Brief Note on the Trade Shootout

It is no surprise to anyone familiar with Chinese thinking on foreign policy or negotiating practice that China is  balking at changing its laws to reflect what the American negotiators apparently thought had been previously agreed. From the Reuters article –

 In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: Theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.

One can marvel at American stupidity, if that is what is involved; or simply invoke the negotiating principle that no items are agreed to until all items are agreed to. One can call it Chinese perfidy, but that would simply imply that the Americans are so uninformed about Chinese negotiating tactics that they should not be in the same room with their counterparties at all.  To paraphrase Harold Washington on politics, trade negotiations ain’t beanbag.

So let’s get past the propaganda and posturing. This below is what no negotiating is going to change.  It is at the heart of some American thinking on the trade battle.

This is from Dan Harris at China Law Blog, the best China business advisory online – Doing Business Overseas? Have you Checked Your Trademarks?

From time to time when we write something here with which a reader      disagrees, we get a comment or an email accusing us of scare-mongering…. If I can scare a few more companies into not losing their trademarks I will have achieved my goal.

… stealing a brand name is a lot easier (and usually a lot more profitable) than stealing a product design. Our international IP lawyers deal with probably three trademark theft cases for every one design case.

Why does any of this matter?

It matters because if someone beats you to registering “your” trademark and you are having products made with that trademark on it, the person or company who owns “your” trademark can stop you from manufacturing your product or exporting the product with the trademark on it. The The trademark owner can also register its mark with its own country’s customs authorities and then have customs seize the trademarked product at the port, preventing your shipment from leaving the country in which it was made. This is a particularly nasty surprise in those cases where the foreign buyer has already paid for the product.

Who is going to register your trademarks? It is typically someone you know, like someone tied to your factory, one of your competitors or even a disgruntled employee. One of our China lawyers loves to talk about what happened a few years ago when he gave a series of lectures in China on how to protect your brand and product when manufacturing in China. After the talks, he went to dinner with a group of foreign company production managers who talked of how they had for years been urging the foreign companies for whom they worked to register their trademark. The foreign companies consistently refused, claiming such registrations were a waste of money. These production managers then told our China lawyer the following:

We are going to form our own trading company. We will register all the   important trademarks of our employers in China in the name of that trading company. When we get fired, we will register “their” marks with China customs and completely shut down their Chinese operations. It will serve them right for being so stupid and lazy.

Now just for the record, the laws in many countries would not allow these employees to get away with this, but the mere fact they were plotting this ought to scare many of you. In my view, your bigger threats to register your brand name where you manufacture is someone tied in with your manufacturer (they do this so they can stop you from going to someone else) and your competitors (they do this so they can stop you).

Note though that these operation managers did not say they were going to steal their employer’s product design…. But this small expense might give them considerable power over their former bosses.

Is a law or regulation negotiated at the central government level going to put a stop to what is legal, if unethical, in China?  No agreement in law or regulation will stop this sort of practice, if for no other reason than China is big and law and regulation are heavily decentralized.  Forget Mr. Xi’s language about rule of law and forget the pronouncements from the new Foreign Investment Law and forget the new National Supervision Commission combining government and CCP regulation of conduct.

There is one, and only one, issue in the trade shootout, and that is IP theft, whether theft by cyber or by hand.  By this point in 2019, after decades of dealing with Chinese companies, everything else is attributable to American naivete and some assumptions about beanbag. 

The culture of lying and deception in business should be well understood by now.  As I always say, this means no disrespect to those Chinese business owners who manage to conduct business honorably, whether one uses Confucian or western standards of conduct.  The Silver Rule is fundamentally no different than the Golden Rule – treat others as you would want to be treated.  Sunzi and San shi liu ji are about deceiving an enemy.  Business partners in the west are not usually thought of as enemies.

As I wrote in No Way Out from the Middle Kingdom –

Think about it this way – is there another major American trading partner where one need fear being kidnapped over a real or imagined payment dispute?  Is there another American major trading partner for which the best trade advisories scream, danger, danger, danger?

Caveat emptor, especially in China.   Perhaps an urgent note to our dear leader and his negotiators would be useful. 

Negotiating Harmony – Conflict and Governance in the New Age

This paper was published in the Journal of the Zhejiang Province School of Administration (otherwise known as Party School) in 2015. 

So far as I know, it is the only original contribution by a foreign author to this Journal.  Since the Journal is from CCP in Zhejiang, one of the wealthiest and most sophisticated provinces in China, it is as well respected as a CCP journal can be.

The paper is way too long for a blog read.  I outline a way for CCP to provide meaningful voice to populations angry over land thefts, pollution problems, and corruption.  Among other suggestions, a ready-in-waiting conflict resolution organization, structured at the provincial level, could be brought to bear on incidents of mass protest.  A stand-still agreement is necessary to force parties to negotiate.  This is one way to provide voice to Chinese people in the absence of democracy. 

This is a theoretical paper, although no one in China would describe it that way.  A bit too clear and direct.  The paper was presented at a conference at Zhejiang Business and Financial University in 2015, although my presentation was kept apart from those of other presenters.  I gave a more or less private briefing to about 30 faculty and students – either to inoculate others from dangerous ideas or provide me with a rapt audience.  Probably both are true.  The presentation was in the school’s Party conference room.  

Negotiating Harmony – Conflict and Governance in the New Age

William D. Markle, Ph.D.

Zhejiang University of Science and Technology

Hangzhou             

March, 2014

Version 2 – May 15, 2014

Contact:

wdmarkle@aol.com

15988832937

Abstract

A fundamental question of the times is whether the economic and political reform necessary to continued growth in the Chinese economy can be accomplished within the existing political system.    This article briefly reviews the literature on complex systems, as applied to the Chinese Communist Party (CCP) and the demands for a new method of addressing fundamental conflict – mass protest – over land rights changes and environmental problems.   The author suggests that use of conflict resolution skills and a defined public participation program, conducted at the provincial level, can be of use to the CCP in adapting to the new society. 

Introduction

Stability and harmony 和谐  hé xié  are key words for public administration in China, as they have been for more than a thousand years.   Nevertheless, for more than sixty years, the concepts of stability and harmony could be trumped by economic development, in whatever form that took – land reclaiming, expressway construction, development zone clearing, or apartment and factory construction. 

That era is over.   For many reasons, including overinvestment, bank balance sheet problems, a rising middle class that demands attention, and social media that make communication instant and definitive, it is no longer possible for government at any level in China to ignore stability and harmony as important principles of governance.

As is well-known to readers of this journal, both environmental problems and land conversions are a significant source of instability.  One has to only consult China Daily, or most any western newspaper or magazine, to get weekly examples.  Most recently, last October, Xiage township in Zhejiang provides an embarrassing example, or Gangnan County in Wenzhou, in 2012. 

This article is not directed at providing advice for policy makers on compensation, or removal procedures.  This article argues for a more sophisticated approach to public involvement in public decision-making that can reduce the potential for, and severity of, mass protest.   Specifically, public participation training, in schools and training institutes, should include courses in conflict resolution and negotiation.  The public officials for whom this training is critical are those working in urban planning, environmental analysis, civil engineering, and public administration. 

In addition to conflict resolution training, it is important to develop a structured dispute resolution system within government, for use in local land conversion, land use, and pollution conflicts.  

There are five suggestions for consideration as part of greater use of rule of law, openness, and the reform agenda of the Xi Jinping era.

The five suggestions are –

1.Training in conflict resolution for undergraduates in urban planning and environmental programs 

2. Similar training for graduate programs in public administration and at institutes

3. Empower professional staff in decision-making, and publish environmental evaluation reports and demand conformance to a time frame

4. Create a defined provincial level procedure for conflict resolution, triggered without excessive delay or petition

5. Process and professionals in conflict resolution to report to provincial authorities

Public Participation, Conflict, and Demand for Change

Public participation techniques are well understood in China, at least at some levels.   Design of public participation in environmental assessment in China has been discussed by Wang and Chen (2006), Horsley (2009), Wang (2006), Zhang (2012), and Tang (2007), among others. 

As long ago as 2006, Pan Yue, the vice minister of the State Environmental Protection Agency (SEPA),  linked environmental changes to increased public participation –

In China, environmental protection is an increasingly pressing issue. Not only are pollution and ecological degradation becoming ever more serious, but also people are more and more unsatisfied about the situation. The speed with which we are polluting the environment far outstrips our efforts to clean it up. Why is this? China has a large population but few resources, and our production and consumption methods are too out of date. But at the root of the problem lies a more significant cause — the lack of public participation in China.  (Yue, 2006)

Wen Jiabao made protection of land use rights in land conversion a theme of the later years of his premiership.  In an article in Qiushi –

Chinese Premier Wen Jiabao has called for farmers’ land rights to be protected and criticized a widespread policy of moving villagers into apartment blocks so their land can be merged into larger blocs or developed.

State-backed land grabs are a cause of deep tension across China. Ten days of protests over confiscated farmland and the death of a protest organizer in Wukan in booming Guangdong province in December drew widespread attention as a rebuff to the stability-obsessed government.

In an essay for influential magazine Qiushi, or Seeking Truth, Wen said “rural residents enjoy the legal rights of land contracts, land use and collective income distribution,” whether they stayed in the countryside or migrated to cities for work, according to a summary published by the Xinhua news agency on Sunday.   (Reuters, January 15, 2012)

 

And as recently as last October, Xi Jinping urged officials to resolve conflicts according to the rule of law, reminding officials of the “Fengqiao experience”  in 1963, in Zhuji.   The Fengqiao experience suggests that people should be enabled to resolve conflicts among themselves without having to refer disputes to higher level authorities. 

Improvements to process and participation in decision making about the built environment are laudable.  But too often, such public participation fails because it is done at the wrong time or at the wrong level of analysis, or with wrong intentions.    Seven years after Hu Jintao promised

To ensure scientific and democratic decision- making, we will improve the information and intellectual support for it, increase its transparency and expand public participation. In principle, public hearings must be held for the formulation of laws, regulations and policies that bear closely on the interests of the public…. We will improve the open administrative system in various areas and increase transparency in government work, thus enhancing the people’s trust in the government  (Hu, 2007)  

we know that the environmental protection process and land conversion process in China fail to protect.  In a short piece in Global Times, quoted in Qiushi, Yan reports that the draft changes to the environmental protection process were unlikely to protect Chinese or the environment.  (Yan, 2012).    And at times, the environmental protection bureau itself displays the problem with both regulating and collecting fines for violations of regulations – the economic moral hazard problem in Haimen City, in Nantong, in Jiangsu.  (WSJ, February 1, 2013)

And even though environmental protection is moving closer to the top of the national agenda, there is still reluctance on the part of powerful departments to consider environmental projection when proposed by the environmental protection bureau –

Strong and influential government agencies such as the planning commissions (jiwei), economic commissions (jingwei), and the construction commissions (jianwei) and industrial and commercial authorities are known to be reluctant to endorse and enforce stringent environmental measures for fear that they might slow down economic growth.  (Wing Hung Lo and Leung, 2007)

We are concerned here not with administrative rule making, or mediation in Chinese village life, or strike resolution, but with the use of public participation ideas in resolving conflicts in land transfers and the built environment.   These are the areas of most significant individual and group conflict in China, which according to research by Sun Liping at Tsinghua, reached 180,000 per year in 2010  (Fung, 2012).   

The topic is not new to the CCP.   At Fujian School of Administration, Wang Liping has held a class that points not to improvements in governance, administration, or communication techniques, but to violence –

To help illustrate his point that forceful demolition can lead to violence, Wang shows a slide of a farmer in Hubei Province who used a home-made cannon to drive away a demolition team in order to protect his land. The class falls quiet.   (Fung, 2012)

 

In what follows, I want to describe the CCP as a system of organization, and make the point that the CCP has demonstrated in the past, and must continue to demonstrate, that is an adaptive system, that can use flexibility to respond to challenge.    Then, discuss governance and public administration in China, and note that conflict resolution has not been part of professional training. 

CCP as a Complex Adaptive System

The unique political and governance structure in China has facilitated economic growth for 30 years.   During that time, the CCP has shown itself to have remarkable flexibility in adapting to new conditions – restructuring SOE in the mid-1990s,  banks in the late 1990s, opening to the world in trade and gradually expanding the scope of the private sector.    All accomplished within a single party state system, with hierarchical but still extremely decentralized control.   How is decentralized control possible?

Despite the decentralized nature of government in China, we can characterize government and political organizations as part of a single complex system.    A definition of relationships and interactions that are complex –

They are complex in that they are dynamic networks of interactions, and their relationships are not aggregations of the individual static entities. They are adaptive; in that the individual and collective behavior mutate and self-organize corresponding to the change-initiating micro-event or collection of events    (Mitelton-Kelly, 2003)

There are an uncountable number of parts, interacting both closely and at a distance, with varying levels of force and reaction over time.   It is really impossible to describe any policy change, any administrative change in such a system, as a linked set of linear commands, coming from a central authority to subordinate groups, which understand and obey.  The rational and hierarchical models of Max Weber or Henri Fayol certainly do not apply.   

 

Within this hierarchy, we can characterize the CCP as a relatively adaptive system, in the terms of Boisot and Child (1999) –

systems that have to match in a nontrivial way the complexity of their environment (Ross Ashby 1954, Wiener 1961), either to achieve an appropriate measure of fit with it or to secure for themselves a degree of autonomy with respect to whatever constraints it might impose (Varela et al. 1991).

Within the system, there are feedback loops, and non-constant levels of action and reaction between agents.  And a system that remains in existence for a significant period of time, responding to change from outside, must be minimally adaptive to the environment.    The adaptation requires the system to interpret, or understand, pressures being applied from outside.   How can a complex system adapt?   We can think of the hedgehog and fox essay, by Isaiah Berlin – “the fox knows many things, but the hedgehog knows one big thing.”   (Berlin, 1953).   An adaptive, interpretive system can be a hedgehog or a fox.

Adaptive, interpretative systems have two quite distinct ways of handling the complexity that underlies the variety:

(a) They can either reduce it through getting to understand it and acting on it directly. That is, they elicit the most appropriate single representation of that variety and summon up an adapted response to match it.  Such a strategy leads to specialization informed by relevant codification and abstraction of the phenomenon.

(b) Or they can absorb it through the creation of options and risk-hedging strategies. That is, they can hold multiple and sometimes conflicting representations of environmental variety, retaining in their behavioural repertoire a range of responses, each of which operates at a lower level of specialization. This approach develops behavioural plasticity. There may be less goodness of fit between any given response and the state of nature to which it needs to be matched, but the range of environmental contingencies that an organism can deal with in this way is greater than in a regime of specialization.  It may endeavor to enhance its capability to deal with a wider range of environmental contingencies …

In plainer English, an adaptive interpretive system can develop a single response, informed by judgment, and specialize;  or, the system can become more sophisticated, and develop a variety of responses that are then more suitable for individual conditions.      There can be a single system response to the same challenge – always do This, or That;   or, be adaptive in the individual circumstance.

A key characteristic of adaptive systems is the ability to undergo substantial  change, without collapse or failure. 

The decentralized complex system can survive because it can adapt.

That CCP absorptive adaptive model now needs to be called upon again, as China addresses the problems of corruption and

environmental pollution and land reclaiming.   This is a public administration problem of the first order.   Existing public administration theories allow for more effective solutions to conflict than have been used in China in the past. 

 

New Public Management – Models and Practice

The term New Public Management (NPM) refers to a view of governance that tries to incorporate consideration of “markets, managers, and measurement”  as a way of improving performance and accountability  (Ferlie, 1996).   Although NPM was a popular emerging paradigm in public administration in the US, and then in China, the number of published articles on NPM has certainly faded in recent years.  And there is no particular reason to force Chinese public administration practice into a western theoretical construct.  But the lessons – treating citizens as customers, providing information, and lessening the gap between citizens and administrators – do continue in China. 

As part of the New Public Management focus, there is increasing attention to what is referred to as “governance.”   Governance refers, in part, to the set of traditions and practices by which laws are implemented.  In essence, governance refers to both quality of governing and reasonableness of policy.   Are rules for society reasonable, and understandable by those to whom the rules are applied, and is there a sense of fairness in the application?   New public management, and governance techniques, are applied to daily effectiveness of organizations in cities in China.  But the implementation process in built environment projects remains a public administration problem in the world, but particularly in China. 

Practice

The Chinese government has learned to respond to the wishes of the people, in some cases better than in others.   In general, one expects that the higher the level of government, the more sophisticated the leadership, the less tied for promotion to enhanced local GDP, the more willing leaders will be to listen to the local view.  

