprises

The ranking of enterprises is

of Human Resources and Social Security.

+3

ranked A Contribution to social services within

Donation of blood

+2 per donation

The maximum score in this indicator is 10 points.

64

the past 5 years

Voluntary services

+2 per 50 hours

Philanthropic donation

+2 per 1,000

yuan Award and honor

An award granted by

+60 per award

authorities at the city level or

The maximum score in this indicator is 10 points.

The maximum score in this indicator is 10 points.

The maximum score in this indicator is 120 points.

above An award granted by

+30 per award

authorities at the district level Investment and tax

Amount of investment totaling

payable

over 5 million yuan Amount of tax payable totaling

The maximum score in this indicator is 60 points.

+20

The applicant can only score in one of the indicators in this category.

+20

over 100,000 yuan in each of three consecutive fiscal years Sources: Guangzhou Municipal Government (2010a; 2010b).

65

Table 6 The rating scheme for qualifying urban hukou in Dongguan city, Guangdong province Category/indicator

Point

Note for the category/indicator

A. Personal quality Education

Professional qualification

Junior secondary school

+15

Senior secondary school or equivalent

+20

College

+60

A bachelor degree

+80

A master degree or above

+100

Junior-level technician title (grade 5)

+10

Junior-level technician title (grade 4)

+30

Middle-level technician title

+50

Senior-level technician title

+60

Professional title equivalent to the

+80

associate professor level or above Occupational

An award of a national registration

+50

qualification

certificate for special occupations

Social security

Urban basic pension insurance

+1 per year

Urban basic medical insurance

+1 per year

Unemployment insurance

+1 per year

Work injury insurance

+1 per year

Maternity insurance

+1 per year

The maximum score in this category is 50 points.

B. Contribution to the society Social services

Donation of blood

within the past 5 years

Voluntary services

Philanthropic donation

+2 per

indicator is 10 points.

+2 per 50

The maximum score in this

hours

indicator is 10 points.

+2 per

The maximum score in this

1,000 yuan Award and honor

An award granted by authorities at the district level An award granted by authorities at

The maximum score in this

donation

+30 per award +60 per

indicator is 10 points.

The maximum score in this indicator is 60 points.

The maximum score in this

66

the city level or above

award

indicator is 120 points.

C. Employment Period of employment in the municipality

Employment period less than 3 years

+1 per year

Employment period between 3 and 6

+2 per year

years Employment period over 6 years

+3 per year

D. De facto residency Period of abode

Residency period less than 3 years

+1 per year

Residency period between 3 and 6

+2 per year

years Residency period over 6 years Regular dwelling

Ownership of residential property

+3 per year +30

The family’s living space per capita cannot be less than the threshold requirement of application for low-income housing in the city (18 sq. meters).

E. Investment and tax payable Amount of investment

+2 per

The maximum score in this

100,000

indicator is 30 points.

yuan Amount of tax payable

+2 per 5,000 yuan

The maximum score in this indicator is 30 points.

F. Incentive offer Scientific

Holding a patent or a principal

invention

investigator of an outstanding

+60

scientific project Talent competition

A winner of a job-skill competition

+60

organized by relevant authorities at the city level or above Family planning

Registration in the city’s family

+5

planning system Implementation of long-term

+5

contraceptive measures Regional factor

Application for settling down in the

+15

The classification of towns is

67

towns classified as type B Application for settling down in the

based on the level of economic +30

towns classified as type C Applicants who come from the areas

development. Towns in type A are the most developed ones.

+30

received economic aids from Dongguan as required by the upper level government G. Punishment Violation of family planning regulation

Any case of unpermitted birth Illegal marriage or illegal adoption

-100 min.

-50 per case

(1) A 5-year ineligibility period for application is applied if the applicant receives any family-planning related punishment. (2) Upon the expiration of the ineligibility period, 100 points are deducted for the first case of violation and double points are deducted for the subsequent cases.

Criminal activities

Surveillance under the law authority

-50 per case

Imprisonment sentence

-100 per case

Sources: Dongguan Municipal Party-Government Joint Conference (2011a; 2011b).

