Reform from Below: The Private Economy and Local Politics in the Rural Industrialization of Wenzhou

全文

(1)Reform from Below: The Private Economy and Local Politics in the Rural Industrialization of Wenzhou Author(s): Yia-Ling Liu Source: The China Quarterly, No. 130 (Jun., 1992), pp. 293-316 Published by: Cambridge University Press on behalf of the School of Oriental and African Studies Stable URL: http://www.jstor.org/stable/654402 Accessed: 16/07/2009 21:13 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=cup. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org.. Cambridge University Press and School of Oriental and African Studies are collaborating with JSTOR to digitize, preserve and extend access to The China Quarterly.. http://www.jstor.org.

(2) Reform From Below: The Private Economy and Local Politics in the Rural Industrialization of Wenzhou* Yia-LingLiu Since the introduction of economic reform in late 1978, rural China has undergone an impressive economic transformation.On the one hand, decollectivization has culminated in the disbanding of the people's commune and the development of individual household farming. On the other, the re-emergenceof the market has brought about a growing commercializationand industrializationof the rural economy. As far as rural industrialization is concerned, a wide spectrum of possible paths for local development, ranging from collective to private industry, has emerged across China. In spite of the disparaged position of the private sector, which is seen as alien to the socialist system, and the second-class citizenship of peasant entrepreneurs,l Wenzhou in Zhejiang province became the first place to be economically dominated by the private sector and, therefore,to draw nationwide attention from Chinese authorities and scholars.2 What is peculiarabout the development of Wenzhou to date is that since the early 1980s the supremacyof private industry over both the state and collective industries in net production value has threatened the very sustenanceof the local socialist economy. In addition, many economic practices prevailing in Wenzhou actually began as devia-. *I am gratefulto William L. Parish,Theda Skocpol,TangTsou and Gale D. Johnson for their commentsand supportfor this research.I would also like to extend my thanks to Su-Jen Huang, Michel Oksenberg,Jean Oi, AndrewWalderand Ezra F. Vogel for their helpfulcomments and criticism.An earlierdraftof this paperwas presentedat the annual meeting of the American Sociological Association, San Francisco, in August 1989. The researchwas supportedby a researchgrantfrom the Centerfor Far Eastern Studies at the University of Chicago. 1. The description "peasant" in China has gained almost a legal status. It is determinedby the ruralresidencyregistrationand is irrelevantto actual occupation.A ruralresidentwho has long been separatedfrom farmingis still officiallyidentifiedas a peasant.If he runs a manufacturingenterprise,he will be calleda peasantentrepreneur. If he engages in commerce, he will be called a peasant merchant or peasant businessman. 2. There are other areas in which a predominantprivate sector has emergedin the local economy. They include Quanzhou in Fujian (see Yu Zuyiao, "Xiangzhenqiye fazhan de di er gaochao:Fujiangjinjingxian yu anxixian xiangzhengqiye fazhan de duibi kaocha"("The second peak in the developmentof ruralindustry"),in Zhongguo Shehui KexueyuanJingjiYanjiusuo(ed.), Zhongguoxiangzhen qiye dejingJifazhan yu jingJi tizhi (The DevelopmentoJ?Chinese Rural Industry and Its Regime) (Beijing: Zhongguo jingi chubanshe, 1987), pp. 77-123; Chen Feitian and Jiang Huakai, "Quanzhou xiangzhen qiye gufen jingJi de kaocha" ("A study on partnership enterprisesin rural Quanzhou"),ZhongguonongcunjingJi (ChineseRural Economy), No. 8 (1988), pp. 45-50) and Qinghe county in Hebei province (JingJi ribao, 4 November 1988, p. 2; Renmin ribao, 3 March 1989, p. 3). However,the predominance of the private economy came much earlierand is greaterin degreein Wenzhouthan in these places. X)The China Quarterly,1992.