Zhejiang Province is a key example.   Rich, experienced, open to the world, and innovative, Zhejiang has long been in the forefront of administrative reform in China.   The Zhejiang model of land reform, allowing for transfers of development rights (TDR) within and between local governments, is well known (Wang, Tao, and Tong, 2009).  And more recently, Haining has been selected as a pilot for land reform, allowing mortgages of village property and sales of farmer land to those outside the village; and Wenzhou has established a “rural property rights service center, that in theory allows sales of village land to citizens from within the county.    

As far back as 1995, the Yantai Service Promise System, in Shandong Province “drawing on the New Public Management approach to administration,”  represented a serious attempt to make the bureaucracy more customer oriented and professional (Foster, 2006).   Fifteen government departments were required to provide service delivery promises to citizens, and the local government leaders appeared to consider citizen complaints and survey results quite seriously in individual leader evaluations.

A version of the Yantai system was begun in Jinhua in 1996, 

and in Wenzhou, in 2003.   Other cities – Beijing, Guangzhou, and others –  have implemented more open communications with citizens, and provided a survey mechanism to review the performance of government departments. 

In addition to openness in administrative matters,  there are public officials willing to experiment.   In Shaoxing, a communications model has been used to defuse conflict between a real estate developer and neighborhood residents.   This model used intervention by the urban planning authorities to pro-actively address concerns, rather than ignoring them or waiting for conflict to reach a higher level of intensity (Zhou, 2008, unpublished).       

But these laudable experiments in communication are still focused on administrative actions and service delivery.   We are concerned here with projects, not programs, that constitute once-in-a-lifetime events for most citizens and farmers.

More commonly, however, we have seen examples of local mass protests, real conflict, being resolved by provincial or higher government leaders, stepping in at the critical moment to undo the Gordian knot of development and its externalities.   Witness environmental and land transfer conflicts in Wuhan (Provincial Party leader steps in to resolve); Dalian (City leaders vow to close paraxylene plant, and move it); Ningbo (city officials decide to cancel paraxylene plant);  Shiyang (Deputy Director of local Development and Reform Commission and former City Party leader meet with protesters);  and many other places. 

There are problems with this high tension, high conflict model, however.

Governance has two components – leadership and administration.   Both exercise power,  and both need to demonstrate legitimacy for a sense of fairness.   China, with its focus on relationship and Party loyalty, has tended to solve public conflicts in governance through application of leadership, rather than administrative techniques.    At the last moment, or too often, after the last moment (someone is killed, or worldwide media attention is obtained) a top leader, from the city or province – possibly from a central organization – steps in to mediate or construct a solution. 

But solution to conflict through application of leadership should be the least attractive option for the CCP and the government.   For reasons that are as apparent in the west as they are in China, using leadership as a solution mechanism puts leaders in uncomfortable positions, often between parties with equally good claims to authority and justice, and forces a solution that could be more sophisticated in form if left to negotiation at a lower level of authority.   Moreover, governance by leadership almost necessarily takes place after local dissatisfaction has risen to the level of local mass protest, once positions have hardened, interests are damaged, and trust in government is weakened. Governance by leadership is a high-cost strategy.  It is responding, rather than anticipating, and tends to put the government in a negative position. 

Leadership, moreover, takes on new dimensions as the demands of the economy and the culture change.   Leadership that once meant making command decisions now must be collaborative, and collaborative not only with a few subordinates and leaders, but collaborative with the general public, who demand more and better from leaders.

What to do, now?   The customary answer is training, for both leaders and for administrative staff.   Government leadership, management, and administrative technical skills can be, and are, taught.   But skills in implementation, particularly as regards dealing with the public –how to do what is desired –  remain generally untaught.   For most environmental and land decisions, “decide, announce, defend” remains the dominant implementation model.   The government decides on policy or program, announces a decision, and then is forced to defend that decision before an angry and aroused public.   But a changing environment demands changing nature of training that can utilize a different, more sophisticated model.   And the new era of development in China requires an implementation model that takes public participation into account, and in a manner more respectful of public wishes. 

 

Public Communications and Public Participation

The term public participation gongzhong canyu, 公众参与 can have many meanings, and many ways of implementing. 

There are many ideas in the “toolkit” of public participation –

Obtaining information from the government

Complaints or petitions to the government

Deliberative democracy experiments

Public meetings or hearings

“Field investigations”

Expert analysis

Online activism

Street protests and demonstrations

 

Public participation refers to the public’s involvement in government decision making, whether regulation or rule-making (zhiding tiaoli, guizhang, 制定条例,规章or administrative  xingzheng juece, 行政决策  (Horsley, 2009).   This is the definition most of interest in discussing ways of lessening public protest and improving citizens’ lives.   But this list of public participation techniques is too limited.   It does not address the response to conflict in the streets, moving to destruction of property and prestige.

A local government can provide information, and take complaints, and have public meetings, and conduct expert analysis of a project well in advance of construction, and still face mass protest at perceive injustice.  One can make the argument that with “correct” dissemination of information to the public, and properly scheduled public meetings, and serious attempts at obtaining expert opinion, there should be no need for additional public participation techniques.    The facts on the ground, however, suggest that the “correct” processes are seldom followed, and the result is the demand for public participation tools that help to resolve conflict.   The suggestion here is that skills in conflict resolution, including negotiation, should be part of the public participation toolkit.   

To be effective, and considered just by all participants, public

participation must be timely – that is, it must take place before spending commitments are made, certainly before construction begins;  information with which to analyze proposals must be provided; and it must be understood as being useful – public participation that is “public relations” rather  than public involvement is designed to result in loss of respect for, and trust in, government.

Above all, public participation must demonstrate respect for the views of the public, whether informed or not, and allow a “seat at the table” in decision making.   This is where the conflict resolution skills are necessary.

Rather than the decide-announce-defend model noted above, a

more sophisticated model for public participation is discuss-decide-announce, in which community concerns are made part of the decision-making process, rather than trying to address them at the end of a process when commitments may already be made and it is too late to develop anything but anger and resentment and protest.  Public participation needs to be more than press agentry, or one way dissemination of information, or even two-way communication that is widely asymmetric in power relations. 

 

A government that can only communicate in these ways is not a government that is confident of its role, and not a government that inspires trust.

Trust can only come from communication, and that in an honest manner.   Otherwise, communication is one-way and is public relations, not public participation. 

In design of a public participation system, there are three dimensions to keep in mind.   What is the scope of participation – will the public be permitted to protest, or petition, but without meaningful response, or will the public be considered as a partner in decision-making?    What is the method of communication – press releases and announcements, or face-to-face discussion, with decision-making to come later?   What is the extent of authority of the government participants?  Are they both responsible for decisions and authorized to make changes?  If not, then the public is going to be at a significant disadvantage in any discussion.   Why talk with people who cannot do anything?  (Feng, 2006).

It is important to keep these three dimensions in mind when considering public participation models for China.

–  Scope of participation  – must include all parties affected; 

– Mode of communication – must be timely, and useful;  special  

  efforts to communicate, and provide technical advisors for the

  public, as needed;

–  Extent of authority – participation must respect the public,

acknowledging that not all interests – even government interests-   can be equally satisfied.

Public participation in physical project review is different from administrative reviews.   Administrative actions generally do not involve threats, or perceived threats, to life, health, or livelihood;  construction projects and land takings often do.    So we are faced with conflict, rather than simple evaluation;  and public participation in conflict resolution is a far different skill than participation in surveys of prior performance. 

One of the teachers within the Chinese Academy of Governance system, Zhong Kaibin, has echoed the demand for better results from leaders, in practice of public management –

The fourth area is related to China’s transformation from a public administration system based on personal will and charisma to one that is increasingly based on rule of law, which has been recognized as necessary for a modern state government. This transformation, however, requires an independent judicial system and genuine public participation process.   (Xue and Zhong, 2012)

The existence of government schools of administration, as well as public administration programs within universities, speak to the need for professional education and continuous learning.    There are now more than 100 MPA programs in universities and Party schools across China (Wu and He, 2009).

Notably, there seems to be increasing attention in Chinese MPA programs on public communications;  negotiation, however, is a topic reserved to business (MBA) programs.   Public communications seems to be focused on public speaking and putting one’s best foot forward, as it were, rather than addressing conflict. 

A review of public administration programs at Zhejiang University, Fudan, and Shanghai Jiaotong confirms that there do not seem to be required or elective courses in conflict resolution or negotiation within public administration programs, at either the undergraduate or graduate level.   There does appear to be a negotiation course and a conflict resolution course within the Tsinghua Master’s in Public Administration Program, but both are 1 credit courses, not required and apparently not considered important topics for education. 

But the “first line” responders to community or village conflict are usually administrative staff,  in urban planning, environmental analysis, or civil engineering.   This is reasonable.   But these professionals receive no training in conflict resolution, or in negotiation.   The question remains as to how much authority such professionals have, in the face of serious conflict.   But they are the first contacts the public sees.   To reduce the spread of conflict, it is important that these “first responders”  have some training in reducing conflict.   This is recommendation No. 1.

1.Training in conflict resolution for undergraduates in urban planning and environmental programs

These are officials with the most direct understanding of issues on all sides of a conflict, and the most technical ability to address problems. 

A review of university catalogs in urban planning, civil engineering, and environmental planning suggest that there are no required courses in conflict resolution or negotiation.

The content of such courses can vary.   International undergraduate business programs already incorporate negotiation courses – examples are Fudan University and Zhejiang University of Science and Technology (ZUST).    These courses will tend to focus on business disputes rather than government-citizen conflicts, but negotiation skills can be similar in both cases. 

But the public management programs – the School of International and Public Affairs at Shanghai Jiaotong University is an example – do not have a required negotiation or conflict resolution course.   Within public administration programs in China, negotiation or dispute resolution does not appear on course listings.   The Chinese Academy of Governance does not seem to offer such courses, either.

In any case, the current negotiation courses taught in China tend to focus on business negotiation, in which both sides are fundamentally hoping to achieve the same goal – a profitable outcome.   But most disputes with village people in China are of conflictual nature, in which power distribution is clearly unequal, one side is reluctant to acknowledge the legitimate interests of the other side, and on one side there are often people willing to take to violence

to protect perceived threats to their lives, livelihood, and health.

Public administration programs, both within universities and within the schools of administration, should have a required course.   There is not a more important piece of training that leads to hé xié than conflict resolution skills.    And current public officials in districts, townships, counties, and cities need such assistance as the first line responders to conflict. 

Where should such training take place?    My suggestion is that the natural location is within the undergraduate or graduate urban planning programs at universities, and within environmental planning programs, and in the CCP schools of administration.  So, suggestion number 2:

2. Similar conflict resolution and negotiation training in graduate programs in public administration and at institutes

 

Community Empowerment – Exit and Voice

Citizens have two active potential responses to undesired local conditions – they can choose to leave, moving somewhere else where conditions might be better; or express their unhappiness.   We refer to these as exit and voice.  Among the two responses to conflict – voice, and exit –  Chinese generally do not have the choice to exit – to leave the village or the neighborhood.    Voice is their means of resolving conflict.    Voice can be discussion, at one end of a communications spectrum, or it can be violent disruption, at the other.   Violence appears when trust is lost.   Discussion, on the other hand, requires trust.   The classic description of exit and voice is by Albert Hirschman (1970).   Voice and exit both work in both the marketplace and in governance. 

The classical work of Tiebout suggests that individuals and businesses make a location decision partly on the mix of public resources available in different locations, and the prices (taxes) at which they are offered.   If the cost benefit analysis of public services and taxes paid changes for the worse, as defined by the individual, the individual or business is inclined to move, to a location with a preferable mix.   This is obviously the “exit”  choice.

The “voice” choice in provision of government services includes complaint, letters, media attention, and street protest.  

But more significant than street protest, more than complaint and media attention, is the work of community organizing and community empowerment in the US. 

Community organizing involves creation of a stronger sense of community in poor and under-served communities, through meetings and public information and creation of a sense of ownership and power, with which to confront the government.  The goal is to win attention, resources, and a “seat at the bargaining table” –  forcing government to pay attention to an organized community that is difficult or impossible to ignore, when individuals could safely be ignored. 

It is fair to say that the seat at the table – the ability to negotiate – is the desire of community organizing everywhere.  In the US, the organizing work of Saul Alinsky and his followers became so powerful that the Chicago local government created a Department of Neighborhoods in 1981, to specifically hear the “voice of the neighborhoods.”   The concept of listening to the people, in a way not provided by representative government (aldermen, mayors) or by individual media, constituted a huge change in the way neighborhoods were understood in American government.   In some cases, local governments now provide annual funds to community organizations that may oppose projects of the same local government.   This can create organized opposition.   But it does provide a way for information to flow up to the decision makers. 

Why would local government do this?   The short answer is that governments in the US do not want to see mass protests or significant organizing against what might otherwise be government policies or projects.  Smart governments want to be ahead of public opinion, not always responding to conflict.   If a “seat at the table”  is the goal of community organizing, after protest and resulting media attention, then it may be possible to provide the seat without the prior conflict.   Making community part of the decision-making process makes for good politics and, in the American sense, good governing. 

It is probably a bridge too far to suggest that governments in China provide funding for a citizen movement.    But conflict that is not addressed, except in the extreme, does not foster trust in government, and people who perceive themselves to be wronged do not forget.   At the same time, there is no negative response more

feared in harmony-seeking China  than the organized mass public protest.   Where should voice be expressed?

These are critical issues for China now, and in the next ten years.   It is no longer sufficient to promise a better world at some undetermined time in the future, when the socialist state is fully achieved.  And, it is no longer sufficient for government to take action without responsible acknowledgement of the interests of the people.   

In negotiations of all kinds, we talk about having to address two different kinds of needs – those that are tangible, and those that are intangible.  In business, we suggest that one party not agree too quickly to an otherwise acceptable offer, or make a concession too fast.  We want the other side to feel that offers and counteroffers are taken seriously.  It is understood that the intangible interests – in being treated seriously, in having positions considered fairly – are as important as tangible results.   In neighborhood and village conflicts, people have interests in a clean environment, and in fair land transfers.  These are tangible.   The intangible is being treated with respect, before, during, and after conflict.    It is no longer sufficient to offer the solution, without the expressed, and intentional, voice of the people being heard.   People have interests in clean air;  but they also have interests in being respected, which requires being heard, and is a form of justice – respect for the individual.

Barriers to Public Participation and a Solution

 

Public participation in environmental impact assessment is required by law in China (Zhang, et.al., 2012).   But despite ten years of required public involvement, the number of protests over land seizures and environmental problems, violent and otherwise, continues to grow.   The list of weaknesses in environmental assessment in China is well known.   Zhang et al., quoting Zhao, 2010 –

there are some limitations in current EIA public participation mechanism. First of all, the extent of public participation is limited. Relatively small percentage of projects is subject to the compulsory public participation requirement. On the other hand, the timing and duration of engaging the public is rather short. The way in which the public is defined and selected also brings bias to the true public participation. Secondly, the access to information is limited. Although progress has been made to increase public access to environmental information, there are still uncertainties regarding what to disclose and how much to disclose, and concerns of potential social unrest if too much information is disclosed. Thirdly, the public has limited impacts on the final decision-making. The power of all the parties is out of balance among project proponents, EIA institutions and the public. In addition, the voice of environmental NGOs in China is still relatively weak (Zhao, 2010).

Despite the widespread dissemination of policies regarding public input, implementation remains generally poor, as evidenced by the size and number of mass protests. 

Why is implementation poor?   There are several reasons.   One is political, or, shall we say, reflects a public choice perspective – leaders who see an advantage from not serving the public interest. 

There is no doubt that political obstacles can easily prevent useful implementation of the participation process.    Low level officials can easily circumvent regulations from above, and to the extent bad information does not flow up the chain of communications, upper level executives may not know about problems until the problems are well advanced in severity and complexity.

So one reason for poor quality of implementation can be found in corruption – local officials trying to collect economic rents for themselves, and deceiving the public in the practice.   This is a serious problem, and must be addressed at the highest levels of the Party.

On the government administration side, another issue is low levels of information made available to the public, or information made available in inconvenient form or at inconvenient times.      In China as in the US, a conflict resolution system will only work as well as the commitment to honest voice and openness 信息公开 xìnxīgōngkāi

There are also citizen reasons for not engaging with government in conflicts.  Low willingness to engage can come from four causes.  

