Is China making the right tradeoff between short term and long term growth?

China has since 2008 engaged in repeated rounds of debt-fueled stimulus policies to prop up economic growth–a pattern that has become so entrenched that many people have forgotten that China ever did anything else. Lots of people, including me, have been critical of these policy choices. Most of these criticisms are, at their base, arguing that China is making the wrong trade-off between the short term and the long term. By focusing too much on preventing short-term growth slowdowns, it is creating more longer-term problems.

There are many examples of such arguments, but a couple of the more recent and systematic ones are worth highlighting. In “Local Crowding Out in China,” by Yi Huang, Marco Pagano, and Ugo Panizza, the authors argue that local governments’ reliance on banks to fund the off-balance-sheet stimulus spending crowded out funds for private-sector investment:

In China, between 2006 and 2013 local government debt almost quadrupled from 5.8% to 22% of GDP. … Given China’s geographically segmented financial market, this increase in local debt created imbalances in local financial markets: to underwrite it, banks curtailed financing to private domestic firms, forcing them to cut down on investment. This local crowding-out was more pronounced in the cities that issued more public debt. Public firms were shielded from the funding scarcity, thanks to preferential access to bank credit and almost exclusive access to bond financing. So were foreign firms, which could turn to their home countries’ capital markets. … Given that private companies are the most dynamic component of the Chinese economy, our results suggest that the large-scale local public debt issuance in connection with massive fiscal stimulus may have sapped the country’s longer-term growth prospects.

A related argument is found in “The Long Shadow of China’s Fiscal Expansion,” by Chong-En Bai, Chang-Tai Hsieh, and Zeng Song, an excellent overview of the post-crisis economic environment. This piece focuses not on the constraints imposed on banks by the need to finance large local government programs, but on the power that this expanded spending gave local governments. They argue that political favoritism has increased, leading to worse investment decisions:

This stimulus was largely financed by the creation of off-balance-sheet companies that allowed local governments to circumvent financial controls. About three-quarters of the stimulus spending was done by these off-balance-sheet companies, on behalf of local governments, with only a small increase in the official budget deficit. After the stimulus spending ended, local governments continued to use their newfound power to obtain access to financial resources.

The result has been an increase in off-balance-sheet local government debt and an increase in investment spending. Local governments, which have long faced high-powered incentives to support favored local businesses, have used this newfound power to channel financial resources toward favored private firms. The effects on the efficiency of capital allocation may, in turn, have had important effects on aggregate productivity growth in recent years.

Personally I find both arguments pretty convincing, as they are well-founded in the realities of how China’s political economy functions. But these kind of criticisms are not new, and so far do not seem to be very convincing to the people actually making economic policy decisions in China. The feared long-term economic damage from the stimulus is difficult to quantify, while the short-term economic costs from a more severe downturn are much more obvious. And to be fair, it is usually not obvious how to make the right trade-offs between the short term and long term.

If I was going to defend the Chinese government’s side in this argument, it would be on the grounds that the long-term damage from deep short-term downturns is indeed fairly severe. And therefore that the best way to ensure incomes rise over the long term is to minimize recessions in the short term. Or, as Napoleon reportedly said: “the game is always with him who commits the fewest faults.”

Some of the strongest support for this view comes from ideas advanced by the economic historian John Joseph Wallis, a collaborator with the great Douglass North. Their wonderful 2009 book Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History argues that the change from slow pre-modern economic growth to fast modern economic growth, and the distinction between poor and rich countries, basically comes down to doing a better job of avoiding economic disasters. Here is a passage from the book:

Economic growth, measured as increases in per capita income, occurs when countries sustain positive growth rates in per capita income over the long term. Over the long stretch of human history before 1800, the evidence suggests that the long-run rate of growth of per capita income was very close to zero. A long-term growth rate of zero does not mean, however, that societies never experienced higher standards of material well-being in the past. A zero growth rate implies that every period of increasing per capita income was matched by a corresponding period of decreasing income. Modern societies that made the transition to open access, and subsequently became wealthier than any other society in human history, did so because they greatly reduced the episodes of negative growth.