68

Table 7 Weights of major variables in different points systems, 2010 Variable

Shanghai

Guangdong

Zhongshan

Shenzhen

Guangzho

Dongguan

u M

RVQ

MP

RVQ

P

M

M

(%)

(%)

MP

RVQ

MP

RVQ

M

RVQ

MP

RVQ

M

M

P

M

M

(%)

(%)

(%)

(%)

Positive weight Education

27

31

80

133.

100

93.2

60

60.0

3 Job skill

15

17.2

60

100.

10

76.9

100

76.9

0 90

76.3

60

60.0

80

61.5

80

61.5

0 Industry/occu

10

11.5

n/a

n/a

50

42.4

n/a

n/a

20

15.4

n/a

n/a

10

11.5

120

120.

50

42.4

60

60.0

60

46.2

60

46.2

min.3

P.Q.

30

30.0

n/

n/a

60

46.2

pation in demand Awards received Scientific

0 5

5.7

n/a

n/a

invention Social service

0 n/

a

n/a

10

16.7

10

8.5

10

10.0

10

7.7

10

7.7

n/a

10

16.7

10

8.5

6

6.0

10

7.7

10

7.7

n/a

n/a

n/a

10

8.5

20

20.0

20

15.4

30

23.1

n/a

n/a

n/a

min.2

P.Q.

10

10.0

n/

n/a

18

13.8

a Donation

n/ a

House

n/

ownership

a

Years of

n/

residence

a

Participation

n/

in social

a

a n/a

50

83.3

20

16.9

30

30.0

50

38.5

50

38.5

n/a

n/a

n/a

min.1

P.Q.

n/a

n/a

20

15.4

30

23.1

n/a

n/a

n/a

min.1

P.Q.

n/a

n/a

20

15.4

30

23.1

n/a

n/a

n/a

5

4.2

5

5.0

5

3.9

n/a

n/a

security program Investment

n/ a

Tax payable

n/ a

Age

n/

69

Variable

Shanghai

Guangdong

Zhongshan

Shenzhen

Guangzho

Dongguan

u M

RVQ

MP

RVQ

P

M

M

(%)

(%)

MP

RVQ

MP

RVQ

M

RVQ

MP

RVQ

M

M

P

M

M

(%)

(%)

(%)

(%)

a Marital status

n/

n/a

n/a

n/a

5

4.2

n/a

n/a

a

n/

n/a

n/a

n/a

n/a

min.5

P.D.

a

Negative weight Violation of

n/

family

a

n/a

min.

P.D.

50

min.2

P.D.

00

min.5

P.D.

0

n/ a

0

planning regulations Criminal

n/

convictions

a

n/a

min.

50

P.D.

min.4 0

P.D.

min.1 00

P.D.

n/ a

n/a

min.1

P.D.

00

Notes: n/a = not available; MP = maximum points; P.Q. = possibly qualified; P.D. = possibly disqualified.

70

The Shanghai Forum (上海论坛) Shanghai Forum, launched in 2005, is an international economic forum co-hosted by Fudan University and Korea Foundation for Advanced Studies. By providing a platform for communication among academic, political and business circles, it endeavors to explore ways of progress for Asia in economic, political, social and cultural fields. The highlight of the Shanghai Forum is its annual conference in each May, and the annual conference of Shanghai Forum (2014) will be held on May 24-27 in Shanghai

Shanghai Forum (2013) Consensus Our age is undergoing extensive and profound changes. Asia should gain experience from history and reality and make full use of its unique wisdom and cultural strengths, to overcome all obstacles and difficulties lying ahead and to pursue coexistence and harmonious development, despite our differences. Shanghai Forum 2013, adopting as its theme “Asia’s Wisdom: Seeking Harmonious Development in Diversity”, has gathered guests in extensive discussions on political, economic and cultural issues.

The core of Asia’s Wisdom is inclusiveness in promoting unity and harmony in creating prosperity. Asian countries must respect each-other in gathering together our collective wisdom and converting it into the concepts, strategies, systems, policies and actions needed to promote economic and social development, so as to achieve sustainable economic and social development.