–  a traditional reluctance in China to engage in public affairs;

–  lack of awareness of proposals, and a means of response (no

non-government data or information sources are available, petitions have no value)

–  fear of reprisals

–  costs to protest, including ineffectiveness of past efforts

Frustration with the process is cited by Ma, Webber, and Finlayson (2008), from Eastern Horizon.   Respondents to a survey on the failed sealing of a waste storage facility were asked what they thought of public hearings generally.   While about 40% of the respondents thought that public hearings were useful,

nearly 59% of respondents chose the answer that public hearings were ‘not useful, public opinions are rarely adopted’. In other words, most people thought that hearings were not useful and/or that public opinion was rarely heeded.

Tradition

There may be a more traditional reluctance to engage with government in China than in the west.   That is possible.  But the intense use of forms of communication – petitions, lawsuits, complaints, trips to Beijing as part of xinfang techniques – suggests that even if there is a tradition of acceptance, that tradition does not impede Chinese from attempting to make their grievances known.   This does not appear to be a reasonable argument for lack of public participation, particularly in this new era. 

Data and Means

There are many ways in which public information can be obtained prior to land takings or construction projects are begun, and all of those are in use now in China, in different places in different times.   As with many regulations and programs in China, problems lie not in the form but in the substance of the work.   The laws exist, the desire to enforce does not.

There are already systems in place to prevent illegal or undesirable conversions of land  (Heurlin, 2007).

There remains a problem of evaluation of data.   Emissions data, or controls on pollution, are beyond the ability of most citizens to evaluate.   How to provide adequate representation for citizens in conflict?  

In politics, we sometimes argue that a government needs a loyal opposition to provide better policy, better monitoring of results, and better outcomes for the society.    This article does not argue for an opposition; but it does argue for a government ombudsman, or review process, or voice in consideration of the public interest, largely construed.   No such voice exists now. 

There are many ways in which a public voice can be provided.   In China, given recent history, it is important that any system of providing additional voice be located away from local officials, and that the system clearly provide for – perhaps, require – additional delay in construction and land transfer.   Delay is always to the benefit of voice.   Delay is always detrimental to those who want to avoid the law. 

An honest search for harmony in “built environment” disputes requires that first-line responders in conflict be empowered to provide data, including any environmental reports.   But before environmental reports are completed, front line officials should be able to provide data and help citizens and peasants understand what has been provided.   So, suggestion number 3 –

3. Empower professional staff in decision-making, and publish environmental evaluation reports and demand conformance to a time frame

Fears

To address public fears regarding public participation, including threats of reprisal from government leaders, it is necessary to locate a conflict resolution or negotiation program at a level of government sufficiently removed from the local level to allow for some public trust in the process.   As noted in an village aphorism,

 

“the Center is our benefactor, the province is our relative, the county is a good person, the township is an evil person and the village is our enemy”  (Michelson, 2008)

At the same time, the way to reduce corruption at the local level – village, township, county – is to empower the public to communicate with leaders above that level.    I suggest a conflict resolution or negotiation process as that method of communication, once past the petition stage.

So, recommendation number 4 –

4. Process and professionals in conflict resolution to report to provincial authorities

Costs

Another reason for lack of participation is the understanding that protest has costs, short term and long, in several forms.   Heurlin calls this the “Peasant’s Dilemma.”   There are costs in lost time, from productive activities in farming or factories, as well as real dangers in being detained, beaten, or murdered.  See Huerlin (2005), Lichbach (1994), Javeline (2003), Whyte (2010), and many others. 

It is important for the government to encourage additional use of public participation measures by the public, as a way of deflecting anger and conflict that rises to the level of collective protest.    The costs, real and perceived, of public participation to the individual peasant are high – costs in lost time, lost wages, potential reprisals.   As a result, anger and resentment fester, and instead of being defused over time, rises to the level of organized protest as a last resort, when the costs of non-protest become too high to bear.   

There are systems in place that have been designed to address conflict that cannot be ameliorated at the local level – specifically, the petition system.   But even with recent proposed changes to the petition system, it is unlikely that this system will work to  the advantage of citizens and peasants, unless there are additional procedural delays and steps required in the development process.

So, suggestion number 5 –

5. Create a defined procedure for conflict resolution, triggered without excessive delay or petition, coming from provincial authority.

 

It is necessary to construct a dispute resolution system that is administered at the provincial level or above, with a funding source that does not depend on city or lower revenues, with trained conflict resolution experts, or trained mediators, who have power to bring about solution.    Robert Emerson made a similar suggestion in Disputes in Public Bureaucracies (1999),   cited in Michelson (2008). 

The benefit of such a system is that it provides the voice demanded by villagers and citizens.   This, per Whyte and others, is a demand for procedural justice, not distributive justice, and can substantially enhance the position of the Party.   Other measures to enhance distributive justice – greater democracy, independent courts, even hukou reform – are far more difficult for the CCP to accept.   Corruption policies are good;  but  it is doubtful whether even the most rigorous corruption regimes can reach to the lowest levels of governance, where most mass protests arise. 

If administrative officials in urban planning or another technical department are to have authority to resolve conflict, they must report to leaders sufficiently high in the CCP ranks to overrule or counteract actions by local officials.   And, of course, the technical staff should be relatively protected from the lure of corruption.    The suggestion is that each province have an urban planning staff, perhaps from the Development and Reform Commission, whose job it is to assist local technical staff in resolving conflict.   Such an official should have the ability to call a standstill to development in the face of conflict – much as the banking regulators were able to call a halt to actions regarding Zhongdan Investment Credit Guarantee Co. Ltd.,  in Beijing in 2012.   Standstill will put a halt to pressured response from villagers, force scrutiny onto local officials, and do much to restore some element of trust in government.  (Chovanec, 2012)

An argument can be made that active use of conflict resolution skills – particularly negotiation skills – is contrary to Party polices and goals, of remaining as the leader of the people.   And government plans and expertise are far beyond anything that is reasonable for the public to obtain – technical skills in planning, real estate, evaluation, budgeting, and mitigation of damages.    Consulting – in an honest, open fashion – could be viewed as government weakness.   Leaders should lead.

The contrary is true.    Leaders who are secure in their power are unafraid to ask for assistance.   There are different sources of power and types of power.   Coercion, threats, and force are ways of exercising power.   But Antonio Gramsci, in Selections from the Prison Notebooks,  used the centaur – half man, half beast – image from Machiavelli to describe the different characteristics of power.    More traditional power, violence and threats, are the beast half;  but capitalist relations demand the more human side of domination, the thinking, consensual source of power.   That is certainly where China is now, and will be.   Use of consensual means of power does not take away from leadership or authority;  it expands it.

Additions to Required Process

In addition to training for government officials, it is necessary to provide a structured public participation program for units of government.   Such a program has several elements –

  1. Requirement for submission of the public record of public hearings and public participation meeting to relevant city and provincial bureaus before a land conversion and transfer can take place
  2. Additional procedural requirements for existing public participation in environmental reviews.
  3. Any public hearing or meeting record regarding land conversion or construction of “significant public projects” must be signed by a provincial or city representative, who was in attendance at the meetings.   This should help remove principal-agent problems among village or other local leaders.
  1. Triggering of a required conflict resolution program –  when protests submitted reach a particular level – and publicized – then a conflict resolution system must be employed. 
  2. Publishing of environmental reviews in time for public consideration
  3. provide technical assistance to the public to help in understanding of technical details of proposals

 

Benefits to CCP of a defined negotiation process

 

What are the benefits to the CCP of better conflict resolution skills in the development of projects and transfer of land?   Here is a list, not in any particular order of importance.

Retain Government Authority

Conflict resolution skills, used proactively, puts the government in charge of change.    Mass protest by definition means that the public perceives that its interests are not being served, and is a failure of change management.   Asking questions at the beginning is far easier than offering concessions in a media charged atmosphere, later.

Keep Conflict Local

It is important for the CCP to keep protests local.   Negotiation and consultation before implementation is one of the best ways to do that.   Citizens in Dalian are unconcerned about negotiations on a paraxylene plant in Ningbo;  but they are concerned when the objections rise to the level of mass protest.     As an adaptive complex system, the CCP allows local solutions to local problems.   That is still true with use of better public participation techniques, but conflict resolution skills and negotiation skills add to the “toolkit” of local solutions.   China is not at the point in development or law in which national laws can be effectively enforced.   Local solutions to local problems are a satisfactory substitute.

Keep Leaders out of Local Processes

Use of planners in planning departments, or officials in environmental departments fits with a traditional Chinese approach – adaptive, not like western approaches, which are more complexity reducing (using law and regulations),  Chinese approaches would be more complexity absorbing (harmony and guanxi)).   In any case, leaders should be kept out of the process as much as possible.  

Reduce Costs of Governance

Mass protest is far more costly to the government and CCP than to villagers or citizens.    By the time conflict reaches the stage of mass protest, the cost to organizing at the village level is small, and the cost to leaders in terms of trust and image is very high.   In this era, information is relatively easy to obtain, voice, as expressed through social media, is cheap.    A small expense in time and money at the beginning of a project will seem very inexpensive when compared with the costs of dealing with protest later. 

Remove Threat of Reprisals

Consultation and negotiation at the beginning removes threats of reprisal from local officials to citizens; which enhances trust in government and creates working relationships.    There have also been cases of threats by the public of revealing confidential  information about leaders,  as a way of forcing upper level action against local leaders.   While providing information about corrupt leaders is good, extortion is not. 

Strengthen Party Discipline Process   

Use of a defined conflict resolution process provides additional evaluation information for both discipline inspection and the organization departments.   How well can leaders serve the public interest?

Increased Party Legitimacy and Flexibility

Allow local solutions for local problems   – including response to petitions, and reduce the use of “extra-legal” actions – chengguan – that stifle protest and decrease legitimacy

Novel idea – Strength Through Openness

Real power is shown in not having to use it.  See  sun tzu-  “the supreme art of war is to subdue the enemy without fighting”   sun tzu    孙子   writing in The Art of War孙子兵法,  Sūnzǐ Bīngfǎ.

Provide Administrative Clarity

 As in Yantai – provide a defined system for protest, rather than the ad hoc system now in place.   This alone, if done in an open and honest way, should provide greater trust in government.

Rationalize Land Use Procedures

Even though several provinces, including Zhejiang, have announced plans to reform rural land use and sales, there remains the problem of how to plan for future uses below the county level.    If peasants are going to be provided with stronger land use rights, then a stronger system of adjudicating those rights must be in place.   A conflict resolution system provides a means of doing that, without having to resort to court actions which may be influenced by local officials in any case. 

Improve the Business Climate

Increased use of conflict resolution or negotiation skills, in advance of significant conflict, improves the business climate by bringing difficult issues – land conversion, pollution – to the leadership at the beginning, when solutions may be possible, rather than later when solutions may be impossible and government legitimacy is lessened. 

There may be additional costs to using better public participation skills.   Costs may be in simple delay, or significant costs in pollution equipment or additional compensation to farmers.   It seems difficult to argue against such spending, however. 

Allow Regional Solutions

At the same time as local solutions – within the township, or village – to local problems are enhanced, there may be a need to consider more regional solutions to larger problems.  The pollution impacts from a steel factory, or a coal burning power plant, are regional.   An honest public participation process allows for consideration of who should be “at the table” in discussion of regional issues, and a structured conflict resolution process is a way to do that.

Improve Evaluation of Cadres

The Organization Department zu zhi bu  already takes into account more than simple GDP growth in the evaluation of leaders for future positions.  The absence of conflict is another measure.   This can be enhanced by existence of a defined public participation program that reduces conflict.   Use of the techniques is not a negative for leaders;  it should be considered a positive development, demonstrating consideration of public needs in addition to business needs. 

Reduce Corruption –  An honest public participation program acts to reduce corruption, since it raises issues of conflict before a project is implemented, and allows the public to ask the question that all too often goes unanswered in China – “why?”

 

Removes Pressure from Leaders for Special Privilege

The honest leader can find himself in a difficult position when pressured by powerful business owners or other government officials to approve a project to which the leader has objections.   The ability to use a structured public participation program, required by law or local practice, allows the leader to “put more moving parts” into the machine of project approval.  Significant opposition by the public cannot be ignored.

Address Democratic Issues

At its most fundamental, democracy is a system for providing voice to the public.  Democracy with Chinese characteristics will certainly not look like American democracy.   But additional voice for the public in China, particularly on those projects in which they are most interested and have the most stake is a good step in the direction of Singapore, which certainly is not democratic but allows voice.

Serve the People

An honest public participation program serves the needs of the people, both locally and regionally.   The program will require additional data and analysis, which may not be available to the public in government channels;  but that is a small cost to pay for the benefits of providing more harmony.

There are many ways to provide additional voice to the Chinese people.   A China that wishes to lead, not only in economics but in public approbation, should do better on government effectiveness.   A dispute resolution system is necessary, feasible, and Chinese.   It is the manifestation of harmony with Chinese characteristics. 

 

 

 

 

 

 

 

 

 

References

Ali, R., Olden, K., & Xu, S.  (2008).  Community-based participatory

       research: A vehicle to promote public engagement for

       environmental health in China.   Environmental Health

       Perspectives  116,10.  1281-1284.

Au L. & Bai, R. (2012, 11-1)  Resistance in China today Solidarity.   

       Retrieved from  http://www.solidarity-us.org

Balla, S. & Zhou, L. (2013).   Online consultation and citizen

       feedback in Chinese policymaking.  Journal of Current Chinese

       Affairs, 42,3.   101-120.

Berlin, I. (1953).  The Hedgehog and the Fox: An Essay on Tolstoy’s

       View of History, London:  Weidenfeld & Nicolson.

Boisot,  M. &  Child, J.  (1999).  Organizations as adaptive systems

       in complex environments: The case of China.   Organization

       Science, 10, 3.  237-252

Chin, R. & Benne, K.D., (1976).  General strategies for effecting

       changes in human systems.  In Bennis, W. G., Benne, K. D., and

Chin, R., (eds.), The Planning of Change (3rd ed.)  New York: Holt, Rinehart and Winston.

Chovanec, P. (2012)  China’s financial system:  No guarantees. 

       Seeking Alpha.  Retrieved January 1, 2014 from

       http://seekingalpha.com/article/603021-china-s-financial- system-no-guarantees

Christianen, T., Lisheng, D., & Painter, M. (2008).  Administrative

       reform in China’s central government − How much “learning

       from the west”?   International Review of Administrative

       Sciences 74,3.  351-371.   DOI: 10.1177/0020852308095308

Ferlie, E., Ashburner, L., Fitzgerald, L., & Pettigrew, A. (1996). New

       Public Management in Action.  Oxford: Oxford University Press.

Gregory, R., Ohlson, D., & Arvai, J.   Deconstructing adaptive

       management: Criteria for applications to environmental

       management
. Ecological Applications, 16, 6.  2411-2425.

Foster, K.   Improving municipal governance in China – Yantai’s


       pathbreaking experiment in administrative reform.   Modern

       China, 32:2.  221-250

Fung, A.  (2006).  Varieties of participation in complex governance.  

Public Administration Review, (December, Special Issue)  66-75.

 

Heurlin, C., and Whiting, S. (2007).   Villagers against

       the state: The politics of land seizures in rural China.

       Conference Papers — American Political Science Association.

2007 Annual Meeting.

 

Hirschman, A. (1970).  Exit, Voice, and Loyalty: Responses to           Decline in Firms, Organizations, and States. Cambridge,

       MA: Harvard University Press.

Hood, C. (1991).  A Public Management for All Seasons.  Public Administration, 69.  3-19.

Hornby, L. (2012, 1-15).  Chinese Premier Wen takes aim at land

       seizures.  quoting Qiushi.  Retrieved from                

http://mobile.reuters.com/article/worldNews/idUSTRE80E0K620120115

Horsley, J.  (2013). Public participation in the people’s

       republic: Developing a more participatory governance model in

       China.  Retrieved from www.law.

       yale.edu/documents/pdf/Intellectual_Life/CL-PP-

       PP_in_the__PRC _FINAL_91609.pdf

Horsley, J.  (2010).  The development of public participation

       in the people’s republic of China  in Leib, E. & He, B.

       (eds.), The Search for Deliberative Democracy in China.

       Palgrave Macmillan.

Horsley, J.  (2006).   Public participation and the democratization of

       Chinese governance, in Yang Zhong and Shipin Hua, (eds.),

       Political Civilization and Modernization: The Political Context of           China’s Reform.  World Scientific Press.