The historical pattern of offsetting periods of positive and negative growth episodes is easier to see in the modern world, where we have better data… Strikingly, the richest countries are not distinguished by higher positive growth rates when they do grow. In fact, the richest countries have the lowest average positive growth rates by a substantial amount. …When they grow, poor countries grow faster than rich countries. They are poor because they experience more frequent episodes of shrinking income and more negative growth during the episodes.

Recently Wallis has, in collaboration with Stephen Broadberry, restated and extended this argument using more comprehensive historical data. The idea is being dubbed “shrink theory,” and as one commentator has already noted, its implications are on the face of it very negative for “any kind of theory that holds that economic recessions are purifying, ultimately beneficial to the economy, and even good for the national character.”

So if the Chinese government wanted to make an economically literate defense of its stimulus policies, it could do worse than to embrace the shrink theory of Wallis and Broadberry. Perhaps there is no hard tradeoff between the short term and the long term: keeping growth going in the short term is also the best way to maximize income gains over the long term. Officials could argue they do not need to spend time worrying about measures that might damage long-term productivity growth, since no one really knows what causes long-term productivity growth anyway, and are right to focus on preventing deep and damaging cyclical downturns.

Yet I think it is unlikely that Wallis and Broadberry will be speaking at a Politburo study session anytime soon, as the their main argument is not really about how to do counter-cyclical economic policy, but about the relationship between political systems and economic growth. They argue some societies are better at avoiding damaging economic downturns because they have more open and flexible political systems–ones that are better at decision-making and avoiding instability and violence in power transitions. I don’t know if they have articulated a specific view on China, but it seems likely that they would view China’s political system as still being at risk of generating damaging instability and an associated economic downturn in the future.

The historical roots of China’s industrial clusters

I’ve been interested in industrial clusters in China for a while, since I think they tell us a lot about underlying patterns of private-sector economic activity. Clusters are behind much of China’s decades-long success in exports, and more recently seem to be related to some fast-growing domestic service sectors as well.

A recent working paper by Xiwei Zhu et al., “Entrepreneurship and Industrial Clusters: Evidence from the China Industrial Census“,  makes some interesting points on this topic. The authors do some fancy math to identify clusters from data on the location of industrial firms, which results in the nice map below.

Zhu-cluster-map.png

The results are broadly consistent with more anecdotal approaches to identifying: industrial clusters are most prevalent in the coastal provinces of Zhejiang, Jiangsu and Guangdong (but note that Sichuan far inland also does pretty well). Places with lots of clusters also tend to be places where the private sector is a larger part of the economy.

Why do clusters form in these places? Geography is part of the traditional explanation, and the authors do find that access to ports (i.e., access to world markets) contributes to the formation of clusters. But they also argue that what they call the historical “supply of entrepreneurs” is an important factor.

Since there were few recognized private companies in China before the 1990s, most founders of private-sector firms had to come from somewhere else–and state-owned or collective enterprises were a major source.

Zhu-entrepreneur-table.png

The authors use the number of firms in 1985 as an indicator of this historical potential for entrepreneurship. And they find that the number of all firms in 1985 is closely related with the number of private-sector firms in 2004:

Zhu-firms-scatter.png

The pattern suggests that the places where private-sector businesses flourished after liberalization were in fact those places where disguised private-sector businesses were already most prevalent. This fits in with historical evidence from the 1970s that pre-Communist commercial traditions and patterns often continued in the form of collective enterprises.

Though this particular paper is heavy on data and light on historical interpretation, I think it does contribute to a different narrative about China’s economic development. In such a narrative, China’s growth resurgence, at least in the 1980s and 1990s, is more about the flourishing of long-suppressed indigenous entrepreneurial traditions than the success of top-down development programs.

How long was China Communist?

In the grand scheme of things, not that long at all.