1. Asia needs to be more forward-looking in leading technological innovations.

A key factor in facing up to Asia’s challenges lies in technological innovation. Asian countries should promote further insights into the world technological frontier, explore and lead in new technology and applications for new energy and information, tailoring the construction of their modern energy information systems to regional resource endowments, and internalizing advanced concepts, technologies and institutions in their domestic or regional development, so as to nurture emerging industries and create new markets and new growth points, thus promoting sustainable economic and social development.

2. Asia needs to be more scientific and rational in promoting economic recovery and development.

First, Asian countries should continue to cooperate with the U.S., Europe and other developed countries, boost trade under the framework of WTO international trade and investment rules of increased trade, and deepen the international divisions of labor between Asia and other regions. Meanwhile, Asian countries should also improve their domestic market rules and legal systems to improve efficiency and enhance the competitiveness of their exports.

Second, faced with challenges and opportunities in the real economy, Asian countries should enhance their own broad-ranging cooperation, especially in the financial sector, so as to improve financial performance serving the real economy, to alleviate risks of instability in 71

the East Asian financial system, and strengthen resilience to external market shocks.

Third, Asian countries should enhance their levels of economic integration, taking industrial reconstruction fostered by Asian Free Trade Areas and regional financial and monetary cooperation as their primary starting point.

3. Asia needs to be more proactive and prudent in exploring institutional changes.

First, during the ongoing process of rapid urbanization, Asian countries need to deal with more complex challenges brought by changes in urban management and social life through urban management innovation and innovation in social institutions, aiming at our living a high-quality urban life.

Second, the fourth communication revolution, featuring new media, has brought new and serious challenges to Asian countries. Only by going forward with an open mind in coping with information technology advances and social changes can Asian countries gradually improve regulations in news media and management systems suitable for our modern information society.

Third, through collaborative research and sharing of practical experience, Asian countries need to develop their health care systems with national characteristics, seeking fair and efficient solutions to cope with the challenges brought to our health systems by an aging population and chronic diseases, which are challenges even to the entire picture of socio-economic development.

4. Asia needs to be more patient in promoting regional cooperation.

As regards global climate issues, Asian countries should actively seek regional cooperation, strengthen exchanges and enhance mutual trust, to cope jointly with climate changes in Asia and in the whole world, and to enhance the voice of Asian countries. As to legal cooperation issues, it is the diversity of legal systems in Asia that determines the diversity of Asian legal wisdom, which provides both the bases and the conditions for legal unification in the region. Asian countries, on one hand, should establish a multi-level and multi-dimensional system for resolving disputes. On the other hand, they should also try to promote partial unification of their civil laws, exploring new paths to a harmonious blend of Asian legal wisdom.

5. Asia needs to be more flexible in promoting regional peace and stability.

Seeking development and promoting cooperation is the mainstream current in today’s Asia.

To resolve currently existing disputes, Asian countries should operate from the standpoint of Asia and learn from the whole world, seek peace and autonomy in a gradual process, cooperate to reach win-win solutions and integration of values, learn from history and face the future.

Asian countries should respect and follow the common aspirations and well-being of the peoples of Asia, seek a common regional peace, a shared level of development and prosperity and a commitment to the resolution of manifold international and regional problems.

72

It was generally acknowledged by the Shanghai Forum 2013 delegates that Asia is playing an increasingly important role in the world in facing up to crises sweeping in from the West.

Asia's future will be as diverse and colorful as history and reality always have been. History proves that if we want to turn Asian dynamics to the real rise of Asia, Asian countries must be united in seeking consensus from diversity and achieving development in harmony. Asian countries should fully respect the differences between each-other, coordinate their positions and carry out pragmatic cooperation, thus achieving win-win situations in the economic, political, social, cultural and environmental aspects. Asia’s wisdom is the wealth of all the people in Asia. It is the ideological cornerstone of Asian countries to achieve harmonious development in diversity.

Audio and Video on China “Toward a More Harmonious World: The Place of Humanities and Social Sciences Education in China”, YANG Yuliang http://vimeo.com/63937781

“U.S. Pivot to Asia: What Does it Mean for the U.S.-China Relations?"