Hu J. (2007).  Hold High the Great Banner of Socialism with Chinese

       Characteristics and Strive for New Victories in Building a

       Moderately Prosperous Society in all.  Report to the 17th

       National Congress of the Communist Party of China.  Retrieved

       from http://www.china.org.cn/english/congress/229611.htm

Jackson, M. (2009)  Fifty years of systems thinking for

       management.  Journal of the Operations Research Society, 60

       supplement 1.  s24-s32.

Kazer, W., & and Zhang, K.  (2013, February 1).  China’s

       environmental protection racket.   Wall Street Journal

 Retrieved from

http://blogs.wsj.com/chinarealtime/2013/02/01/chinas- environmental-protection-racket/?mod=WSJBlog&utm_s

Ma, J., Webber, M., & Finlayson, B.  (2009). 

On sealing a lakebed: mass media and environmental

democratisation in China.   Environmental Science and Policy, 12.  71-83.

Michaelson, E. (2008).  Justice from above or below?  Popular strategies for resolving grievances in rural China.  China Quarterly, 193.  43-64.

Mitleton-Kelly, E. (2003).  Ten principles of complexity & enabling

       infrastructures.  In: Mitleton-Kelly, Eve, (ed.) Complex Systems

       and Evolutionary Perspectives of Organisations: the Application

       of Complexity Theory to Organisations.  Elsevier, 23-50.

O’Brian, K. & Li, L.  (2006).  Rightful Resistance:  Contentious

       Politics in Rural China.  New York: Cambridge University Press.

Sriramesh, K., & Vercic, Dejan, eds.  (2003)   The Global Public

       Relations Handbook.   Mahwah, New Jersey:  Lawrence Erlbaum

       Associates.

Shu F.  (2012, 2-9)  A national conundrum.   Global Times.  Retrieved

       from http://www.globaltimes.cn/content/695272.shtml   

Taylor, M., De Guerre, D., Gavin, J. & Kass, R. (2002)   Graduate

       Leadership Education for Dynamic Human Systems. 

 Management Learning 33:5 349-369.

Wang, A.  (2013).   The Search for sustainable legitimacy:

       environmental law and bureaucracy in China..   Harvard

       Environmental Law Review, 37.  365-440

Wang, Z.,  & Chen, X.  (2006).  The design of public participation in

       environmental impact assessments.  Aquatic Ecosystem Health

       and Management, 9,1.  93–97.  DOI:  

       10.1080/14634980500535776

Wing Hung Lo, C., & Leung, Sai Wing (2000).   Environmental

       agency and public opinion in Guangzhou:  the limits of a

       popular approach to environmental governance.   China

       Quarterly, 163.  677-704.

Wang, H., Tao, R., & Tong, J. (2009).  Trading land development

       rights under a planned land use system: The “Zhejiang Model”

       China & World Economy, 17,1.   66-82.

Whyte M. (2010).  Fair versus unfair: How do Chinese citizens view current Inequalities?.  In Oi JC, Rozelle S, & Zhou X (eds.) Growing

       Pains: Tensions and Opportunity in China’s Transformation.

       Stanford: Shorenstein Center.   305-332.

Whyte, M. (2011). Myth of the social volcano: Popular responses to     rising inequality in China.  In: Kirby W. (ed.) The

       People’s Republic of China at 60.  Cambridge, MA: Harvard

       University Asia Center.

World  Bank.  (nd).  Worldwide governance indicators.  Retrieved

       From        http://info.worldbank.org/governance/wgi/index.aspx#faq-2

Wu, J. & Gao, X. (2009).   Citizen-participation

       performance evaluation for local governments in mainland

       China
 – The state of practice, analytical framework and

       research agenda
.

  中国公共管理评论 Chinese Public Administration Review.   6, 1-2

Wu X., & He J.  (2009).   Paradigm shift in public

       administration: Implications for teaching in professional

       training programs.   Public Administration Review4. 521-528.

Xue, L., & Zhong K.   (2012).  Domestic reform and global

       integration: public administration reform in China over the last

       30 years.   International Review of Administrative Sciences

       78,2.  284-304     DOI: 10.1177/0020852312438784

Xinhua.  (2013, October 11).  China’s Xi stresses conflict resolution

       through rule of law.  Global Times.  Retrieved from

http://www.globaltimes.cn/content/817246.shtml#.Ulmy8yTdj-k

Yan S.   (2012, 9-27). Experts say proposed environmental

       protection laws fail to protect.  Global Times.   Retrieved from

       http://english.qstheory.cn/law/201209/t20120927_183990.htm

Yue P.  (2006).  The environment needs public participation. China

       Dialogue, 5 December.  Retrieved from  

       http://www.chinadialogue.net/article/show/single/en/604-the-environment-needs-public- participation  

Zhang Y.,  Liu, X., Yu, Y., Bian, G., Yu L.,  & Long, Y.   (2012).  

       Challenge of Public Participation in China’s EIA Practice. 

       Proceedings from  ‘IAIA12 Conference Proceedings’ Energy

       Future The Role of Impact Assessment 32nd Annual Meeting of

       the International Association for Impact Assessment 27 May- 1

       June.  Centro de Congresso da Alfândega, Porto – Portugal

Zhao, Y.  (2010).   Public participation in China’s EIA regime:

       rhetoric or reality?  Journal of Environmental Law, 22,1.  89-

       123

Zhou, Z. (2011).   Public participation in government

       performance measurement in China:
 a critical review and

       prospects.    China Public Administration Review, 6:3/4. 1-12

A Note on the Middle Income Trap

In the last couple of years, a number of China political observers have commented on the dangers to China of the middle income trap.  The fear is that the Chinese economy will fall into the trap. Since economic growth is the remaining claim to legitimacy for CCP, a substantial slowdown from real growth rates of 6 to 15 per cent per year, which obtained in the last forty years, will be disturbing to the harmony that keeps CCP in power. 

In what follows I am not making direct claims for or against the middle income trap in China, only describing the concept. 

What does the middle income trap mean? 

Most models of national development posit a growth track that demands –

– increased savings, so savings can be used for investment;

– an abundant low wage population;

– transfer of low wage, low productivity workers into higher productivity jobs in factories;

– promotion of exports; and

– a progression to higher levels of productivity, eventually approaching the GDP per person levels of the most developed countries. 

Only a few countries – notably, the Asian Tigers – Singapore, South Korea, Taiwan, Hong Kong – have made that transition.  More countries have begun the transition and after a couple of decades, found themselves stuck – unable to significantly increase GDP per person.  That list is longer – Mexico, Philippines, Malaysia, Indonesia, Turkey. The World Bank has identified 37 countries that are prisoners of the middle income trap.  These countries have achieved middle-income country status, but seem unable to pass that barrier, or trap. 

It is important to note that the middle income trap does not mean people are starving, or in poor health.  It does not mean that economies are failing, only that GDP/person is failing to grow much.  National economies are stuck, not declining.   But notably, economic performance is the remaining claim to legitimacy for CCP, now that Marxism-Leninism is discredited (except for Mr. Xi) and nationalism is a dangerous ally.  If nothing else, the middle income trap may be just reversion to the mean of GDP growth.  But that alone is scary for a government whose claim to legitimacy is growth. 

Reasons for the middle income trap include the need to transition institutional arrangements, from those that worked well when the country was emerging from poverty to those needed for higher quality growth – one can imagine changes in rules about finance, banking, savings, property ownership, transfers of ownership, control of bribery and corruption.  With increasing sophistication of work come demands for increasing sophistication of education – workers in finance need different training than workers on factory assembly lines.   Also, changes in cultural features – attitudes to education, health care, family connectedness.   Acemoglu and Robinson in Why Nations Fail boil most of the necessary changes down to institutional change – rules, regulations, laws, customs built in to culture. 

Is there evidence for the middle income trap in China?  Here are some things that keep Chinese macroeconomists up at night.

 Scott Rozelle, education and health researcher in rural China, defines part of the problem, not mentioned in glowing reviews of Chinese economic power.  In decades of research across many Chinese provinces, he finds that iron deficiency anemia was present in 40% of students in fourth and fifth grade in at least four rural provinces; in Guizhou and other southern provinces, 50% of children suffered from at least one type of intestinal parasite; and nearsightedly was common in schoolchildren, but went unaddressed in many rural areas.   Health care and education in rural areas is now significantly better than twenty years ago, but problems persist for much of the rural population.   The health problems are definitely treatable; but they persist, nevertheless.   Rozelle has found that 15% to 20% of rural kids do not do not complete middle high school.  That is a fearful statistic for future growth.   Many of those same kids are affected by poor quality or poisonous drinking water, or rice laden with heavy metals, or air that is even more poisonous.  China has been a leader in flashy environmental projects – wind, solar, dam construction.  Not so much in the unflashy, dirty job of cleaning air, water, land, or ensuring food quality.  Spending on those items will make no contribution to exports or factory technology or even short term health.  For local officials, what’s the point?

For those rural kids, China now has much less ability to build on exports to fuel internal growth.  The rural school children who don’t go to high school are not going to swing investment deals in London, and other countries in Asia and Africa are now lower cost producers of commodity and low-end  products.  That part of the growth path is now less available in China for the 800,000,000 or so who are not middle class and living in Beijing or Shanghai or Hangzhou.  How will they flourish?

That is one side of the problem.  Another side is the ability of superior Chinese scientists and engineers to continue with indigenous innovation.   In one sense, this is not a problem – what is not invented can be stolen, as in the past.  But innovation is no longer an individual working in his garage, but coordinated lab work and bench work and computer work, and collaboration with people outside China is vital.  The Great Firewall, in all its manifestations, inhibits that.  On a project basis, that may not be much of a problem.  In addition to theft, direct internet access to western journals and scientific reports in readily available within scientific and engineering schools and labs.  The firewall, which is eminently adjustable locally, does not affect them.  On another level, however, those same scientists and engineers can find themselves unable to participate in the events of the world in which they have an interest – conferences and symposia and simply news of family and friends outside China.  Sometimes, these sophisticated workers find the daily restrictions and requirements – writing paeans to Xi Jinping Thought, as is a current requirement –  to be just too stupid, and they leave.  They don’t want their kids to write such paeans, either.

When we look at the macroeconomic picture of China is all its glory and warts, we come down to the Acemoglu and Robinson prescription – institutional change.  The change required is not small.  It is systemic, and at the heart of the Chinese model for the last forty years – financial repression and investment in infrastructure and real estate.  Interest on savings in banks was held low, so loans to SOE and other factories and real estate developers could be held low as well.  The hukou kept peasants out of cities, keeping social overhead capital for poor people – primary and secondary education, health care, low income housing, pensions – mostly out of government budgets.  But changing the model means changing the relative shares of income in the economy – poor people and farmers and ordinary savers need to get a larger share of total income, and lots of vested interests in government and SOE and banks need to get a smaller share.  The reluctance to share in China is no less than it is on Wall Street, hence the political conundrum.  Social spending in China on education and health care and pensions needs to go up significantly, as China ages and education needs are greater and pensions, long a source of misspent and stolen funds and poor accounting, become a bigger factor in people’s lives. 

Truthfully, when reform began in 1978, China did need every piece of infrastructure that it could build – trains, planes, airports, ports, expressways, housing, factories, offices.  Now, what was needed is built, and far more.  The return to GDP from more construction is less and less.  That contributor to GDP growth is no more.  But building more stuff is the only lever that officials have right now to goose short term GDP. 

Finally, the world is no longer cooperating with China.  For forty years, in the US and Europe, policy makers were willing to accept some job losses in return for low priced consumer goods.  Now, in 2019, governments are less willing to trade jobs and technology for low priced shirts and televisions.   That is one threat facing China.  Another is the economic construct of a secular stagnation, a  general slowdown in all the advanced economies attributable to ageing populations (which don’t buy as much), greater income disparities (since the wealthy don’t simply buy more food or shirts or televisions), greater savings in advanced economies (due to risks of recession or simple job loss), and even greater flexibility in wages and prices, which we normally think of as a good economic outcome (flexibility can increase savings and decrease spending because incomes can now fall as well as rise).  In general, there is more savings than the world can profitably use, and investment levels remain anemic.  This is certainly not good for China exports or profitable Chinese infrastructure investments overseas. 

There is no guarantee that GDP/person will fail to grow in China.  But the threat is there, as evidenced by the paper by Barry EichengreenDonghyun ParkKwanho Shin in 2013 – Growth Slowdowns Redux: New Evidence on the Middle-Income Trap.  Their conclusion – We also find that slowdowns are less likely in countries where the population has a relatively high level of secondary and tertiary education and where high-technology products account for a relatively large share of exports, consistent with our earlier emphasis of the importance of moving up the technology ladder in order to avoid the middle-income trap.

That is what CCP theoreticians and macroeconomists are thinking about. 

Idle Thought – last week in January, 2019

What if this past weekend were the beginning of the end for the orange haired baboon?  And, in the process, the GOP were so damaged that even a Pence presidency couldn’t do much harm, and we gained a president in 2020 who was smart, thoughtful, respected intelligence and loyalty to allies and was up for repairing the extraordinary damage, domestic and international?

Someone who might say something that would remind us of these lines –

“Let the word go forth from this time and place, to friend and foe alike, that the torch has been passed to a new generation of Americans, born in this century, tempered by war, disciplined by a hard and bitter peace, proud of our ancient heritage, and unwilling to witness or permit the slow undoing of those human rights to which this nation has always been committed, and to which we are committed today at home and around the world. Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success of liberty.”

Suppose we looked back on the past two years, or three, as having fought and emerged from a great conflict, knowing that the alternative was always looking us in the face, that if we had failed no one would never hear the American version –

… then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new dark age made more sinister, and perhaps more protracted, by the lights of perverted science.  Let us therefore brace ourselves to our duties, and so bear ourselves, that if the British Empire and its Commonwealth last for a thousand years, men will still say, “This was their finest hour.”

And in an inaugural speech in January, 2021, we might hear echoes of –

With malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in, to bind up the nation’s wounds, to care for him who shall have borne the battle and for his widow and his orphan, to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations.

Good luck to us with that.  How would that sit with all the tinpot dictators who have sprung up in the last five years, and their beleaguered people? And how would that sit with all those in Africa, and the –stans, and South America, who have looked hard and trembled at rapacious lending of China and the prospect of Chinese internet, Chinese censorship, Chinese media, Chinese rule of men, Chinese tribute, wishing for an alternative that left them some dignity?

Oh.  And Reagan on walls –

“Rather than talking about putting up a fence, why don’t we work out some recognition of our mutual problems, make it possible for them to come here legally with a work permit,” he said. “And then while they’re working and earning here, they pay taxes here. And when they want to go back they can go back.”

https://www.mercurynews.com/2018/12/21/analysis-heres-what-reagan-actually-said-about-border-security/

And –

“I’ve spoken of the shining city all my political life…in my mind it was a tall, proud city built on rocks stronger than oceans…with people of all kinds living in harmony and peace; a city with free ports that hummed with commerce and creativity. And if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here. That’s how I saw it, and see it still.”

https://www.azquotes.com/quote/547667

Cultural Economy

In the old days, before about 1890, there was no field of economics.  There was only political economy, rightly reflecting the link between institutions and laws and the incentives they created.  As Acemoglu and Robinson pointed out in Why Nations Fail, what we call economics arises from the interplay of culture and institutions, and to think that economics is the same for all is to think poorly.

I want to point out some of the ways in which economic thinking can differ across cultures, and explain some of what we see in development in China, and in foreign countries with Chinese companies. 

Economic issues are necessarily paramount for any national leader.  Right now, both Mr. Xi and Mr. Trump derive their legitimacy from promises to achieve national greatness again, and for both, this fervent hope has much citizen – that is, cultural – support.  For Trump, the political slogan is Make America Great Again; for Xi, Made in China 2025, or perhaps, Socialism with Chinese Characteristics for a New Era.  

In China, this promise is more than a political slogan – more than, it’s the economy, stupid.  For Xi and CCP, the promise of development is at the heart of the promise to the Chinese people. All other values are to serve that purpose.  That has been CCP policy since inception.  The CCP Constitution is pretty clear –

In leading the cause of socialism, the Communist Party of China must persist in taking economic development as the central task, making all other work subordinate to and serve this central task.

Chinese development internally has been one of the world’s great stories – from extreme deprivation and depression to dual tier markets and township village enterprises and some land rights and property rights and competition law and insurance and stock markets and financial markets of all kinds.  The infrastructure miracle is the obvious sign of change for investors and foreigners alike.  But China doesn’t seek to export its development model.  It is understood that China is sui generis – except for infrastructure, where the universal model always seems to be, if you build it, they will come.