I’ve been reading a lot about the Soviet Union lately, and there are indeed these two large, multiethnic, Communist states have many things in common. But I’m starting to think that the most important difference might be a very simple one: the fact that Russia and the other Soviet republics were Communist in the strict economic sense–central planning and controlled prices–for much longer than China was.

Central planning in Russia could just be dated from the October Revolution of 1917 to the collapse of the Soviet Union in 1991. A more precise chronology might be from 1918, when the Bolsheviks nationalized industry and centralized distribution of grain, to the liberalization of prices and other economic reforms in 1992. But it’s 74 years either way: that’s two generations.

Think of what that means in terms of life experience: someone who was 25 years old during the Soviet economic reforms of 1985 would have been born in 1960; assuming an average childbearing age of 25 (on the high side), their parents would have been born in 1935, well into the Stalin’s rule. They would have to go their grandparents to find someone with any memory of how to survive in a non-planned economy. By contrast, a Chinese person who was 25 in 1985 would have had parents who had grown up in a non-planned economy, and could pass on useful experience and family business traditions.

I have not come across much systematic examination of this issue, but there’s an interesting discussion in a 1994 paper by Mark Selden, “Pathways from Collectivization: Socialist and Post-Socialist Agrarian Alternatives in Russia” (JSTOR link), who notes that while Chinese farmers eagerly embraced the decollectivization of agriculture, Russian ones did not:

Where does the call for reform or transformation of collective agriculture originate? In Russia pressures for reform have emanated from the highest levels of political authority, specifically, in recent times, Gorbachev, Yeltsin, and some of their close associates. Pressures for change have been weak and resistance strong not only among middle- and lower-level officials, but also among farmers in the collective and state sectors.

Most significant, in contrast to the Chinese experience, is that virtually no pressure for privatization has come from the vast majority of collective and state farm workers, few of whom have thus far shown any inclination to claim land for private cultivation other than the private plots available to collective and state farm workers. Moreover, there has been powerful resistance from collective and state farm administrators who are well-positioned to thwart the reform agenda. …

In recent generations numerous Russian farmers have made the transition from the rhythm of the agricultural cycle regulated by sun and season to the eight-hour day of the industrial worker. They have moved from the sickle to the combine harvest and from animal power to electricity and diesel power, but at the same time many have lost whatever command they and earlier generations may have had of the multiple skills of cultivation, marketing, and borrowing while becoming specialists in one or a few areas of agricultural production. For such people, the combination of wage and welfare guarantees, plus continued access to the private plots that produce approximately 25% of the value of Russian agriculture remains an attractive one. To abandon the guarantees provided by collective and state farms seems to most farmers a risky march toward an uncertain future.

Most important for comparative purposes is the fact that three generations of collective experience eradicated many of the habits, as well as the multiplicity of skills required for effective management of family farms in a market economy. By contrast, while Chinese farmers historically consumed a substantial portion of their harvests within the family, they also had a long and deep familiarity with private land ownership and the workings of local markets. And 30 years after collectivization, as family farms re-emerged in China, there remained an experiential basis, including networks of relationships and historical memories, on which Chinese family farms and market activity could be resurrected.

A 1997 World Bank paper also used a variable appropriately dubbed “market memory” to compare the different starting points and trajectories of transition economies in Asia and Europe; it is defined as the number of years under central planning. I’ve reproduced a table from the paper below:

WPS1866-table

Again we see Russia and Ukraine topping the list with 74 years of central planning experience. The other Soviet republics are given 70 or 71 years, reflecting the fact that the USSR was formally established in 1922, so central planning got a slightly later start in other regions. The Baltic states of Estonia, Latvia, Lithuania, and Moldova were incorporated into the USSR in 1940 as a result of the Molotov-Ribbentrop Pact, and so had 51 years. And then the various Eastern European states became Communist at even later dates, in the aftermath of the Second World War.

