‘Institutional reform’ and unemployment in China

By Zhang Kai, October Review, Vol.24, issue 5/6, 31 December 1997

Please find below an article on China in the latest issue of October Review. The article has been revised for minor translation inaccuracies over the previously sent article. Please feel free to distribute or reprint them (with a reference to October Review).

The most notable outcome of the First Meeting of the Ninth National People's Congress (NPC) was the promotion of Zhu Rongji as Premier, and the decision to conduct institutional reform of the government bureaucracy.

Luo Gan, Chief Secretary of the State Council, made a report to the NPC, stating the urgency for institutional reform: firstly, the problem with the current government institution is the no-separation of political and economic administration. With the government's direct intervention in the production activities of the enterprises, it is difficult for market mechanisms to play their role. With redundant departments and multiple decision-making centres, efficiency is low. Secondly, government departments basically manage economic and social affairs by administrative mechanisms, and there are many issues that should not or cannot be managed by the government. Hence, there should be division of responsibility and appropriate roles need to be clearly defined. Thirdly, redundancy is acute, giving rise to bureaucratism, corruption and graft, and also serious burden to state finance. Both at the central and provincial levels, a huge budget is spent on wages.

To provide statistical data to substantiate the need for reform, the Lookout Magazine published by the State Council carried a signed article in No.4 this year, stating that presently, the ranks of the bureaucracy fed by the state are bulky and out of control. By the end of 1996, 36.73 million lived off the state, an increase of 82.2% compared to 1978. In this same period, China's population increased by 27.1%. If one person got an average 10,000 yuan a year on the payroll (excluding housing, medical benefits, pension etc.), it would cost the state 360 billion yuan a year. This amounted to almost half the state's total financial budget.

An official from the Finance Ministry revealed that a pretty resolute institutional reform was conducted in 1993, creating quite a sensation. But five years after that reform, 5 million staff have been added to the bureaucracy. The Finance Department has had an annual increase of 100 billion yuan of revenue since 1993, but all the increase has been exhausted by the increased cadres on the royal payroll. (Hong Kong's Ming Pao, 8 March 1998)

The above does not include corruption, graft and extravagance of the bureaucrats.

Such a bureaucracy is in dire need of a revolutionary, radical democratic reform. The official reform now proclaimed by the State Council also names the current reform a revolution. But its targets and methods show that the so-called revolution is but a lukewarm whitewashing. Departments will be cut down from 40 to 29, but in reality, most have their names changed and their ranks demoted. After some reshuffling, the actual number of units in the State Council will be reduced from 85 to 83. The planned reduction of half the cadres (about 30,000 within the State Council, and 4 million at different regional and local levels within three years) will be carried out by having the cadres retain their rank and position but being re-allocated to different institutions in industry, commerce, finance, market management, taxation, culture, education, or health. This in effect means that the state bureaucracy will be trimmed down while other institutions will swell. The latter will come under further leadership or intervention of Party/state cadres, and more collusion between the state and the commercial sectors will also follow. With a tradition of favoritism and factional struggles, the streamlining will also offer good pretexts for the top leadership to get rid of rivals or dissidents.

This current reform, claimed to be a revolution, cannot be anything contributing seriously to radical democratic reform of the political institution. The reform scheme mentions only the separation of political institution from enterprises, with no mention at all of the separation of the Party and the state functions. From the state to the enterprises, actual leadership is still held in the hands of the ruling Party and its cadres.

The power and privileges enjoyed by the Party/state bureaucracy since its inception in the early fifties have been expanding, and the entire bureaucracy is unscathed by the many campaigns on streamlining throughout these several decades. Deng Xiaoping's words Streamlining is a revolution of 1982 have frequently been quoted to stress the state's determination for reform. Yet, all the reforms conducted by the bureaucracy on itself have been partial, mild, and ineffective. For a revolution on the bureaucracy to be truly conducted, the masses need to be mobilized and the state apparatus broken down in order for the resistance of the interest-vested bureaucrats to be crushed. If the people remain powerless in decision-making on political and economic matters, there cannot be any true revolution.

Luo Gan, to explain for the failure of previous attempts at reform of the bureaucracy, blames the planned economy. The reform Zhu Rongji will be launching on the streamlining of the bureaucracy will go hand in hand with a further strengthening of the capitalist market economy. One aim of the current reform is to return more sovereignty to the enterprises, to set them free from bureaucratic intervention. Power is to be delegated of course to the leadership and not the workers.

Massive layoff of workers continues to be on the agenda. It is reported that the current number of workers temporarily laid off had increased from 8-9 million at the end of 1997 to 13 million in February 1998. Lin Yongsan, deputy minister of the Labour Department, said that there are four types of surplus labour in China: 1) 130 million in the countryside; 2) 7-8 million joining the labour force every year; 3) 5.7 million registered as unemployed every year; 4) about 20 million redundant labour from state enterprises every year. It is estimated that the total number of people waiting for employment is 170 million. (Ming Pao, 8 March 1998)

According to Hu Angan, researcher of the Chinese Academy of Social Sciences, the actual urban unemployment rate should be around 7.5%, amounting to perhaps 35 million. It is also estimated that another 11 million will be laid off this year from state enterprises, in addition to a new increase of 20 million labour every year. (Hong Kong's Apple Daily, 28 February 1998) Furthermore, in the next three years, half a million soldiers will be discharged.

One way the government intends to shift the burden is to force women to return home. The All-China Federation of Women protested about the change of maternity leave from 3-month paid leave to no pay leave ranging from one to five years. This would cost women workers the loss of seniority and even their jobs. (China Daily, 3 March 1998) With even the Women's Federation, usually a passive follower of government policy, protesting strongly against the victimization of women workers in the name of economic reform, one can see how explosive the unemployment problem is.

30 March 1998