Many revenue-generating infrastructure projects within China seem structured as loss leaders for economic development, to the benefit of the local party chief.  There just isn’t any way for the completed project to throw off enough cash to pay for all construction and development and operating costs. One sees this in some expressways, subways, some high speed train lines, some airports and ports. The completed projects are beautifully appointed white elephants. How can this go on, year after year, across China?  Where is the ROI calculation?  Where is the money coming from? Who is eating the losses?

One has to understand the difference in ways of understanding economics in China and the west.  This means understanding how culture drives incentives. Economic interpretations are culturally implanted. Thinking about long and short term can be different. Thinking about goals can be different.  What is rational can be different. Let me give you some examples. First, from the savings side of the market.

Example 1 – bank savings 

It is about as fundamental an economic idea as there is.  When returns go up, people invest more and restrain consumption.  Interest rates go up, people will save more, and restrain consumption.  At the national level, macroeconomists have to figure out the impact of potential changes in interest rates, exchange rates, employment rates and investment.  What will people do? And while every situation has its own special character, when one has been making judgments for a while, one gets a feel.   So it was with some surprise that I saw Chinese policy makers discussing the impact of a rise in interest rates on savings.  This was at a time that policy makers were debating whether to allow rates on bank savings to rise, giving citizens a bit more of a return on their money, commensurate with growth in the economy, and ever-so-slightly slowing demand for money from developers and governments.

But what’s to discuss?  If interest rates go up, people put more money in the bank.  That is how the world works.

But maybe not always.  Our standard assumption, seldom noted, is that people are unconstrained in their choice to save or consume – that is, people are free to alter their spending or savings pattern as they wish.  For many savers in China – for most of us in the real world – that is not true.  You know the deep cultural importance attached to education in China.  Families, grandparents, will sacrifice mightily to save enough money to send their star student off to college, maybe high school, in America.  That may take extreme savings over a fifteen year period, but the investment is considered worth it.   If the grandparents have a defined monetary goal – $50,000 in fifteen years, then savings of $240 per month are required if interest rates on bank savings are 2%.  Returns in the real economy might be 7%, or 10%, but savers never see those returns.   But suppose policy makers allow interest rates to rise – say to 5%.  Then monthly savings of $193 are required to meet the future monetary goal, and perhaps grandma and grandpa can eat a little better, or afford the medicine they sacrificed for the cause.  Current consumption instead of savings.  The policy question is then, will they spend the extra $47 per month, or save it?  If you are a policymaker, how do you think about the goals of savings?  If you raise interest rates, will people put more money in the bank – or less?  Without some handle on the cultural features of savings, you don’t know.  And don’t let libertarians or advisors whose understanding of economics includes no psychology or human behavior tell you that economics has no cultural biases. 

Example 2 – trust and good faith

Getting to Yes is the well-known book on negotiating by Roger Fisher and William Ury.  I think everyone in the world who has ever taken a negotiation course has read this book.  In it, Fisher and Ury lay out the major principles for successful business negotiating over time – focus on interests, not positions; try to invent options for mutual gains; quantify or be clear about goals and measures of success. They are well aware that some negotiators lie, cheat, and distract, for the sake of the bargain.  But a general assumption in the US at least, is that the parties are negotiating in good faith – meaning a sincere intention to deal fairly with others.  In American contract law, good faith means that one party will not act so as to destroy the ability of the other side to receive intended benefits.

That is decidedly not a good assumption in negotiating in China.  The best known classics of war, and negotiating, in China are san shi liu ji, 36 Stratagems, and sun zi bing fa, the Art of War, by Sunzi.   Both are studied closely by students and businessmen.  Both emphasize deception, misdirection, and secrecy in dealing with the enemy.

With apologies to Chinese businessmen who have been highly successful by acting in open and principled ways with Chinese and foreigners, good faith is not a good assumption.  Stories about misunderstandings in completed negotiations or the irrelevance of a signed contract can be attributed to cultural differences. This is part of learning the turf.  But other problems, such as quality fadetheft of molds and IP, even kidnapping of American business people over payment disputes, are not cultural, but simply describe dishonest behavior.  This, when negotiations in China are designed to take extra time in order to build relationships.

Even within a company, growth plans can be secret, the province of only the owner. Survival and growth in the market is akin to warfare. Sunzi tells us that deception is a necessity, even when dealing with subordinates. 

5:19 Energy – Thus one who is skillful at keeping the enemy on the move maintains deceitful appearances, according to which the enemy will act.

6:9 Weak Points and Strong O divine art of subtlety and secrecy! Through you we learn to be invisible, through you inaudible; and hence we can hold the enemy’s fate in our hands.

11:35,36 The Nine Situations  It is the business of a general to be quiet and thus ensure secrecy; upright and just, and thus maintain order… He must be able to mystify his officers and men by false reports and appearances, Literally, “to deceive their eyes and ears”and thus keep them in total ignorance.

Per Sunzi, and per common practice, implementation in business or government can then be undertaken without clarity for underlings. It is a powerful tool in both business and government. Clarity for CCP underlings is not required when leaders are the only source of truth and know the goal.  For leaders, lack of clarity permits use of oppression when unclear laws are violated. For citizens, lack of clarity requires self-censorship in word and deed. In business, proper use of unclarity and deception might induce the “other side” in any negotiation to reveal its secrets or preferences, or even act rashly when confronted with apparent delay or indecision.  In the best of times, trust in good intentions is limited.  There is no good faith in the absence of relationship built over time.

This is both a powerful tool and a crippling handicap in Chinese international infrastructure deals.  Initial lightning speed and mystery in decision-making overwhelm opposition, but in the longer term, substantial good will is lost.  We dealt with that problem in the US – the model of government action as “decide, announce, defend” became too costly in time and lawsuits.  Better is “discuss, decide, build.”  But that isn’t necessary in an authoritarian state.

Example 3 – infrastructure investment

We are all astounded by the sheer extent of Chinese infrastructure investment in the last ten years.  The stimulus in 2008 was far larger, as a per cent of the economy, than the American one.  But those of us with some boots on the ground are also astounded at the sheer wastefulness of some of that investment.  We know that these projects are financed by bank loans, and those loans come due in three years or so – banks are not long term lenders.  And aside from projects taking three years to build, we have the experience of (theoretical) revenue generating projects that cannot possibly generate enough money to pay for construction and interest and operations.  No way.  A favorite example of mine is a new expressway built from Shanghai to Pudong, where the international airport is located, completed about 2008.  My first trip to the airport in 2008 was uneventful, for the simple reason that there were hardly any other vehicles on the road for 30 miles.  I mean, nearly zero.  At the time, this was a new expressway, and I suppose the information of its availability could have been scarce.  Possibly.  But I used that expressway at least twice a year for eight years, and the level of congestion hardly changed, anytime of the day or night, weekend or not.  Nearly no traffic.

There were simply too many other competing routes to the airport.  Big mistakes are possible everywhere in the world on infrastructure projects, the US being no exception, but we see similar stories repeated across China.  Transportation economists and engineers work pretty hard to forecast traffic and revenues, consider alternative routes and toll costs, and while the results are less than perfectly accurate, they are a decent guide to the investment decision.  But voters in the US, not to mention bond holders, would be more than a little exercised if their investment produced no ability to repay after so much planning.  Is there a different calculus in China?

Chinese planners have the means to make perfectly rational decisions about such matters.  So how can such revenue-short projects get built over and over again – aside from the pressure on local officials whose promotions depend upon generation of a target level of GDP in their three or five year term, and the need to spend following the huge 2008 stimulus.  Is the investment planning really for a twenty year horizon, at which time future demand will be sufficient to pay off the loans?  (I did transportation planning and economics work for some years.  There is no twenty-year projection of expressway use that is worth the spending of electrons to produce).

There is a way to make sense of these deadbeat projects, whether they are expressways, high speed train lines, airports or commercial ports.  And there is a way to understand the difference with western decision-making.  Given that the real decision is a political one, even more so than in the US, the trick is to consider than the long term doesn’t really matter.  A little bit of the cynical Wall Street IBG, YBG – by the time it matters, I’ll be gone, you’ll be gone.

How to understand this?  A simple chart from econ 101 should help.  A key point to understand is that the construction contractors, lenders, and local government investors in these projects are either government entities or heavily government-compromised.  While many big SOE make big profits, the companies can have political goals as well.  This means that they are not strict profit maximizers, in basic econ terms.  This also means that someone will take care of them in times of trouble.

Many, if not most, expressway projects in China are constructed by SOE as what we call B-O-T projects – build, operate, and transfer.  The concept is that the SOE contractor borrows the money to build the expressway, and receives tolls for a period of time – twenty years, let us say – to repay the loan and provide profits for the contractor. At some point in the future, the right to receive tolls reverts to the original government owner of the expressway.

But what happens when tolls are nowhere near enough to pay back loans?  This is a rather common problem.  Or would be a problem in the US.  Two particular ideas of “capitalism with Chinese characteristics” pertain here.

  • Loans for construction are bank loans, but the borrower may include local governments where the branch of the lending bank is located and even though loans come due every three years or so, the loans can be rolled over again … and again. That is part of what the SASAC (State Asset Supervision and Administration Commission) does – help borrowers roll loans among different local lenders. At some point in the future, someone will have to deal with these problem loans – perhaps one of the “bad banks” created for that purpose. But that is not now.  Just FYI, my favorite expressway to Pudong is now being handled by the one of the SASAC units in Zhejiang.
  • But wouldn’t the construction companies get cold feet, or nervous about not receiving planned income or having to repay the banks? Not necessarily.  In many recent cases, the borrower is actually a partnership between local governments and an SOE contractor.  And here is a neat trick, that could – theoretically – explain how the contractor can sleep at night.

How do regular retail stores decide to close for the evening, or the season?  How does a Starbucks decide to close at 10:00 PM, and then, miraculously, reopen at 6:00 AM?  Why not stay open all night?  Or, the ski lodge – open for five months a year, then close for seven months, and reopen?  How can this work, with mortgages and taxes and rents to pay?

The econ 101 answer is that businesses will shut down temporarily when revenues cannot cover average variable costs – for Starbucks, the cost of salaries and cups and coffee and heat or a/c.  If these variable costs can be covered, then the store will remain open.  If not, then close down and reopen when there will be enough customers – in the morning – that you can reliably cover average total costs.  In the morning, you will begin taking in enough revenue to cover operating costs and the bank loans and interest and rent and insurance and other fixed costs and make a profit. In the short run, you stay open if you can cover average variable cost.  In the long run, you have to cover all the other costs as well, but that is the long run. This is also the situation for the Chinese expressway with little traffic.

Stay with me on this, and the graphic representation will help.

In the figure below, you can see that the price P of the good is still above average variable cost AVC at the quantity Q being sold.  In this case, the seller should remain open, as long as the seller is confident that sales will pick up at some point in the near future (the morning) and sales quantities will then be at or above average total cost ATC.  Think of the price here as the price of the average sale at 2:00 AM; by 11:00 AM, both the average sale and the quantity sold will be greater, putting the company into a profitable situation again.

  • Even though the firm is not earning any economic profit, it is earning enough to pay their laborers (AVC), and thus it incurs less loss compared to the whole of average fixed cost.
  • In this situation, the company should continue producing the product.
  • P = MR > AVC , P = MR < ATC –> point where MC = MR minimize its loss
  • Economic loss = Q (ATC – P)
  • When AVC < P < ATC, the firm can stay open as long as they can cover the AVC
  • If a firm can cover all of the AVC and even part of the fixed costs, they will lose less than shutting down, as MR < ATC
    • Shutting down would mean losing everything and still have to pay for fixed costs, while in the loss minimizing case, costs are still covered.

Source: Welker’s Wikinomics

The same concept can apply to Chinese construction companies in BOT projects.  Loan servicing costs don’t really matter.  Someone, sometime, will deal with that, in the long run. If tolls from cars and trucks – and tolls are very high in China* – can cover operating costs – labor to collect tolls and trim bushes – then the project can remain open.

*Example – passenger car tolls for the 600 mile trip from Hangzhou to Jingzhou, in Hubei Province, are about 500 yuan, one way – say $75.

This is only a theoretical example.  I don’t really know if this is the thinking behind expressway projects that will never make money with debt taken into account. More likely is the the leader at some point said, proceed, and at that point, money became no obstacle.  And obviously some projects can pay their debts. You can see why big projects are often development projects, with revenues from related operations – retail stores, sales of apartments, rental from offices – rather than simply infrastructure projects.  Just like the building of the transcontinental railroad in the US, where the railroads were given land to use for non-railroad revenue.

The example shows what could be a rationale for continuing to operate the expressway.  And a positive spin on this story would be that to a much greater extent than in the US, Chinese infrastructure projects are expected to pay for themselves. 

When they cannot pay for themselves, loans are, in fact, rolled over again and again.  At some point, these projects with negative economic value must be recognized as such, and GDP will suffer as the project is written down to some value via sale to a third party, all the partners and the bank will need to take a big hit, or else someone – some government – will need to continually feed money into the project to cover debts.  This process usually happens quickly in the US, in bankruptcy.  In China, the process can take many years, but that is what the “bad banks” are for – to take the otherwise uneconomic projects and run them until they can be sold to someone or debt finally paid off by the Ministry of Finance.  The current idea is to convert the bank debt into bonds owned by the banks, and let the banks sell the bonds to (haha!) foreign investors.  Win-win!

Example 4 – stock investing

Stock markets were originally intended to accomplish two tasks – provide a source of funds for SOE, and “privatize” some of the risk. These efforts succeeded, and now most companies on the Shanghai stock exchange are SOE, with private funds supplementing a major government position, either ownership or management. Two way foreign and domestic stock market trade between Shanghai and Hong Kong has been allowed since 2014, and there is now an rmb clearing function in London, meaning trades can be settled in rmb outside of China. Now the government is pushing quite hard to get foreign investors directly into stocks and bonds in China.

My own somewhat cynical view is that this is not in the long term interest of Hong Kong or London – or foreign investors.  As long as CCP controls markets in China – and Mr. Xi is reestablishing the “Party is fundamental in all markets” philosophy – markets will not receive the sort of information needed to function efficiently.  Observe how much markets in China are affected by news reports or a speech by a particular high level official.  And observe the somewhat herd-like behavior of Chinese in purchases – a good word from the government suggests safety and profitability in a nation critically short of widespread basic economic news, not to mention divergent views. 

Michael Pettis does a superb job in pointing out the structure and pitfalls of China investing. He is one of the few China macroeconomic analysts with both western and Chinese investment trading experience, as well as the academic chops to put all in context.  Those interested in China financial markets should not miss a posting, now hosted at the Carnegie Center for International Peace.  Every post is rich.

Pettis writes most about overinvestment and the necessary macro adjustments, but his writing about the stock markets is also insightful. Writing in late 2013, he made an important point –  The recent Nobel Prizes in economics suggest both that markets are efficient, and that they are not. In fact they are likely to be efficient under certain conditions and inefficient under others.

Pettis argues that stock markets can be efficient at allocating capital under some conditions and not others.  He sees the need for an appropriate mix of three different kinds of investors, with different investment profiles, which he terms fundamental investors, relative value investors, and speculators. 

It is now 2019.  I don’t follow the Chinese stock market, and perhaps Pettis now has a different view.  But the fundamental conditions seem unchanged to me, if not more destabilizing than they were in 2015 and before.

He defines the three segments as follows –

  • Fundamental investment, also called value investment, involves buying assets in order to earn the economic value generated over the life of the investment. When investors attempt to project and assess the long-term cash flows generated by an asset, to discount those cash flows at some rate that acknowledges the riskiness of those projections, and to determine what an appropriate price is, they are acting as fundamental investors.

These investors are buying the long term trend of the economy, or the long term prospects for an individual company.  They want good financial information on companies.

  • Relative value investing, which includes arbitrage, involves exploiting pricing inefficiencies to make low-risk profits. Relative value investors may not have a clear idea of the fundamental value of an asset, but this doesn’t matter to them. They hope to compare assets and determine whether one asset is over- or underpriced relative to another, and if so, to profit from an eventual convergence in prices.

These investors are buying the shorter term trend in the market, and perhaps choosing among individuals stocks in one industry, based on what information they have.

  • Speculation is actually a group of related investment strategies that take advantage of information that will have an immediate effect on prices by causing short-term changes in supply or demand factors that may affect an asset’s price in the hours, days, or weeks to come. These changes may be only temporarily and may eventually reverse themselves, but by trading quickly, speculators can profit from short-term expected price changes.