I’m not sure why China is given 46 years of central planning in the table, which seems like an obvious error. The simplest dating would be from the establishment of the People’s Republic in 1949 to the beginning of economic reforms in 1978, or 29 years. This could probably be fine-tuned, as 1978 was mostly a political landmark. Local experiments in both rural and urban areas did begin then, but the breakup of agricultural collectives did not really take off until 1982, and nationwide changes to the management of non-agricultural companies had to wait until 1984. On the other hand, the beginning of central planning could perhaps be pushed forward until 1952 or 1953: the Communist Party after its victory in the civil war initially focused on stabilizing the economy, and took a few years before moving full-on to nationalization and five-year plans. Still, roughly three decades.

But it’s possible to argue for an earlier date for the collapse of central planning in China, on the basis that during the Cultural Revolution actual government authority over the economy had significantly eroded. The work of the Hong Kong-based historian Frank Dikötter offers some evidence for this:

If the Great Leap Forward had destroyed the credibility of the Party, the Cultural Revolution undermined its very organization. The extent to which ordinary villagers reconnected with the market in the last five years of the Chairman s reign is amply illustrated by evidence from the archives. …

Wealthy regions joined those mired in poverty in a silent revolution that subverted the planned economy. In villages along the southern coast, people raised ducks, kept bees, grew fish, baked bricks and cut timber, always in the name of the collective. By late 1971, in the county of Xinchang, Zhejiang, which housed a population of roughly a quarter of a million people, some two-thirds of all villagers were independent – or “go-it-aloners” in the parlance of the time. Much of this was done with the tacit consent of the local authorities, who rented the land to individual households in exchange for a portion of the crop. A year before Mao Zedong’s death, the habit of leaving the collectives to try one’s luck on private land or in underground factories was described as “widespread” throughout the province. …

Some wealthier villages not only planted profitable crops for the market but also began establishing local factories. This was common in many parts of Guangdong. In Chaoan, just outside Shantou, where entire villages had been reduced to poverty after embroidery was declared to be “feudal” at the height of the Cultural Revolution, historic links with the overseas community were revived after the Ministry of Light Industry lifted the trading restrictions in 1972. Two years later, up to half of the women in some villages once again specialized in drawn work and embroidery. …

The growth of cottage industries in the Yangtze Delta followed old manufacturing habits and trading routes that predated liberation. They were revived as soon as the hand of the state weakened. Much as Shantou had a long tradition in exporting embroideries to overseas markets, for many centuries the villages around Shanghai had specialized in household goods, ceramics, cloth, silk and other handicrafts. … The extent to which rural industry reconnected with its past in the early 1970s is shown by statistics: in Jiangsu province as a whole, industry represented a mere 13 per cent of total output in the countryside in 1970, but a phenomenal 40 per cent by 1976. These factories were often collective, if in name only.

That’s from his article “The Silent Revolution: Decollectivization from Below during the Cultural Revolution“; see also this previous post on how the Cultural Revolution prepared the way for the economic reforms of the 1980s.

So you could even argue that effective central planning in China was only practiced for a couple of decades, and, in at least some places, traditions of rural private industry were already reviving well before 1978. The long-term damage to China’s human capital and institutions from the detour into central planning was certainly significant, but was probably much less than in some other Communist countries. The post-1978 “reform era” is now closing out its fourth decade, and so has already lasted quite a bit longer than the planned economy did.

On this note, spare a thought for the people of North Korea, where Communist rule has now endured 72 years and counting, and is much more regimented and isolationist than the Soviet Union was in its last decades. The experiences of North Korean defectors to the South have already made it clear that the North’s people are very poorly equipped to manage in a market economy–much worse than East Germans were when the Berlin Wall fell.

time-under-central-planning

The divergence over the Great Divergence is narrowing

Stephen Broadberry, Hanhui Guan, and David Daokui Li have updated their impressive paper compiling estimates of Chinese per-capita GDP over about one thousand years (“China, Europe and the Great Divergence: A Study in Historical National Accounting, 980-1850“), with results that help shed light on one of the great debates in economic history: just when and by how much did incomes in Europe start to overtake those in China?