A Conversation Between Kurt Campbell and Susan Shirk http://www.uctv.tv/shows/The-Pivot-to-Asia-with-Kurt-Campbell-and-Susan-Shirk-25372

73

“Consumer Switching and Competition Strategy in IT-enabled Markets” Xiahua WEI My dissertation studies consumer switching and competition in information technology (IT) enabled markets. IT-enabled markets – for example, wireless telecommunications, Internet, and cable services – are usually customer-centric and characterized by consumer switching between service providers (Katz and Shapiro 1985). However, switching can be costly, in terms of money and effort (Klemperer 1987). In fact, consumer switching costs are a salient feature of many IT-enabled markets (Shy 2001). Therefore, understanding and managing switching costs is critical for competition. As pointed out by Shapiro and Varian (1999, p.133), “you cannot compete effectively in the information economy unless you know how to identify, measure, and understand switching costs and map strategy accordingly.”

In my dissertation, I focus on two major sets of issues related to consumer switching: (1) How do industry regulations that reduce switching costs affect market competition? (2) Is investment in acquiring new customers effective when competition intensifies? I use the global wireless telecommunications industry as a testing filed to explore these issues. The analysis reveals interesting findings, and provides insights into pro-competitive policymaking and firms’ competition strategy in a technology-intensive environment.

The strategic importance of switching costs becomes compelling given policymakers’ recent interest in reducing switching costs in various industries to promote market competition.

Mobile Number Portability (MNP) is such a policy in the wireless telecommunications industry.

By allowing customers to transfer phone numbers when changing wireless operators (firms), MNP eliminates “social network switching costs,” a major barrier to switching due to the need to inform one’s social networks such as friends and business contacts. This policy intends to even the playing field for small firms, but its actual consequences are unclear.

To explore this issue, I construct an asymmetric duopoly model in which switching costs are heterogeneous across customer segments. The model predicts that the overall market share of the large firm will decrease, while its average price may increase; the effect on the small firm is the opposite. I test these predictions empirically by analyzing panel data of 218 wireless operators in 52 countries over six years. I find relative market share gains for small firms under MNP. Yet, large firms still manage to sustain a higher average price than smaller firms. I call these two contrasting findings “market share convergence” and “price divergence.” By examining customer base composition, I find that large firms are able to retain higher-value contract subscribers while small firms tend to attract lower-value “pay-as-you-go” subscribers. Contrary to popular belief, even with MNP, large firms continue to dominate.

These findings inform our understanding of the effectiveness of pro-competition policies, especially how portability policies may alter firms’ ability to compete, and how firms should adjust their strategies to better retain customers. In addition, whereas prior studies on MNP are limited to an individual market, my global datasets allow me to account for various market conditions in an international context, and to find that MNP effect may be more evident in markets that have low concentration. Hence, it seems more effective to introduce the policy 74

at early stage while the market is still growing and has not been stuck with a sticky oligopolistic equilibrium. This kind of implication for policymaking is absent in smaller-scale studies on individual markets. Further, with MNP as a valuable experiment in the wireless industry, my approach is applicable to the analysis of public policies in other IT-enabled industries, such as personal data portability in the banking industry, and the healthcare industry.

My dissertation also explores the effectiveness of customer poaching. The increasing expenditure on customer acquisition in the past decade, coupled with significant churn, raised an important question for firms: Do these poaching efforts pay off as competition intensifies? I investigate how spending on customer acquisition affects business performance along three stages of customer relationship management (CRM): acquisition, retention, and revenue generation.

The understanding of competition is limited in the empirical literature on CRM, and my study contributes to this aspect by analyzing the wireless market competition along two dimensions: race for in customers, and race for better technology. Incorporating the role of technology into customer poaching distinguishes my study from other work on CRM. And as such, I am able to address a central question: to better acquire and retain customers, should firms invest more in paying customers to switch, or new technologies (e.g., 3G or 4G)?