These investors are looking at price changes over a span of minutes, hours, or days.  They respond to signals that are clearly not fundamental to the growth of the economy, such as insider behavior or political announcements.

Michael Pettis. The Difficult Politics of Economic Adjustment. China Financial Markets, November 11, 2013. Now at Carnegie Endowment for International Peace as When Are Markets Rational?  Note – versions of this newsletter are available online, but for the most part they do not include this stock market analysis.  The stock market portion of the post is at Naked Capitalism.

Pettis argues that stock markets in China are inefficient because the data necessary for fundamental investors – good macroeconomic data, honest financial statements, clear corporate governance – is lacking; and China has few value investors, because the conditions they need – ability to trade frequently and quickly at low cost, and ability to short securities – is also absent.  Speculators, he says, trade against very short term trend information, and are unconcerned about long term market fundamentals for a particular company.  China stock markets are dominated by speculators.

One could categorize these three investor types as having long, medium, and short term horizons.  Each type of investor looks at different information or analyzes the same information differently, and an efficient market can result when all information is available on which to trade.  Without a good mix of all three, markets lose flexibility, and don’t allocate capital well.  The Chinese markets are necessarily dominated by speculators – roughly 80% of stocks are held by retail traders, mostly individuals. The top ten listed companies on the Shanghai exchange are SOE, and most of the companies and the values are in government owned companies.  China has pension funds and insurance companies that can take a long term view; but even those industries cannot get access to trustworthy and general fundamental information on companies.  As a result, markets can be very volatile.

Example from Financial Times, September 27, 2017 –


When China’s vice-minister of industry said this month that Beijing was considering setting a deadline to ban sales of fossil fuel-powered cars, most auto industry experts did not overreact. The official did not offer any timetable, and rich countries such as Britain and France have set distant deadlines of 2040. Judging by the market reaction in Hong Kong, however, investors could be forgiven for thinking the statement was a bombshell. Shares in BYD, China’s largest producer of electric vehicles, surged to a record that day and are up more than 60 per cent this month. After BYD’s chairman speculated China’s deadline could be 2030 — in what experts said was more of a lobbying effort than a prediction — shares in the group’s separately listed mobile-handset unit also hit a record, despite the fact the company is not even involved in cars.

Not even involved in cars.

Even today, 80% of the listed companies on exchanges are SOE.  There can be little investor confidence in any market data, from government or an individual company.  Pettis notes that even credit decisions must become speculative, because when bankruptcy is a political decision and not an economic outcome, lending decisions are driven not by considerations of economic value but by political calculations.  See the example of Pudong expressway construction above. 

There are plenty of other ways in which “economics with Chinese characteristics” is different from that in the US – some of those ways make much more sense than what we think of as normal economics.  I thought it would be fun to point out some differences – for good or for ill – that could lead to cultural, institutional, and even economic change in the US.  After all, we import just about everything else from China.  Ideas may be next – after all, Mr. Trump and the GOP follow Mr. Xi and CCP in political philosophy in so many ways now.  Lightning speed and mystery and decision-making for the oligarchs and financial instability – no infrastructure, so far, though.

A Note on City Size and Political Economy

Among the China superlatives that we have heard for the last two decades is the fantastic growth in city size – Pudong in Shanghai from fishing and farming villages to the world’s most recognizable skyline; similarly for Shenzhen, Guangdong, and literally dozens of places most of us have never heard of. 

 
Source: Lujiazui 2016.jpg

The US has ten or eleven cities now with a population of at least one million; China has scores, and many of them growing from seemingly nothing.  China has about four times the population of the US, but far more than four times the number of larger-than-1,000,000 population cities – by 2018, well over a hundred.  100 cities bigger than Liverpool.  What gives?  We think we understand the concept of growing economies, and the concept of city growth; but how can these superlatives be so?   A couple of ideas, and some clarification on terms –

1.  urbanization is not only a global phenomenon, it is a modern economy phenomenon – farm-to-factory increased densities of cities a great deal in the Industrial Revolution, but the modern service-oriented economy demands (and allows for) even much greater densities of people, and, moreover, pulls people into the biggest and most diverse cities at a higher rate than in past decades.  There are scale effects – the biggest and most successful tend to get even bigger. (We will ignore the ancient forces that created megacities of a thousand or two thousand years ago – Kaifeng (largest city in the world early in the Song Dynasty, with a population of about 600,000) and Hangzhou, the largest city in the world in the late Song and Yuan dynasties, and into the early Ming,  and Rome, about a million population until the collapse;  and after the collapse of Rome, no place in western or northern Europe until London, about 1700)

List of Cities in China        List of Largest European Cities in History

There was a time in China when manufacturing was conducted each within its own walled danwei, and inside the urban area. Each danwei had its own housing, entertainment areas, and shopping.  Each danwei was the Chinese version of Pullman, the ideal city created by George Pullman in the 1880s)  Pullman, Chicago  This was the Maoist era when land had no value. In the opening and reform under Deng, land began to have realizable value.  In the last three decades, Chinese local governments have undertaken policies to encourage or force manufacturing to relocate to the outskirts, opening large swaths of urban land to development of housing and offices and shopping.  This is American suburbanization of industry conducted at pace and at a time when necessary manufacturing access to river transport had long past.  So, a frenzied catching up.  Think of the demand for oil, before and after invention of the internal combustion engine.  The oil just laid around for millions of years, before it suddenly achieved value.

2.  government fiscal policy matters – After Mao, Chinese cities became the focus of development.  “If we want development, we want cities to grow.”  China supported cities and helped them grow.  “Stadtluft macht frei,” the old saying about the medieval urban place, that “city air makes one free,” was true in China in both senses – that of opportunity for the individual and relative independence of the place from domineering control by a greater unit of government.  In the US, cities were strangled by federal policy, administrative law, and political fragmentation.  The strangulation continues today – Chinese laugh at our inability to build tunnels under the Hudson, fix subways or airports, or let cities grow.  Among cities in China, as in the US, there is the rough and tumble of leader and administrative negotiation over infrastructure expansion and competition for location of business and facilities.  A difference is that in China, there is always a leader with enough power to say yes, and then all the pieces fall into place, and development can happen.  In the US, with heavily fragmented political power buttressed by rule of law, everyone has the power to say “no,” and no one has the power to say “yes,” and force implementation.  Delay is built in to American growth in a way that does not exist in China. The political fragmentation that starves American cities in favor of its suburbs doesn’t exist when the political boundaries of cities in China are so much greater than boundaries in America.

3.  definitions matter – This is the most important distinction between American and Chinese cities for understanding the proliferation of huge Chinese cities.   Briefly, counties in the US are generally larger than cities, and counties are contiguous across the US – one moves from one county into another.  In China, counties are subunits of cities and cities are contiguous – one moves from Hangzhou (city) to Jiaxing (city).  In the US, cities are generally quite small – Chicago is only 225 square miles (590 square kilometers) and New York is only 302 square miles (784 square kilometers). The surrounding suburban area dwarfs central city area.

Every city in China has a substantial rural area – even Beijing and Shanghai.   A city in China can have mountains and large lakes, in addition to farm land.  As you know, there are no mountains or farmland in New York or Chicago.  There are historical reasons for the large area of subprovincial and prefecture-level cities, but another reason for concentration of people and development is the historical government fear over food security.  By law, and enforced pretty fiercely, each province must maintain at least 84% of its land in rural, or let us say, non-urban development land.  This regulation is passed on to cities under the province’s jurisdiction.  The Land Bureau in each city receives an allocation of land each year that can be converted to construction land; without the allocation from the central government and the province, no additional land conversion can take place.  Some of you know about the truly enormous fill-in-the-ocean projects in some Chinese cities – Dongtou County in Wenzhou is one example, but there are others.  This project calls for filling in hundreds of square miles of ocean, creating land for development.  Why?  Wenzhou is a fast growing city (despite the overbuilding of the last decade) and it is surrounded by hills and mountains that make expansion impossible.  So, a solution- create more land.

With unitary government – all power derives from Beijing – it is feasible, and relatively common, for cities to merge and become one administrative place, and for formerly rural counties to become districts of cities.  So areas of cities and population totals are a bit less reliable than those in the US, since change in areas and even definitions is more frequent.  I encountered problems establishing a population for Hangzhou, a place I know pretty well.  For example, Xiaoshan was a county-level city, an independent unit of government (sort of).  In 2001, it became a district of Hangzhou, and Xiaoshan as a separate city disappeared.  The population and the area of Hangzhou increased substantially. Similarly for the Yuhang district of Hangzhou – merged into Hangzhou in  2001, and Lin’an in 2017.  Population and area can grow substantially just by administrative fiat. 

4.  comparing apples with apples – What makes sense from a political science or administrative perspective is to compare roughly similar sized areas.  Hangzhou has a population of 8.7 million, about the same as New York, and three times that of Chicago.  But Hangzhou is 16,847 square kilometers; New York is 784; Chicago is 590.  What is roughly comparable in area with Hangzhou is the metropolitan planning area of Chicago, including seven or ten counties.  The seven counties of northeastern Illinois still have some farmland, and are about 10,387 square kilometers – that is Chicago plus all the land around its satellite cities – Waukegan, Elgin, Aurora, Joliet, Gary.   And still, Hangzhou is substantially larger, at 16,847 square kilometers.  The population of that larger Chicago planning area is 9.5 million for the seven counties.

5.  examples, using area and population –

Hangzhou is the capital of Zhejiang province, and one of the most economically developed cities in China.  Dalian, in Liaoning province, is a rarity in China – a city that is better known than its provincial capital, Shenyang. Dalian, too, is a growing city.  I pick these two places because I know them reasonably well, and they are certainly characteristic of the size relations in Chinese cities.  See the table below.  Data is from published sources, wiki and Chinese government estimates, but I make no claims to precision.  The urban population of Hangzhou (means what?) is said to be about 5.6 million in the 2010 Census; Shenyang, about 5.7 million, Shanghai 20.2, and Dalian, 3.9.  For “urban,” my own preference is to use the districts of a city, as inexact as that may be.  Some comparisons –

Place                           Area, km2                   Population, x 106       Population density, per km2

Liaoning Province          145,900                        43.9                         300                        

Zhejiang Province          101,800                        55.6                         550

Illinois State                  150,000                        12.8                          89.4

New York State              141,300                        19.9                        159

Note that Liaoning and Zhejiang are of roughly similar size as the States of Illinois and New York.   Here you see the roughly 4x greater population in China.  Zhejiang has significantly larger GDP than Liaoning; New York, more than Illinois

Shenyang                         12,980                         8.3   (2010)                  640

 – urban districts                     571                        3.8                            6,655

Shenyang

Dalian                               13,237                         6.7   (2010)                   532

 – urban districts                    550                          2.1  (2015 est.)          7,721

Dalian

Hangzhou                        16,847                         9.4   (2017 estimate)     570

 – urban districts                   706                          3.7                              5,240

Hangzhou

  List of Cities in China by Population and Built-up Area

Shanghai                           6,341                       24.0  (2017 est.)            3,800

 Shanghai

note – these data define Shanghai as only urban, which is not the case from casual observation.  Better data would show Shanghai urban area as much more dense than indicated above.

New York                            784                         8.7                           10,400

Shanghai is close to twenty times the size of New York City in area, with about three times the population.

Cook County                      4,230                        5.2                              2,129

City of Chicago                      590                        2.7                              4,594

Chicago planning area       10,387                        9.5   seven counties

The “urban districts” of Hangzhou are reported at 706 km2, and 3.7 million people.  I know the Yuhang district quite well, and that is not included in the urban district data.  Yuhang is now quite densely built-up suburban, with the main offices for Alibaba and many other companies, and thousands of new apartments.  So, as always, data is only … data.

But one can see that the urban and suburban part of Hangzhou (districts) is much closer to the size of Chicago, and much closer in population.   The population densities of the urban districts of Shenyang, Dalian, Hangzhou, and even Shanghai are reasonably close to those for New York and Chicago.  Again, some liberal allowances are needed for interpretation of the data. 

6.  for decades, political career advancement was partly determined by GDP advancement – Chinese have always valued cities as seats of power, in a way that Americans have not.  Without exception – I think – the provincial capital is the largest city by population in any province. Political power is united with economic power. Compare with American state capitals.  After Deng, and opening up, the advancement of political careers depended in part upon achieving a target rate of GDP growth in the province, city, county, or district.   In addition to feeling modern economic pressures, leaders in China competed to grow their own economies, and growth was most easily defined by real estate growth.  So, the pressures to urbanize in a country with no history of suburban trains-to-downtown to permit office sector workers to live far from their jobs.  Concentration was important for GDP growth as well as for satisfying the needs of a modern economy.  (Don’t get me started on short term v long term GDP growth, or the impact of excessive bad debts.  Careers are made or lost in five years). 

7.  GDP growth is easy when you have determined goals and the power to achieve them –  as a last note, I want to point out that the development goals in American urban planning and Chinese urban planning were at one point broadly similar –  to provide for more people, more GDP generated, more taxes paid locally.  There have always been local exceptions, and quality of life is more of a concern in planning now in the US than was the case thirty or forty years ago, and certainly more of a concern than is currently the case in China.  But let me leave you with an understanding of how easy it can be to achieve GDP growth, if one has the power to control land and location of people and businesses and the growth goal is quantifiable.

As you might know, the National Development and Reform Commission, the economic planning arm of the central government, establishes a target GDP growth for each year in the Five Year Plan.  Five Year Plans  That national growth rate is then allocated, with some give and take, to individual provinces, and from provinces to cities.  A mayor of a city understands what his targets are, and he has five years in which to perform, at which time he is judged on performance and suitability for advancement in governance.

With a target of X% growth per year, how can one accomplish such a task?  Quite simple, really.  Every piece of the built environment – housing, offices, factories, subways, expressways, universities, hospitals, airports, ports, even recreational facilities – has some estimated cost of construction.  While urban planning in China can be quite detailed and sophisticated, planning and implementation are distinct.  If one needs to achieve Y billions of yuan in growth, representing X% GDP growth, all one need do is add up the potential projects, create some new projects if needed, and get started on building.  Not so hard when you control all the land, the developers and contractors and lenders are mostly state owned businesses with goals similar to your own, and there is little to no power to oppose what is decreed.  Lead, follow, or get out of the way is a known sentiment in China. 

If you have made it to the end of this piece, I hope you have the idea that while China is densely populated, the densities are not so far from those in normal urban areas in the US.  Much of the city growth in China in the last three decades is the result of policies to encourage urbanization, city consolidation, and the ability of governments to focus development in ways absolutely unavailable in the US.  Nothing mysterious here – just a different set of policies and priorities.  I tell my Chinese friends that Hangzhou is like Chicago; and Shanghai is like New York, except that there are more Chinese in New York.  Always good for a laugh.

No Way Out, 2 Understanding the Chinese Constitution, the New Citizens Movement, and Document No. 9

The New Citizens Movement should not have been a big deal – a loosely organized group of activists campaigning against corruption and for “constitutionally protected rights” in China.  Xu Zhiyong, a PhD from the Peking University Law School, was one of the leaders.

Xu Zhiyong, shortly before arrest   Xu Zhiyong speaking at a meeting in Beijing in March, 2013, shortly before his arrest

And since Xi Jinping has made anticorruption a key part of purifying the CCP and the Chinese people, one might think that such a citizen’s movement would be welcomed.  A group advocating for what is already in the Chinese Constitution – equality before the law, the right to vote, freedom of speech, freedom of the press, freedom of assembly – should be innocuous. 

One would be wrong.  One must remember the fundamental rule of any authoritarian government – the leader determines the truth, the leader determines right and wrong, and only the leader can lead the people.  Any attempt by citizens to “contribute,” particularly if organized, can only be anathema.  Any organization – any civil society organization – that intends to compete with the government must be destroyed as an enemy of the state.  There cannot be any organization that intends to stand between the state and the individual. 

When Xi came to power, some western observers questioned whether Xi would be a reformer, continuing more or less down the path opened by Deng Xiaoping.  The answer by now, in 2018, is certainly clear – CCP members talk (not openly) about a return to the days of the Cultural Revolution, when fear and terror worked among colleagues, friends, and family members to expose the slightest hint of political deviation from Mao Zedong Thought. Students recording and reporting on teachers,  Chill and fear in the classroom, colleagues evening old scores by reporting someone to the jiwei, without evidence.  (This latter was in my direct experience.  More on that in a future post).    