Our estimates indicate that Northern Song China was richer than Domesday Britain circa 1090, but Britain had caught up by 1400. Also, China as a whole was certainly poorer than Italy by 1300, but at this stage, it is quite possible that the richest parts of China were still on a par with the richest parts of Europe.

By the seventeenth century, however, China as a whole was already substantially behind the leading European economies in the North Sea area, despite still being the richest Asian economy. Even allowing for regional variation within China, it is clear that the Great Divergence between China and Western Europe was already well under way by the first half of the eighteenth century, before the start of the Industrial Revolution.

Although this clearly contradicts the early statements of California School writers such as Pomeranz (2000) and Wong (1997), it is broadly consistent with the later views of Pomeranz (2011), who accepts that his early claim of China on a par with Europe as late as 1800 was exaggerated, and is now willing to settle for an earlier date between 1700 and 1750.

We think this is encouraging, because it shows how engagement between researchers using primarily quantitative methods and those who tend to put more weight on qualitative methods can result in a new consensus that challenges the original position of both sides in a major debate.

The California School were right to claim that, taking account of regional variation, historical differences in economic performance between China and Europe were much less than was once thought. However, the early claims of the California School went a bit too far: China and Europe were already on different trajectories before the Industrial Revolution, as European economic historians have traditionally maintained. The Great Divergence did not begin as late as the nineteenth century.

But you don’t have to take their word for it; Kenneth Pomeranz himself has weighed in with a blogpost reviewing some of this recent research:

A recent paper by Stephen Broadberry, Hanhui Guan and David Daokui Li suggests that Britain must have overtaken the Yangzi Delta in per capita GDP by the first quarter of the 18th century. This is, of course, materially different from my claim in The Great Divergence that the Yangzi Delta had not fallen significantly behind until well into the second half of the 18thcentury, and maybe not until 1800…

I think it is noteworthy that a debate between an early and a late 18th century divergence represents a considerably different intellectual landscape than the one we would have if we relied on Maddison’s GDP numbers, or on the non-quantitative work of David Landes, Deepak Lal, and various others – or for that matter, on an earlier attempt by Guan and Li to estimate comparative GDPs, which had previously claimed that a huge gap already existed in the 15th century. …

Admittedly, that is far from the rough parity I had originally suggested at 1800, and would now be inclined to put at somewhere around 1750 instead; there are some plausible adjustments that I think would narrow the gap further, but that is not really the point for now.  Instead I would emphasize that despite continuing disagreements and continuing data problems – the latter of which will probably never be fully solved – we have made some progress in narrowing the range of plausible answers about when and how much divergence occurred in these terms.

On the whole I see this as an example of the virtues of quantification in social science: when disagreements are about empirically measurable quantities, rather than abstract principles, it should be easier to resolve them. But still, how often does that actually happen in economics?

broadberry-china-table

Welcome to the land of soft openings

I’m about halfway through Ian Johnson’s The Souls Of China: The Return of Religion After Mao , but it’s already clear it’s the China book of the year. Not just because the subject matter is fascinating and undercovered, but also because it is packed with insights about all aspects of contemporary China.

I hope to blog more about the discussion of religion later, but for now I really want to share the following passage, which despite being more or less tossed off as an aside is a fairly profound insight into how China works:

China is the land of soft openings: projects are first announced to big fanfare, structures erected as declarations of intent, and only then filled with content. In this sense, developing a new ideology to unify China is similar to building a shopping mall: the deal is publicized, the building goes up, a few stores open, but only years later are all the shops and restaurants open for business, and only after a number of anchor tenants have gone bankrupt. This makeshift model differs from how Westerns like to see projects–envisioned and planned thoroughly, then completed according to that design. But it has its own logic. If viable, the project goes ahead; if not, backing out is easier.

Keeping this pattern in mind is a good way to maintain a clear head when dealing with the latest grandiose Chinese announcement.