I find several interesting results, based on a firm-level panel dataset of 38 operators in seven countries over eight years. First, acquisition spending helps to attract new customers (higher acquisition rate). However, it does not improve customer retention or revenue. Customers with lower switching costs (prepaid) are more sensitive to firms’ acquisition efforts. They are easier to lure, but also easy to lose, because they incur low switching costs without contract obligations. As a result, churn is higher and revenue is lower. Second, rivals’ competitive actions substantially reduce the effectiveness of the focal firm’s acquisition effort. What appears to matter is the acquisition spending relative to rivals’, i.e., the level of differentiation in acquisition efforts as opposed to the absolute level of spending. Third, increasing the focal firm’s acquisition spending can lead to greater acquisition rate in the prepaid segment than in the contract segment; meanwhile, acquisition spending is effective to poach contract customers only if the innovative technology (3G) is present. Hence, differentiation in acquisition cost is important to keep up the race of customer poaching, especially in the low-value customer segment. Using new technology alleviates the adverse effect of competition, especially in the high-value customer segment. Fourth, higher market penetration is associated with lower acquisition rate and lower revenue, but insignificant in churn rate. As a market gets saturated, it becomes harder to acquire new customers; aggressive acquisition spending can in fact aggravate revenue in such markets. Also, the moderating effect of market penetration on acquisition spending differs across customer segments. With high penetration rate, acquisition spending is effective only to acquire prepaid customers. This is because customers who have not entered the market are those with low willingness to pay, i.e., prepaid customers.

75

Together, these findings imply that in the race for poaching customers, investment in customer acquisition does not necessarily carry on to every stage of CRM. Devoting resources to customer acquisition can be costly, especially when rivals respond aggressively.

Further, firms ambidextrous in both customer and technology strategies have an edge over competitors. To make customer acquisition strategy effective, it is important to make use of new technology to attract high-value customers, ahead of the competition or at least not falling behind.

76

Embeddedness and Conflicts: “The Process and Logic of U.S. Military Institution Changes” Zuo Xiying In the International system which is filled with rivalry of great powers, building strong armed forces is the most effective approach to keep secure for all the states. In this case, the fundamental measure is to build a high efficient and flexible military institution which can extract strategic resources to the largest extent and transfer them to powerful military strength.

As the hegemony in the world, the United States and its complicated military institution provide a good paradigm for our research on the changes of military institution. Throughout the processes of military institution reforms after World War II, we can find an interesting phenomenon. On the one hand, every reform movement was dedicated to promote the power of Joint Chiefs of Staff while advanced the power of the United States Secretary of Defense.

On the other hand, every reform movement devoted to change the organizational forms of army, navy, air force and morine corps in order to push forward the integration of institutions and joint operations.

The key questions of the article are, why are all the U.S. military institution reforms devoted to promote the powers of both civilian and military? Why are all the reforms devoted to promote the cooperation among the services? What are the dynamics and mechanisms of U.S. military institution changes?

The author clarifies the dimensions and forms of U.S. military institution and then develops an “Embeddedness-Conflict Theory” to explain the changes of U.S. military institution. This theory argues that the change of U.S. military institution is a process of different institutions embedded slowly together. On the horizontal dimension, the institutions of army, navy, air forces and morine corps embed and integrate together. On the vertical dimension, the institutions of civilian and military embed and integrate together. In this process, the institutional embeddedness and institutional conflict mixed together.

According to “Embeddedness-Conflict Theory”, the change of U.S. military institution is a process from peripheral embeddedness to central embeddedness. This institutional embeddedness process includes two core socialization mechanisms which are the mechanism of reembeddedness and mechanism of the institutionalization of power transformation. This theory also argues that the linkage of institutional embeddedness that the elites are absolutely necessary. The elites play a crucial role in the process of institutional embeddedness and institutional conflict.

Moreover, the author advances the international pressure, military doctrine and inter-service rivalry as the independent variable. The core thesis of the article is that the embeddedness degree of U.S. military institution depends on the extent of international pressure, military doctrine and inter-service rivalry. Then the author does five case studies 77

chronologically which are the reforms caused by National Security Act of 1947, Department of Defense Reorganization Act of 1958, Goldwater-Nichols Department of Defense Reorganization Act of 1986, the reforms of Donald Rumsfeld and Robert Gates, and a negative case which is the Revolution in Military Affairs (RMA) in Clinton administration.

The new theory can help us reveal the logic of U.S. military institution changes after World War II from a totally new angle. Meanwhile, the new theory also explains how the inter-service rivalry and civil-military relations exert influence on the changes of U.S. military institution and the security policy decision-making process. This can help us better understand the behavior patterns of the US military and trends of institutional change.