But the Xi path might have been clear when Xi gave his first speech to the press, following his election at the end of the 18th Party Congress in November, 2012  Xi’s first speech after elevation.   He outlined his agenda in stamping out corruption and taking China to a leadership position internationally.  No one – not even CCP members – knew then how the agenda would be implemented. Now we all know.

The crackdown on any dissension from the path of Xi began with arrests of the New Citizens Movement leaders, in April, 2013.  Simultaneously came the infamous Document No. 9, a warning from the CCP Central Committee General Office to CCP members about the seven deadly western sins seeking to destroy CCP and China.   This document, only available for a short time online before being “harmonized,” as they say, telegraphed the entire Xi Jinping crackdown on speech, civil society, a free press, and freedom of assembly.  It is not subtle.   

As you know, there have been many detentions and prison sentences for human rights lawyers, dissidents, artists, academics, and anyone expressing dissatisfaction, or worse, with CCP and the CCP path as defined by Xi Jinping.  A couple more examples, after the destruction of the New Citizens Movement –

 In July, 2015 Wang Yu, a commercial attorney turned civil rights advocate, was seized.  She had been representing six schoolgirls who were abused by a school principal.  Wang Yu  The seven minute video at this site is worth watching.  Wang Yu interview  Her son, Bao Zhuoxuan,  was not permitted to leave Tianjin last year (2017) to attend college in Australia.  The government told her son that he was a national security threat, and mutilated his passport  Family responsibility This is just like ancient China – one guilty person convicts the whole family.  After a forced confession of her sins, Wang will remain under surveillance for years, with little or no access to friends and family, perhaps the rest of her life.

 Wang Yu     Source:  New York Times

I have CCP colleagues, or friends of colleagues in China, who are bereft at the moral quandary they now find themselves in.  They are forbidden to tell the truth, or say what they think – they know the truth, or what is right, or what is the law; and they are required to obey to do otherwise. 

What I want to do in this post is (briefly) review three documents – the Chinese Constitution, the advocacy of the New Citizen’s Movement, and the threats of Document No. 9.  This is a blog, not an essay, so I will let the reader do most of the work here.  But the reading is not long, and the distinctions clear.  The role of the New Citizens Movement, and others like it, in stimulating repression is quite clear.  It is as if Document No. 9 is responding directly to the perceived threat of the New Citizen’s Movement, even though the New Citizen Movement is not calling for anything that isn’t already in the Chinese Constitution. 

First, the Chinese Constitution, occasionally modified but generally intact since the 1982 major rewriting.  Chapter II describes the fundamental rights and duties of citizens –

Article 33 All persons holding the nationality of the People’s Republic of China are citizens of the People’s Republic of China.

All citizens of the People’s Republic of China are equal before the law.

The State respects and preserves human rights …

Article 34 All citizens of the People’s Republic of China who have reached the age of 18 have the right to vote and stand for election, regardless of ethnic status, race, sex, occupation, family background, religious belief, education, property status or length of residence, except persons deprived of political rights according to law.

Article 35 Citizens of the People’s Republic of China enjoy freedom of speech, of the press, of assembly, of association, of procession and of demonstration.

Article 36 Citizens of the People’s Republic of China enjoy freedom of religious belief.

No State organ, public organization or individual may compel citizens to believe in, or not to believe in, any religion; nor may they discriminate against citizens who believe in, or do not believe in, any religion.

The State protects normal religious activities. No one may make use of religion to engage in activities that disrupt public order, impair the health of citizens or interfere with the educational system of the State.

Religious bodies and religious affairs are not subject to any foreign domination.

Article 37 Freedom of the person of citizens of the People’s Republic of China is inviolable.

No citizen may be arrested except with the approval or by decision of a people’s procuratorate or by decision of a people’s court, and arrests must be made by a public security organ.

Unlawful detention or deprivation or restriction of citizens’ freedom of the person by other means is prohibited, and unlawful search of the person of citizens is prohibited. 

Article 40 Freedom and privacy of correspondence of citizens of the People’s Republic of China are protected by law. No organization or individual may, on any ground, infringe upon citizens’ freedom and privacy of correspondence, except in cases where, to meet the needs of State security or of criminal investigation, public security or procuratorial organs are permitted to censor correspondence in accordance with the procedures prescribed by law.

Article 41 Citizens of the People’s Republic of China have the right to criticize and make suggestions regarding any State organ or functionary. Citizens have the right to make to relevant State organs complaints or charges against, or exposures of, any State organ or functionary for violation of law or dereliction of duty; but fabrication or distortion of facts for purposes of libel or false incrimination is prohibited.

Wow.  Sounds pretty reasonable.

Second, the mission of the New Citizen’s Movement, as described by Xu Zhiyong in May of 2012, concurrent with the rise of Xi.  Following this one-sentence mission statement are several paragraphs describing what individual Chinese can do to further the movement.  To us, nothing sounds very subversive –

The goal of the New Citizens’ Movement is a free China ruled by democracy and law, a just and happy civil society with “freedom, righteousness, love” as the new national spirit.    Xu Zhiyong’s controversial essay

To push forward the New Citizens’ Movement, the New Citizen can:

Disseminate the New Citizen Spirit: Explain the “freedom, righteousness, and love” of the New Citizen Spirit by way of online posts, street fliers, t-shirt slogans, and any other method of spreading the New Citizen Spirit. The New Citizen Spirit must appear on the Internet, flourish in the streets, and, most of all, take root in the deepest part in our hearts.

Practice New Citizen Responsibility: Promise to practice New Citizen Responsibility, stand fast to New Citizen behavioral standards, reject corruption in one’s life, reject the practice of seeking private gain at the expense of the public, be loyal to good conscience and do not actively do evil, do good service for society, and mutually supervise one another to carry out this promise. The New Citizen Spirit is the spirit of commitment, sacrificing one’s profit to be an example, to maintain good conscience and righteousness, up until righteousness exists all over the Chinese nation.

Use the “Citizen” sign or other identifying methods: Citizens design their own “Citizen” insignias, and strengthen their own Citizen status and self-affirmation by wearing the insignias in everyday life.

Participate in civic life: Hold regular mealtime talks, discuss current political situation, pay close attention to people’s livelihood, care for public service as well as public policy, help the weak, serve society, promulgate fairness and justice. Every place has a group of modern citizens. Everybody needs to group together for society to progress. Unity begins with acquaintance.

Unite to share labor and coordinate work. Repost messages, file lawsuits, photograph everyday injustices, wear t-shirts with slogans, witness everyday events [specifically referring to the phenomenon of standing in a circle around someone causing a scene to witness it], participate or openly refuse to participate in elections, transcribe [things that you see happen], hold gatherings or marches or demonstrations, do performance art, and use other methods in order to jointly promote citizens’ rights movements and citizens’ non-cooperation campaigns—such as assets reporting, openness of information, opposition to corruption, opposition to housing registration stratification, freedom of beliefs, freedom of speech, and the right of election. Practice the New Citizen Spirit in action. Citizens’ power grows in the citizens’ movement.

Xu Zhiyong and other leaders of the New Citizens Movement were arrested in 2013 and sentenced to prison.  Xu was released last year, in 2017.  China Change offered a translation of his “return from captivity” post in September of 2018.  Xu Zhiyong returns   A short YouTube video explains his plans, now that he has been released from prison –  Xu Zhiyong video on plans

The New Citizen Movement promoted following the language of the Chinese Constitution (see above) although not many Chinese have ever seen their constitution or knew that it existed.  But now you can understand why “constitutionalism” was denounced by CCP as dangerous.  Following the rule of law (as suggested in the Chinese Constitution) would mean that CCP members were subject to the same laws as ordinary citizens, and that just could not be permitted.   And read the New Citizen Movement tasks listed above.  The denunciations of western evils in Document No. 9  – free speech, free press, civil society – are all right there in the New Citizens Movement manifesto.  With Document No. 9, it is as if Xi Jinping is responding to the New Citizens’ Movement directly. 

It didn’t help that Xu was also promoting transparency about the fabulous family wealth of Wen Jiabao and Xi Jinping, reported by the New York Times and Bloomberg, respectively, in the summer and fall of 2012.  Today, the NYT and Bloomberg are both still banned in China.  

Third, the infamous Document No. 9 – Compare the goals of the New Citizens Movement, and their program of advocacy, with the warnings in the now infamous Document No. 9 (below), from the spring of 2013, warning CCP members against any tolerance of the western evils attempting to destroy China.  The New Citizens’ Movement was by no means the only civil society group working for change in China, but you can see clearly the relationship between the goals and advocacy of direct action by the NCM and the warnings in Document No. 9.  The document warns against

constitutionalism, civil society, “nihilistic” views of history, “universal values,” and the promotion of “the West’s view of media.” It also called on Party members to strengthen their resistance to “infiltration” by outside ideas, renew their commitment to work “in the ideological sphere,” and to handle with renewed vigilance all ideas, institutions, and people deemed threatening to unilateral Party rule.”  (Introduction at China File translation)

Document No. 9 appeared on April 22, 2013, a few months after the NCM manifesto and a few months after the ascension of Xi Jinping, before being deleted internally. I edit the following language from Document No. 9 liberally, providing only pertinent language on all seven of the deadly western sins, but the entirely is available at  The Infamous Document No. 9

The document is addressed to leaders, including those in the Party Committees of private businesses, probably at a senior mid-level ranking or higher.  Members are warned to resist and oppose –

  1. Promoting Western Constitutional Democracy: An attempt to undermine the current leadership and the socialism with Chinese characteristics system of governance.
  2. Promoting “universal values” in an attempt to weaken the theoretical foundations of the Party’s leadership.

The goal of espousing “universal values” is to claim that the West’s value system defies time and space, transcends nation and class, and applies to all humanity.

This is mainly expressed in the following ways: [The people who espouse universal values] believe Western freedom, democracy, and human rights are universal and eternal. This is evident in their distortion of the Party’s own promotion of democracy, freedom, equality, justice, rule of law, and other such values; their claim that the CCP’s acceptance of universal values is a victory for universal values,” that “the West’s values are the prevailing norm for all human civilization,” that “only when China accepts Western values will it have a future,” and that “Reform and Opening is just a process of gradually accepting universal rights.”

  1. Promoting civil society in an attempt to dismantle the ruling party’s social foundation.

Promoting civil society and Western-style theories of governance, they claim that building a civil society in China is a precondition for the protection of individual rights and forms the basis for the realization of constitutional democracy. Viewing civil society as a magic bullet for advancing social management at the local level, they have launched all kinds of so-called citizen’s movements.

Advocates of civil society want to squeeze the Party out of leadership of the masses at the local level, even setting the Party against the masses, to the point that their advocacy is becoming a serious form of political opposition.

 

  1. Promoting Neoliberalism, attempting to change China’s Basic Economic System.
  2. Promoting the West’s idea of journalism, challenging China’s principle that the media and publishing system should be subject to Party discipline.

Defining the media as “society’s public instrument” and as the “Fourth Estate;” attacking the Marxist view of news and promote the “free flow of information on the Internet;” slandering our country’s efforts to improve Internet management by calling them a crackdown on the Internet; claiming that the media is not governed by the rule of law but by the arbitrary will of the leadership; and calling for China to promulgate a Media Law based on Western principles. [Some people] also claim that China restricts freedom of the press and bang on about abolishing propaganda departments. The ultimate goal of advocating the West’s view of the media is to hawk the principle of abstract and absolute freedom of press, oppose the Party’s leadership in the media, and gouge an opening through which to infiltrate our ideology.

 

  1. Promoting historical nihilism, trying to undermine the history of the CCP and of New China.
  2. Questioning Reform and Opening and the socialist nature of socialism with Chinese characteristics.

These mistaken views and ideas exist in great numbers in overseas media and reactionary publications. They penetrate China through the Internet and underground channels and they are disseminated on domestic Internet forums, blogs, and microblogs, They also appear in public lectures, seminars, university classrooms, class discussion forums, civilian study groups, and individual publications. If we allow any of these ideas to spread, they will disturb people’s existing consensus on important issues like which flag to raise, which road to take, which goals to pursue, etc., and this will disrupt our nation’s stable progress on reform and development.

Western anti-China forces and internal “dissidents” are still actively trying to infiltrate China’s ideological sphere and challenge our mainstream ideology. Some of their latest major efforts include: Some people have disseminated open letters and declarations and have organized petition-signings to vocalize requests for political reforms, improvement of human rights, release of “political prisoners,” “reversing the verdict on ‘6/4’[the Tiananmen Massacre],” and other such political demands; they have made a fuss over asset disclosure by officials, fighting corruption with the Internet, media supervision of government, and other sensitive hot-button issues, all of which stoke dissatisfaction with the Party and government. Western embassies, consulates, media operations, and NGOs operating inside China under various covers are spreading Western ideas and values and are cultivating so-called “anti-government forces.” Cooking up anti-government publications overseas. Within China’s borders, some private organizations are creating reactionary underground publications, and still others are filming documentaries on sensitive subject matter, disseminating political rumors, and defaming the party and the national leadership.

 

Quite a mandate.

I described the quandary for American businesses in No Way Out.  But that is a quandary about profits and operations.  For CCP members, and rights lawyers, and journalists, and academics, and dissidents, the quandary is much more personal, about moral choices and family preservation, and threats to life and livelihood.  It is No Way Out at a different level of salience. 

A little more on attorney detentions, disappearances, prison terms, threats, and torture –

 Arrest of more than 200 civil rights lawyers followed in July, 2015 (the 709 incident).  200 lawyers detained – the 709 incident

More on New Citizens Movement

Description of 14 more lawyer cases –

14 Cases Exemplify the Role Played by Lawyers in the Rights Defense Movement, 2003–2015  By Yaxue Cao and Yaqiu Wang.  China Change,  August 19, 2015

Party’s Over

October 9, 2018 

The crackdown on expression hardens for CCP and anyone in government, even if not CCP 

Jiayun Feng, reporting in SupChina  jeremy@supchina.com – 

 New Party rules to govern members’ online behavior 

The Chinese Communist Party (CCP) is set to implement some new regulations for its members to monitor how they behave on the internet.

The new set of revised discipline rules was released by the Central Commission for Discipline Inspection on September 26, and is set to take effect on October 1. Party members are required to be hyperconscious about what they post on digital platforms, such as the popular messaging app WeChat.

Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts.  Independent, May 28, 2015

Source: The Independent – Chinese Artist Detained

These discipline rules are meant to be more stringent than anything coming out of the Party Central Office in the last four years.  But there is foreshadowing of these rules, as there often is in China.  In 2013, the infamous Document No. 9 specified seven rules for CCP members to observe, including forbidding any discussion of free speech, civil society, free press, and – notably, here – any negative comments about CCP or Party history (Mao, famine, Tian’anmen, et.al.)  From the Jiayun Feng piece –

According to the updated regulations, members could face expulsion from the Party if they make inappropriate remarks online. These include the endorsement of bourgeois liberalization, opposition to the Party’s policy of reform and opening up, groundless criticism of the Party’s major policies that will potentially undermine the organization’s unity, defamation of national heroes and models, and slander of the Party and state leaders. The invention or spreading of rumors regarding politics might also lead to various degrees of punishment.

My own sources suggest that the rules taking effect on October 1 will be implemented severely within universities.  In the run-up to the current rules, over the last couple of months, my contacts tell stories about a university Party leader who quit his job rather than be subject to speech discipline.  In another university instance, a faculty member who teaches comparative politics was left in a conundrum – she cannot say anything good about anything foreign.   When she objected, she was summarily removed from her teaching job and assigned to the library – a permanent demotion.  A PhD professor now stacks books, likely for the rest of her career.

Teachers are now observed, surreptitiously, either by provincial or central government jiwei, the discipline inspection bureau.  My students often recorded my lectures; now, that recording of Chinese teachers can be used against them in disciplinary proceedings.  In another despicable development, I have direct stories of person-to-person comments at an informal dinner, later leading to punishment.   Who do you trust?

For obvious reasons, I cannot name names in these articles, and I am reluctant to even name provinces, given the environment.  There was a time, back in the good old days prior to 2012, when one could conceive of the arc of history bending in the direction of greater openness in China.  In general, my CCP friends were happy about the direction of change.  No more.

In the past, personal exchanges on WeChat could include  comments on government policy, good and bad.  Now, those will be forbidden, under penalty of losing one’s job, expulsion from the Party, or at least “punishment,” which could include demotion or passover for promotion.   This assumes that the government can and will listen in on WeChat messages.