The frenzy of commentary on China’s Belt and Road Initiative has, for instance, generally not done this. Much of this makes the fundamental mistake of not understanding that the initiative is indeed in soft opening mode, and talking about it as if it is a massive and detailed plan for infrastructure development (it isn’t). On the other hand, that doesn’t mean that it’s correct to take all the official rhetoric about shared prosperity at face value, as too many ludicrously overwrought op-ed pieces have. A makeshift structure that gets filled in over time is, I think, exactly the right way to think about it.

 

(Disclosure: Ian is a friend and former colleague, so I was predisposed to like his book. But I’d recommend it anyway.)

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Why most older Chinese women do not work

Here is an interesting paper by Wenchao Jin with a good account of why Chinese women stop working at such an extraordinarily young age. I like that it is attentive not only to the details of public policy but also of social institutions:

In 2013, the employment rate among 55-64-year-old urban women in China stands at 27%, well below the rates seen in most other countries at all levels of development. The urban female 55-64 employment rate is around 50−55% in the UK, Thailand (which has similar GDP per capita to China) and the Philippines (which has lower GDP per capita). …

The first and foremost explanation is the low pension age for urban women. The biggest public pension schemes set the formal retirement age at 50 for female workers and 55 for female ”cadres” or managers, and 60 for men. However, there are different rules for people with special circumstances like disabilities and compliance is not perfect, so the age at which a woman becomes eligible for a public pension can be as early as 45 or as late as 60. According to the China Health and Retirement Longitudinal Study 2011, 90% of current female pensioners completed the retirement process by 55. …

The second explanation of low employment rate among older females is their adult children. First, (expected) financial transfers from children when one is old and frail reduce the need to accumulate a large stock of assets through working. About 60% of women in their 50s live with their children, and about 70% receive financial support from their non-coresident children in the last year. There is some evidence that the financial transfers from children respond to parental incomes. Thus, transfers from children have a wealth effect as well as an insurance effect, both of which have implications for parents’ decisions on labour supply and saving.

Moreover, demands from adult children for domestic services such as grandchild care mean less time is available for paid work in the market. In urban China, the majority of women have grandchildren before 60 and, conditional on having grandchildren, the majority spend time looking after their grandchildren for an average of more than 30 hours a week. Moreover, I find that urban female employment is significantly negatively correlated with having grandchildren (conditional on her own age, education and so on), and this correlation comes from those women with more educated children. This is consistent with the hypothesis that parents cooperate with their adult children when choosing between market and domestic labour supply and leisure.

Older women are thus both pushed out of the labor force by the official retirement age, and also pulled out by demands of family. At least the first of these factors is likely to change over time, as the Chinese government has confirmed it plans to gradually raise official retirement ages for men and women. (The normal retirement age for women in most OECD countries ranges from 60-67.) The model developed in the paper suggests the effects of this change would be extremely large:

Raising the female pension age from its current level (which varies across individuals and has a mean of 50.6) to 60 would increase the employment rate by 28 percentage points on average over age 50-59. The average age at which women leave the labour force would also increase from 52.9 in the baseline to 55.7.

When provinces fought back against reform

Here is an interesting and little-known episode from the early days of China’s reform era, dealing with the early days of the household responsibility system in the 1980s. The adoption of this system, a fancy name for allowing individual farmers to manage their own plots, is one of the most storied episodes in Chinese economic reform, and is often portrayed as a kind of bottom-up revolution by farmers fed up with collectives.

The household responsibility system did indeed spread rapidly once Deng Xiaoping and the central government endorsed it, but there were some holdouts. The governments of the three northeastern provinces–sometimes called the “little Soviet Union”–had a strong attachment to Soviet- and Mao-style collectives that could practice large-scale mechanized farming, and fought back against the household responsibility system:

Because the problems of collective farming were so widely recognized for so long, unless the center’s preference did not differ, many provinces were willing and eager to adopt the system of household farming. If the new policy could bring about enhanced productivity and increased income, there would be little lost on the part of the provincial authorities. Furthermore, household-based experiments of the 1960s provided some assurance about the workability of the new system.