78

“Cyberspace Romance In Translation: The Case of China's Email-Order Brides” Haiyi LIU: In the past two decades, greater ease of travel and expansion of Internet access have enabled an explosive growth in international dating arranged through web-based matchmaking agencies. My dissertation, Cyberspace Romance in Translation: The Case of China’s Email-Order Brides, examines this phenomenon with a particular focus on relationships between women from China and men from Western countries. I explore the social and cultural conditions that motivate non-English speaking Chinese women to seek foreign husbands, as well as the processes by which their marriage brokers mediate their courtship interactions. My dissertation examines Chinese women’s out-migration in the greater context of the nation’s socio-economic transition, and analyzes the processes through which new cyber-dating practices in the global 21st century change gender, racial, and familial perceptions and relations.

With funding from the Fulbright Foundation and the UC Pacific Rim Research Program, I conducted fifteen months of ethnographic research at three different matchmaking agencies in China over a course of five years (2008-2012). The three local agencies I studied are among the hundreds that work with a foreign “male-supplier” company, which at the time of my study had nearly 1 million registered Western male clients and provided service to 38,461 women from 24 developing countries, including 22,550 women from China. The couples in my study rely on translators at the matchmaking agencies to translate their email exchanges as well as arrange for the in-person meetings when the men travel to China to visit their potential brides.

My research consisted of interviews with the staff and clients, as well as

participant observation both on-site at the agencies where I volunteered to teach English to the female clients and off-site when the men traveled to China to visit their potential brides.

While many previous studies cite poverty or the desire to escape gender patriarchy at home as the primary reasons leading women to seek out-migration through marriage, I suggest otherwise in the case of China, where the composition of female marriage migrants has shifted since 2000 from the below-30 age group to the 30-60 age group. The women in my study consisted of laid off workers of former state enterprises, ex-wives of nouveau riche men, and single mothers. I discuss why their middle-aged, divorced status puts them at a significant disadvantage in China’s post-reform labor market and marriage market. Moreover, I suggest that, having experienced turmoil in their previous dating or marriage lives as a result of China’s increasingly unstable family structure during its current phase of transition, they idealize Western men as less promiscuous and seek out-migration not only for financial reasons but also in search of a sense of emotional security that has been lost since China’s pre-reform/early-reform era.

In my discussion of the matchmaking agencies, I examine the process through which the translators use their knowledge of Chinese youth culture and Western popular culture to create hyper-feminized images of their female clients and thereby reinforce the existing stereotypes of Asian women in the Western media. I also discuss the commoditization of the 79

male clients and the female clients’ role as consumers during the cyber-dating process, which have been overlooked in previous scholarship that focused only on the women as 1

commodities. Building on Hochschild’s theory of emotional labor (1983), I introduce the concept of “emotional entrepreneurship” in my discussion of how translators create feelings and fantasies for their male and female clients when they translate their clients’ email exchanges. Finally, I discuss the challenges that the translators, who are recent college graduates struggling to make a living in China’s over-saturated labor market, and the managers, who are first-time entrepreneurs navigating the waters of China’s under-regulated business environment, face as they try to balance their profit-making goals with their ethics and conscience.

My dissertation contributes to the fields of migration, gender, globalization, economic sociology, and China studies by enhancing our understanding of a) how sending country cultures and conditions affect migrant decision-making processes; b) how gender stereotypes are created and disseminated; c) how globalization and technological advancements foster new channels through which intimacy and sexuality are commoditized; and d) how China’s socio-economic reform impacts women’s livelihood.

1

Hochschild, Arlie. 1983. The Managed Heart. Berkeley: University of California Press.

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Scholarly Publications Books: Unfinished Reform in the Chinese Economy, Singapore World Scientific 2013 Zhang Jun edited China has quickly moved into a critical point in the sense that its past performance in economic growth and development has created so many unsolved problems, and for such problems to be addressed, a better understanding of these problems and a clear policy framework are required for policy makers to conduct reforms. Based on high–level empirical research on China's economic development by each of the contributors, this edited book provides an in-depth and clear analysis of many of important issues facing China's move to new phase of economic development and transformation, and discusses policy issues involved in further reforms.