The crackdown is getting far more serious.  I told foreign students in 2014 to advise carefully potential future students, about whether they wanted to endure the petty disruptions and censorship that was China then.  (See the prior post here). Now, the disruptions and threats are at the point where some Chinese teachers, CCP members, would rather quit their jobs than be subject to the terror of the jiwei (discipline inspection bureau).  In the case of the comparative politics professor, the dean of her school and the party leader of her school were both disciplined for not controlling what she said in the classroom.

In the last year, I know of three separate incidents, two in Wuhan and one in Tianjin, in which university professors were fired (in one case, the professor reportedly kept his job after begging on his knees) for comments made in class that disturbed the local jiwei (discipline inspection) unit.  Either jiwei personnel or students with an axe to grind or guanxi to gain were listening in on the class.

Consider that these new rules are part and parcel of the social credit score, which has been discussed much in the last year.  If friends of yours make negative comments, not in your presence, that may reduce your own social credit score.   Who will want to collaborate with another faculty member who is impure in thought?

In related developments, the National Radio and Television Administration will now forbid any foreign tv shows to be broadcast in prime time, and foreign content will be limited to 30% of the time on streaming sites.  China limits foreign tv shows and streaming.

This reminds me – a liitle bit – of the level of terror in East Germany, or Stalin’s USSR, when family members informed on each other and friends informed on friends.  In China, this was last done in the Cultural Revolution.  Tellingly, many CCP members have been saying for years that the reign of Xi Jinping reminds them of nothing so much as it does the Cultural Revolution.  Of course, now, truly, no one could say that.

I am reminded of the Paul Simon line in Sounds of Silence – “people talking without speaking.”  Then, it was hearing without listening.  Now, it is what we call “performative declamation” rather than communication – speech acts as performance, without intent to communicate anything of meaning.  Those of you with CCP members in your wechat circle will now get only pablum as commentary.

All one need do to understand this system is read Orwell’s 1984, which describes official language perfectly.  CCP members are now caught in the doublethink trap.  For the most part, CCP members, particularly university teachers, are smart people.  But one must now say what is correct, rather than what one knows to be true –

To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them, to use logic against logic, to repudiate morality while laying claim to it, to believe that democracy was impossible and that the Party was the guardian of democracy, to forget, whatever it was necessary to forget, then to draw it back into memory again at the moment when it was needed, and then promptly to forget it again, and above all, to apply the same process to the process itself—that was the ultimate subtlety; consciously to induce unconsciousness, and then, once again, to become unconscious of the act of hypnosis you had just performed. Even to understand the word ‘doublethink’ involved the use of doublethink.

George Orwell.  1984.  Book 1, Chapter 3.

One’s speech must conform to the Truth as dictated.  And truthfully, it is not too difficult for even thoughtful and smart CCP members to spout the Party line. They learned the style of speech long ago, but its use was becoming limited until 2012.  Another name for this type of speech is New China Newspeak, a term popularized by renowned China scholar Geremie Barme. New China Newspeak describes a form of bureaucratic and political speech that uses history, scientific and technical jargon, vernacular references, economics, Chinese victimhood, and moral judgment to argue – seemingly interminably – for the Chinese government perspective as the only rational perspective.  New China Newspeak is not always long-winded, but it is repetitious.

See Geremie Barme.  New China Newspeak The China Story.  Australian Centre on China in the World.  August 2, 2012.

Katherine Morton provides an example in The Rights and Responsibilities of Disagreement (The China Story, September 21, 2014)    She refers to the “Hall of the Unified Voice” that she experienced while teaching a group of Chinese and foreign students in Turin, Italy, in 2013.  When one Chinese student ventured a comment on the Chinese Dream, each Chinese student then felt compelled to comment as well, with vacuous – and similar – statements that were a form of verbal posturing rather than attempt at introducing ideas or stimulating debate.  She describes –

an example of ‘group think’ aimed at presenting a united front in the face of independent thinking. It’s just this kind of knee-jerk solidarity that also vouchsafes the individual against the ever-present threat of being reported to the authorities back home.

The current crackdown on expression is part and parcel of this old historical style of speaking and writing.  Sophisticated speakers are good at this, but it takes practice.  One should begin learning with repetition – war is peace, freedom is slavery, ignorance is strength.

I have a longer essay on Performative Declamation  in the book section of the China Reflections blog.  It needs a little editing – right now, too much “performative declamation.”  But perhaps worth part of a look.

The International Student Office – Evaluation

This is the executive summary of a report prepared by students in my Modern Chinese Economic History course in spring 2014.

At that time, every Chinese university was competing to admit foreign students, mostly from Africa and the middle east.  University programs got put together on very short timeframes, with no training for staff and procedures more or less made up on the spot.  The pawns in this process were the foreign students themselves, who often arrived unprepared for college work, unfamiliar with China, lacking any Chinese language, their first time out of the home country, and certainly unprepared for Chinese university norms.   This work was an attempt to bring some efficacy, functionality (rather than efficiency) to the international student program.  Although this report is from 2014, there is no doubt that international programs in China still require upgrading to bring them to a minimal acceptable standard of responsiveness and care.

 Any student looking to attend school in China should read this, at least to get the jist of the boots-on-the-ground feel among foreign students.  This is not to say, do not attend school in China.  But forewarned is forearmed.   The full report is available by emailing me. 

 

An Evaluation of the Efficacy of the Administration of the International Student Program at Zhejiang University of Science and Technology

 

                     Prepared by

                     Students of

           Modern Chinese Economic History

        Zhejiang University of Science and Technology

 

 

                     Spring, 2014

 

              William D. Markle, Ph.D. Professor

 

Participating Students

茅晚菱 Mao Wan Ling

Bogdan Oprea

杜亚芳 Du Ya Fang

严丽文 Yan Li Wen

李亚男 Li Ya Nan

Nikodemus Hermanto

Lukas Cavalcante Baier

杨雪芳 Yang Xuefang

Mohammed Abdullah Mohammed Ali

Maingi Joy Nkatha

Dorothy Mutsamwira

沈洁妮Shen Jie Ni

阮芳波Ruan Fang Bo

陈雪Chen Xue

李丹Li Dan

Candy Shirly

Gladis Tshizainga Kasongo

Tariro Kurly Chingarande

章旭霞Zhang Xu Xia

顾盛霞Gu sheng Xia

吴越 Wu Yue

江添 Jiang Tian

Diana Madalina Nemes

Mary Assumpta Muhoza

Golden Chifune

Twagirayezu Didier

Sadick Mahdi Aden

Stefanie Bracher

Martina Odermatt

葛佳锋Ge Jia Feng

张晨凯Zhang Chen Kai

吴雯雯Wu Wen Wen

包舒影 Bao Shu Ying

 

An Evaluation of the Efficacy of the Administration of the International Student Program at Zhejiang University of Science and Technology

 

Executive Summary

 

Zhejiang University of Science and Technology (ZUST) has a long history of cooperation with foreign schools, particularly schools in Germany. While there have been many years of exchanges of faculty for research and lecture purposes, there were no foreign full-time degree candidate students at ZUST until the fall semester of 2009. This is considered the beginning of the ZUST international student program.

In the spring of 2014, there were 392 full time degree candidate foreign students at ZUST. In civil engineering, 167 foreign students; in the School of Economics and Management, in marketing, 47; in international economics and trade, 120; in the Language School, in business Chinese, 47; and a new major, information science, 11 students. First year students in the spring of 2014 numbered 142. There are additional exchange students, mostly from Germany, who stay at ZUST for varying lengths of time, from a few weeks to one year. (source: ZUST International Student Office, personal contact)

International programs are complex, perhaps more for university administration than for university academic faculty. Teachers need to address language barriers and perhaps cultural barriers in class; but administrators must deal with a far broader range of concerns, from admission standards, dorms and living conditions to food and health issues and visa and language and cultural difficulties. 

ZUST has now had an international student program for five years, with a second graduating class this June (2014). It is time to assess the quality of the international student program – is the program working as intended? Are students satisfied with outcomes? Are teachers satisfied with outcomes? What remains to be done to blend the international student program into the culture of a Chinese university? How effective is the program in creating customer satisfaction?

The fundamental goal of this research is to assist ZUST staff in making the International Student Office more effective in serving students, and thereby providing a better experience for foreign students. 

This evaluation addresses the administrative elements of the international student program. We reviewed student experience with health services, postal services, dorms and living conditions, and the international student offices, within the university and the individual department.Individual academic units within the School of Economics and Management and Civil Engineering should address academic quality. But students are the customers, in a real sense, of a Chinese university, and we want to ask whether their consumer needs are being met.

We conducted surveys and interviews of ZUST students, staff, and faculty. We document a wide range of concerns from students, less so from teachers and administrators. This is suggestive, in itself. 

We were also interested in how the ZUST international program compares with that at other schools. While we could not get substantial information due to time constraints, we did obtain good information about the experience of students and administrators. We interviewed students and administrators at two other schools, Zhejiang University and Zhejiang Gongye University (Zhejiang University of Technology).

Many students do not find significant problems in dealing with either the International Student Office in A4 or their department office. Problems that are identified by other students generally are about communications, in various forms.  

Conclusions are described in detail in Chapter 6.  Broadly speaking, we consider three fundamental areas requiring attention –

  • Quality and details in communications with foreign students verbally and in print, by email and text and online

There are difficulties in communication in both directions – Chinese staff to students, and students to Chinese staff. Additional training and techniques are necessary here, particularly for communications that involve student health and safety.

  • Timeliness and trust in communication

There are significant problems in lack of trust in communications from Chinese staff. The problems are attributable to communications that are too late for effective response, last minute requirements, communications that are wrong, and communications that are perceived by foreign students as simply lying. This harms both the administration of the program and academic quality.

  • Management of the International Student Office and department office functions – quality of management and policy direction

There does not appear to be any systematic training for international program staff. Nor can we see program goals, objectives, measures of performance, or an ongoing program of quality improvement.  As ZUST adds more foreign students, these defects will become even more apparent.  By accepting foreign students who are not qualified to be in the classroom, either due to English or preparation difficulties, the International Student Office defeats the purpose of having foreign students at all – to make Chinese students better.  The current model is a business model, not an academic model.

Particular recommendations are described in Chapter 6. 

Academic Integrity in the International Civil Engineering Program at Zhejiang University of Science and Technology

This is the executive summary of a group research project conducted by students in my Modern Chinese Economic History course in spring of 2014.


This work could only have been conducted under my direction – no Chinese faculty member would dare to investigate the rampant cheating in the civil engineering department.   In addition to the widespread academic dishonesty, the investigation found that there seems to be no civil engineering program in China – with the possible exception of a program at Tsinghua – that meets international accreditation standards – meaning that no graduate from a school in China will be eligible to take the PE exam for most countries without significant additional training or experience. 

The full report is available.  Contact me if interested.

An Evaluation of Academic Integrity in the International Civil Engineering Program at Zhejiang University of Science and Technology

 

Prepared by

Students of Modern Chinese Economic History    Zhejiang University of Science and Technology

  Spring, 2014

William D. Markle, Ph.D.  Professor

 

Participating Students

Salman Wasir     Tong Xiaixia     Dancan Siparo Ntirra     Carine Sonia Barutwanyo     Ali Mohamed Ahmed     Chadya Lys Everole Okola Aha

Mary Nyamvumba     Matshik Isabelle Mbako     Mahad Abdullahi Mire     Musabao Kahingania David     Wang Xiaoyan     Ren Zhoudi

Zhou Zhenhao     Shen Bijia     Wang Chenyang     Bogdan Oprea     Mao Wanling

 

An Evaluation of Academic Integrity in the International Civil Engineering Program at Zhejiang University of Science and Technology

Executive Summary

      Accreditation is the process by which a university program is accepted into the academic community.   Is an academic program doing teaching, and research, that is consistent with the quality standards in the field?   Can an academic civil engineering program produce engineers who know enough, have experience enough, are trustworthy enough, to be trusted with the lives, projects, and financial resources of their clients in the future?

      Governments in much of the world do not decide whether an academic program meets the requirements of knowledge transfer and academic integrity.  Accreditation is a peer evaluation of the quality of a program. 

      Academics from other schools and professionals in the field review the teaching, research, students, and outcomes of a program to judge its effectiveness, quality, and correspondence to standards in the academic and professional communities.    Academic programs judged to meet the standards of the academic and professional community are accredited, and are considered part of the academic community.  A program that is not accredited does not necessarily close down; a program might actually be quite successful, and of good quality.   But non-accreditation means that a program has not been admitted to the academic community of scholarship and research, as judged by peers – other scholars.

      In this evaluation, we are looking at the ZUST civil engineering program, with regard to only one element – academic integrity.  Integrity is an essential part of professional and academic life in engineering.  A student who cheats on an exam, when only a grade is at stake, might be expected to cheat on design of a bridge or a building when a lot of money is at stake.   Engineering as a profession does not want such people.

      While individual cases of university cheating and plagiarism would not normally affect accreditation of an engineering program – an individual student can be failed in courses, or expelled from school – the assumption in academic life is that no department or program would permit failures of academic integrity to become epidemic.   Widespread cheating, in one course or over time in several courses in a program, would be cause for immediate attention from departmental leaders, college deans, and university administrators, including the provost.   Accreditation programs would certainly investigate reported incidents of widespread academic dishonesty, whether reported by faculty, students, or outsiders.  If such information becomes widely known, it would affect the ability of the university to attract quality teachers, and affect the ability of students to get better jobs when they graduate.

The goal of this evaluation is to determine whether there is widespread violation of academic standards for honesty in the ZUST civil engineering program.    There have been allegations of widespread cheating on exams and tests.  Is that true?  What response from the civil engineering department faculty or administration?  If true, have students been expelled or punished?   Are violations of academic standards for honesty tolerated at other universities?   How do other schools address the problem?    The results of this evaluation will not produce an answer, “yes,” or  “no.”    We will get information on the experience of students and teachers at ZUST and at other schools, report on our findings, and let others decide what to do as the next step.

The survey and interview results suggest that academic dishonesty is found in a rampant manner within ZUST. The surveys collected and interviews taken from students and teachers across ZUST’s learning environment seem to point that cheating is a serious and dangerous problem for the system, a problem that the administration does not take seriously at the moment. The consequences of such behavior by the administration are leading to a poor quality learning environment and a cheaper degree, which puts students graduating from this program in a difficult stance. All the results and conclusions are based on the surveys and interviews collected in ZUST and in the similar universities as a mean of comparison. The results mainly provide the idea that the unwillingness to control cheating defeats attempts by the school’s administration desire, to upgrade ZUST, from a college (xue yuan) to a university (da xue) level, creating an incentive for students to minimize their efforts in the learning process and engage in being dishonest.

A meaningful interview came from one of the graduates of 2014 promotion. He was asked through an email, what is his perspective on academic dishonesty in ZUST, based on the citation: “A student who cheats on an exam, when only a grade is at stake, might be expected to cheat on design of a bridge or a building when a lot of money is at stake.   Engineering as a profession does not want such people.”

After four years within ZUST civil engineering program, his answers could not be more sincere: “The statement above is, in my opinion, arguably right. I have seen a lot of cases like this in my university life, for about four years. I will not lie to you, I have also cheated two or three times in my exam. I do not quite remember which courses they were, but one of them was finite elements taught by Wang Ji Min. I did that because I could not understand his course, as a whole, due to the difficulty of the course and because the teacher was not competent with his English. For the other courses, I studied hard and did just fine until I graduated few days ago.

What intrigued me was, in four years of university life, I always find students who cheats on every exam. They use their phone (mainly wechat) to take photos then shared the answers. I have never seen anything like this before, so I am quite surprised. 

Cheating in class, based on my experiences, is the faulty of both students and teacher, lets just say 70% faulty on students and 30% on teachers. Students come from all over the world, so they have varied learning background, because we all finished high school. However, I find that the quality of students enrolled in the university (mostly from African continent) is surprisingly below average. It is not because they are not capable, but because they are lazy. They did not put much effort to learn in the courses. I also found something strange with students that applied for a major in ZUST and skipped most of the class because they are working or some other reasons, only showed up 2 or 3 times in class, then attended final exam and PASSED the course. Of course, they copied all the answers from others. This is all I know about integrity problems in ZUST, and sometimes Chinese students also do it, academics dishonesty.”

The conclusion drawn from his interview can be stated with the following quote: “The civil engineering degree then becomes not the first step to a progressive career, but a limiting step.   The graduate is confined to lower level work, without professional engineer status, unless significant additional education or experience is obtained.”