The same could not be said of a few “resisters”: Heilongjiang, Jilin, and Liaoning. The average compliance rate for these three provinces was only 26.9 percent in December 1982. Even in December 1983, the rate stood at 92.1 percent, still lower than the national average by 6.2 percent. The common factor for these Northeast provinces was a complex relationship between the size of land available to individual households, the average size of a production team, and the specific type of mechanization pursued there. Unlike elsewhere in China, the Northeast provinces had an exceptionally large plot of land for each household, which was not susceptible to manual labor or even small machinery-based mechanization.

Spread of HRS

Heilongjiang, for instance, highlighted the unique characteristics of the province as follows: “Our province has one outstanding difference from the rest of the country: our province is a region of modernized large-scale agriculture…with a mechanization level of 60 percent…. This indicates the advanced level of our production forces. Therefore, the implementation of the household responsibility systems should proceed in accordance with these local characteristics.”

Even after Central Document No. 1 [of 1982] was issued, Heilongjiang was still of the position that the scope of household-based farming was to be confined only to poor teams (accounting for 15 percent of all teams there) with low levels of mechanization and that the pace of implementation should be gradual in accordance with the principle of safeguarding local interests. Liaoning’s and Jilin’s positions differed little from that of Heilongjiang throughout 1982–1983.

Over time, Beijing came to identify the pace of local compliance with the legitimacy of the policy, thereby raising the level of urgency for the reform. Soon, Beijing put political pressure on the noncomplying provinces, starting in the second half of 1982. In July, Premier Zhao Ziyang visited Liaoning and called for an immediate popularization of the household responsibility reform in the Northeast. In August, Hu Yaobang went to Heilongjiang, where he criticized the sluggish pace of decollectivization there. In October, Du Runsheng of the Rural Development Research Center issued a stern warning: “In carrying out the household responsibility reform, we have to continue liberating our ideology and relax control…. A few regions are still unwilling to act on the demands of the masses by refusing to change the ‘one big bowl’ situation.”

Beijing’s pressure reached its apex with the speech by Wan Li, vice-premier in charge of agriculture at the National Agricultural Secretaries Conference in November. Wan remarked: “Comparatively speaking, the household responsibility reform has not been successful in all corners of our countryside. In fact, there exists certain ‘passivity’ in many areas and, in some areas, such passivity is of a very bad sort…. The implementation of contracting to the household has not been very smooth due to the obstruction on the part of some leading cadres.”

Heilongjiang and its first party secretary, Yang Yichen, did not succumb to the pressure from Beijing. One day after the publication of Wan’s speech, Yang delivered his own at the Prefecture, County and City Party Secretaries’ Work Conference: “In determining which responsibility system to implement, we have to value the opinions of the masses that will eventually choose a system on the basis of their local conditions.”

The center drew the last card: personnel reshuffle. In February 1983, Yang Yichen was transferred to Beijing as the supreme people’s procurator-general. Given that his transfer had already been decided in December 1982, Yang’s speech was apparently the last expression of his firm stance on the household responsibility reform. With Yang’s departure, Heilongjiang’s pace of implementation skyrocketed within two months, from 12 percent in December 1982 to 73 percent in February 1983. Because Yang’s successor, Li Li’an, was known to be sympathetic to the decollectivization reform, Heilongjiang’s household responsibility reform took off thereafter.

The quote is from Jae Ho Chung’s Centrifugal Empire: Central-Local Relations in China.

The topic of local resistance to reform seems timely, as it’s emerged as a persistent theme under Xi Jinping. Premier Li Keqiang made headlines in 2014 when he called local officials “passive” and “lax,” and this year Xi Jinping devoted much of a meeting of his reform task force to urging better implementation of reform plans.

The comparison with the 1980s episode helps clarify some of the differences: it doesn’t look like China is experiencing ideologically driven local opposition to specific reforms. Rather, as investigations into the resistance to reform have found, the central government is making huge numbers of contradictory demands on local officials, and then punishing them severely when things go wrong. The result is an understandable lack of willingness to take risks and make commitments, quite the opposite of the valorization of local initiative and experiments in the 1980s.