Chinese Economic Reform, with Chinese Characteristics of Course

​By Kevin Toda
 
Much of China’s rapid economic growth in the last several decades stems from the abandonment of a planned economy model and the retreat of government intervention in private business (increased integration into the world economy was also a major factor) (1). In 2013, at the 3rd Plenary Session of the 18th Central Committee, China’s leaders declared that markets would play a “decisive role” in the economy. Western experts praised the ambiguous announcement as a step towards a modern market economy.
 
Many of these experts were left deflated after China announced, this September, that reform of state owned enterprises (SOEs) would merely consist of promoting mixed ownership.
 
On November 13th, Dr. Deng Feng of Peking University’s Law School joined the NexGen Global Forum to discuss the evolution of legal regulations in China’s economy.
 
During the presentation Dr. Deng covered China’s transition in 1979 from a command to a mixed economy. He began with a brief explanation of the unit system that formed the basis of the Chinese planned economy during the Mao era.
 

​​朱逸煊供稿
 
在过去的几十年中，中国经济的快速增长，主要原因是放弃了计划经济模式（融入世界经济也是一个重要因素）。2013年，在第十八届三中全会上，中国领导人宣布市场将在经济中发挥“决定性作用”。西方专家盛赞这一公告是向现代市场经济迈进的重要一步。但这其中的许多专家在今年九月中国宣布，国有企业改革只会是推进混合所有制时，感到十分失望。
 
11月13日，北京大学法学院邓峰博士加入了我们的课堂，讨论中国经济法律制度的发展演变。在演讲中，邓博士说明了中国1979年从计划经济向市场经济的转变。他对在毛泽东时代，中国在计划经济的基础上形成的单元系统作了简要说明。1984年之前，所有的企业都是国有的，由单位组织。每一个单位都有一个“上级主管单位”，直接向中央报告。这些单位并不灵活，有着固定的就业机会、极少的横向合作和严格的行政法规。1984年，中国政府公布了城市的经济改革措施，即对国有企业的简政放权。1988年，进一步的改革为私营部门的发展提供了法律保障。上世纪90年代后期，成千上万的国有企业被私有化。这些变化为中国经济的增长减轻了负担，极大地提高了中国经济的效率。
 

Before 1984, all enterprises were state owned and organized by work units (单位/danwei). Every unit had a “superior unit in charge” who reported directly to the central Communist party. These units were inflexible, with fixed employment, little horizontal collaboration and strict administrative rules.
 
In 1984 the PRC government released major urban economic reforms, decentralizing control over SOEs. Further reform was promulgated in 1988 that provided a legal guarantee for the development of the private sector. A decade later, tens of thousands of SOEs were privatized, forcing the former state companies to streamline or fail. These changes shed massive amounts of excess weight and tremendously increased the efficiency of the Chinese economy.
 
The government, however, was not willing to relinquish control over its most prized SOEs and wanted to regulate the new private sector which, for the first time, included foreign investors.
 
Maintaining Control
 
One method of control that regulators have utilized is a quota system. In his discussion with NexGen Global Forum, Dr. Deng focused primarily on government control of the securities and land markets. All land in China is owned by the government which enables them to tightly control the market. The government determines to whom land will be sold, how much land will be sold for and generally how land is used.
 
The government entity that controls the securities market is the ministry level China Securities Regulatory Commission (CSRC), which, among other responsibilities, “supervises the issuance, listing, trading, custody and settlement of stocks, convertible bonds, bonds of securities companies, and bonds and other securities…” (2). This includes IPOs, the volume of shares allowed to be traded in the market and the distribution of employee stock options. Finance is an important sector that the government watches closely. This could be seen during this summer’s stock market crash when the CSRC suspended IPOs and barred shareholders, with stakes larger than 5% in a single listed firm, from selling.
 
As for the state owned sector, the Communist Party has maintained that certain industries are essential to China’s economic and national security and thus cannot be entrusted to any entities outside the central government. Industries SOEs play a dominant role in range from electronics to energy, to telecommunications and beyond. Further categorization of SOEs was included in September’s announcement with some deemed for-profit entities while others dedicated to public welfare. According to Xinhua News Agency, “the former will be market-based and stick to commercial operations and should aim to increase state-owned assets and boost the economy, while the latter will exist to improve people’s quality of life and provide public goods and services.”
 