Wu Jinglian: Voice of Reform in China, MIT 2013.

Barry J. Naughton,

Book Abstract For more than thirty years, Wu Jinglian has been widely regarded as China's most celebrated and influential economist. In recent years, Wu has emerged as a prominent public intellectual fighting not just for market reform but also for a democratic society backed by the rule of law. This book presents many of Wu's most important writings, a number of them appearing in English for the first time. Each section offers an informative introductory essay

by Barry Naughton, the volume's editor and an expert on China's economy. The book begins with Wu's most recent articles, which make clear his belief that gradual marketization combined with institutional development will make Chinese society fairer and less corrupt.

Biographical writings follow, accompanied by a richly insightful text by Naughton on Wu's life and career. Taken together, these texts map not only China's path to economic reform but also Wu's own intellectual evolution.

Book Review Almost every page of this book is insightful on Chinese economics or politics or usually both together. (Tyler Cowen Marginal Revolution) Decades from now, future generations will look back at the turn of the twenty-first century and ask how China moved away from the socialist planned economy system and engineered one of the most spectacular stories of economic growth in human history. There will be no shortage of books devoted to analyzing these processes. In relative -- if not total -shortage will be stories told by the actors who played major roles in this historical transformation. This rare and valuable volume, based on writings and stories of one of China's most influential economists and public intellectuals, Wu Jinglian, will serve that 81

important function. It provides materials from a unique angle for contemporary readers to appreciate and understand the processes of China's reforms.

(Wang Feng, Professor of Sociology, University of California, Non-resident Senior Fellow, The Brookings Institution) Wu Jinglian has long been a critical figure in the Chinese reform process, at once an intellectual mastermind behind several key policies and a trenchant observer of the process as a whole. To the best of my knowledge, this book represents the first comprehensive English -- language presentation of Professor Wu's writings. Moreover those writings are coupled with insightful commentary by Barry Naughton, one of the world's foremost experts on the Chinese economy. This volume offers a crucial window onto the intellectual foundations of China's ongoing economic transformation.

(Edward Steinfeld, Professor of Political Economy, MIT, and co-director of the China Energy Group in the MIT Industrial Performance Center) Naughton's focus on Wu Jinglian, whom he rightly identifies as a key contributor to the lengthy gestation of China's reform and marketization, is both attractive and timely. Naughton gives the reader a sense of the entire milieu in which debate and, eventually, Chinese reform occurred, as well as highlighting the issues and some of the personalities involved.

(Thomas G. Rawski, Professor of Economics and History, University of Pittsburgh)

About the Author Barry Naughton, an economist, is Professor and Sokwanlok Chair at the Graduate School of International Relations and Pacific Studies at the University of California, San Diego.

He is the author of Growing Out of the Plan: Chinese Economic Reform, 1978--1993 and The Chinese Economy: Transitions and Growth (MIT Press). Wu Jinglian, one of the principal architects of China's economic reform, worked in the Institute of Economics of the Chinese Academy of Social Sciences, and the State Council Development Research Center in China.

He has held positions at Oxford, Stanford, Yale, and MIT.

Research Reports Fudan Development Institute edited, Driving by the "Two Engines": China’s Strategic Choice of Development in the Next 10 Years (双轮驱动：中国未来十年发展的战略选择), Fudan University Press 2012.

After the per capita GDP reached $3000 in China, the structural problems of development are getting more severe. The challenges of internal and external toward national development are very serious. The reports in this collection try to explore the path of development and change in the next decade and the effective mechanism of the national construction, which will serve to find out national strategic choice in completing governance transformation and put forward reform and development. Reports involve the following realization of challenges facing to China in next decade: contradiction of economic structural 82

and lack of innovation ability, lack of reform consensus and restriction of state power, social conflicts intensified and insufficient social organization development, cultural based value weakened and lack of cultural innovation, conflict between multiple ideology and ideology with closed form, leadership of CPC and ruling foundation weakened, contradiction between development and environmental deterioration, adjustment of world order and the strategic conflict between countries, etc..

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