Network Capitalism
 
Dr. Deng argued that China’s capitalist development is markedly different from the Western experience. Dr. Deng referenced From Fiefs to Clans, Dr. John Child and Dr. Max Boisot’s article on China’s trajectory towards network capitalism as opposed to market capitalism.
                                              
The 1996 article describes China’s historical lack of a codified bureaucratic order and how that pushed the Chinese system to develop around “clans” or personal networks and not the market. This, explained Dr. Deng, is why Chinese reforms often protect patronage networks. Economic regulation reform in China is a constant balance between those networks who benefit from state protection and the reform-minded ideological camp. While growth and efficiency are certainly a priority for the PRC government, the ultimate aim is not to create a fully privatized market economy but to strengthen the state sector.
 
Given China’s recent economic history and the entrenched interests in the SOE structure, it is unrealistic to expect wholesale reforms of the Chinese market. Some experts, such as Tao Wang (chief economist at UBS), however, believe that the reforms are not insignificant; after all, mixed ownership is a divestment of state assets. Recently, Beijing has shown interest in importing the Temasek model from Singapore in order to avoid the potential problems of rapid privatization that plagued Russia in the 1990s. And yet, the central government has shown time and time again that it is reluctant to release control. We will see if President Xi Jinping’s reforms will indeed allow market forces to play a “decisive role” by 2020.
 
As per usual, we’re on a need-to-know basis.
 
Dr. Deng was the 4th speaker in the Tsinghua-SAIS dual degree program’s “Economic Transition in China” case study course. Prof. Deng specializes in corporate and enterprise law, as well as regulation and anti-trust litigation.
 
(1)  Max Boisot and John Child. “From Fiefs to Clans and Network Capitalism: Explaining China’s Emerging Economic Order,” Administrative Science Quarterly, Vol. 41, No. 4 (Dec 1996), pp. 600-628.
(2)  CSRC.gov.cn About page (http://www.csrc.gov.cn/pub/csrc_en/about/)

维护控制
 
然而，政府并不愿意放弃对其最有价值的国有企业的控制权，并希望加强对私营部门的管控（包括外国投资者）。
 
控制的一种方法是通过配额制度。邓博士的研究主要集中在政府控制的证券市场和土地市场。中国的所有土地都是由政府控制的，他们控制着市场的供应。政府决定将土地卖给谁、多少土地将被出售以及土地将如何使用。
 
中国证券监督管理委员会（证监会）作为国家正部级机构，监督股票、债券、可转换债券和其他证券的发行、上市、交易、结算等情况，这包括首次公开发行股票（IPO）、市场上的股票数量、以及多少股份可以被用于股权激励等。证券市场是政府密切关注的重要领域。我们在今年夏天的股灾中看到，中国证监会可以暂停股票上市并禁止股东的行为：在一家上市公司中持股超过5%的股东被禁止抛售持有的股票。
 
至于国有部门，中国共产党一直坚持某些产业对中国经济和国家安全至关重要，因此不能被委托给中央政府以外的任何实体，包括能源、电信等行业。国有企业的进一步分类在九月的公告有披露。有些国有企业被认为是营利性的实体，而其他的则应致力于公益性。据新华社报道，前者将以市场为基础、坚持商业经营，以增加国有资产、促进经济增长为目标，而后者则将致力于改善人民生活质量、提供公共产品和服务。
 
社会网络主义
 
邓博士认为，中国的市场发展与西方的经验明显不同。邓博士引用John Child博士和Max Boisot博士的文章“From Fiefs to Clans”，对中国向“社会网络主义”而非“市场主义”发展作了说明。
 
这篇发表于1996年的文章认为，中国过去的制度化官僚秩序发展不足，导致中国的“氏族”理念或个人社会网络观念较强，而不是市场观念。这一点也解释了邓博士为什么认为中国的改革经常保护会既得利益阶级。我国的经济体制改革是一个保守和改革思想不断平衡的过程，以经济增长和效率为当然优先考虑的中国政府，最终的目的不是创造一个完全私有化的市场经济，而是加强国有部门实力。
 
鉴于中国经济体制发展的历史和国有企业结构中根深蒂固的利益，期待对中国市场的全面改革是不现实的。一些专家，如瑞银首席经济学家汪涛认为，改革是不充分的，毕竟混合所有制只是对国有资产的分散投资。近日，北京表示出新加坡淡马锡模式的兴趣，以避免快速私有化的潜在问题（在上世纪90年代一直困扰着俄罗斯）。然而，中央政府又一次又一次地表示，他们不愿放开控制。对于此次改革是否能在2020年之前使市场力量发挥“决定性作用”，我们拭目以待。