(3) 294. The China Quarterly tions from state policies, if not as outright illegality. How could this occur in a centrallycontrolled,socialist society?If the private sector is prescribedby the state only as a supplementto the socialist economy, how could it be allowed to predominate over both the state and collective sectors in Wenzhou? Five arguments are provided by Chinese scholars and officials to account for the rise of private industry in Wenzhou: the historical tradition of entrepreneurship,the lack of state investment and the weakening of state control because of Wenzhou's geographic isolation, the destitution of local economic life, the state reform policy, and the open-mindednessand willingness to take risks found among Wenzhou cadres. I believe that all these arguments,though valid, are insufficient to explain why Wenzhou is the first area in China to achieve a predominanceof private industry, and would argue instead that it is the unique historical legacy of the 1949 political transformation in Wenzhou which ultimately accounts for the faster development of the local private industry. The "self-liberation" by an independent local guerrilla force in 1949 provided the Wenzhou cadres with exceptional coherence and solidarity that has enabled them to marshala collective resistanceto the state-imposedcollectivization and to protect the local private economic activities in which a coincidence of interest between cadres and peasants has been embedded. It was this protection by the local authoritythat sheltered the household farming and peasant sidelines before 1978, and that eventually enabled the private sector to dominate the local economy first across rural China after the 1978 reform. A study of local deviation from state policies and its historical roots also inevitably raises the question about the degree of control of a socialist state. It will be argued in this article that the concept of a sporadic totalitarian state, which denotes a state with strong despotic power but weak infrastructuralpower, can best explain the vicissitudes of economic activities in Wenzhou since 1949. First, however, the events in Wenzhou since 1978 need to be examined.. The PrivateEconomy in Wenzhou3 Wenzhou, located in the south-east corner of coastal Zhejiang province, is a harbour city near the mouth of the Ou river. As an administrative unit, Wenzhou municipality covers 11,800 square kilometres, including two municipal districts, one inland city, and eight rural counties. Among its 6.3 million residents, 520,000 reside 3. For more detailed discussionof sweepingprivatizationand marketizationover the local economy in Wenzhou,see Peter Nolan and Dong Furen(eds.), MarketForcesin China: Competitionand Small Business- The WenzhouDebate (London:Zed Books, 1 990)..

(4) The Private Economy and Local Politics in Wenzhou in the municipal districts and 5.78 million in rural areas.4 The development of the local economy in Wenzhou since 1978 can be characterized as privatization, marketization, and local deviation from state policies. Privatization.Since the state eased its control over the economy in late 1978, privatization has been sweeping through almost every economic sector in Wenzhou. As early as 1985, local private industry, service, transport and construction have taken the lead over their counterpartsin the local socialist sector in net production value and transactionproceeds.5 As far as private industry is concerned, it began with household industry, based on individual household handicrafts and semimechanical production. Its production value since 1984 has accounted for nearly 60 per cent of the net industryoutput in Wenzhou, far beyond that of both the state and collective sectors combined.6As household industry triggered labour mobility and capital flow, it paved the way for the rise of a private factory industry based on enterprises whose fully or semi-mechanical production is separated from the individual households, and which usually employ nonfamily workers.7By 1986, Wenzhou already had more than 10,000 private enterprises.8Since for political reasons the private enterprises are usually listed as collective enterprises in ofEcial statistics, their actual weight in the economy is difficult to determine, but it would appear that most so-called collective enterprises in Wenzhou nowadays are actually private enterprises. The rapid development of both household and private factory industries in Wenzhou has been transforming the local economic structure from agriculture to commerce and industry. The data in 4. He Rongfei, Wenzhoujingji geju: women de zuofa he tansuoxing yijEan(The EconomicStructureof Wenzkou)(Zhejiang:Zhejiangrenmin chubanshe, 1987). 5. For instance, as early as 1985, 70%of local transportand 70%of food servicesin Wenzhou were provided by the local private sector; the total value of transaction proceedsin privatecommercewas at least equal to, if not greaterthan, that of the state sector. See "Wenzhou nongcun shangpin jingi kaocha yu zhongguo nongcun xiandaihuadaolu tansuo"("A studyon the commodityeconomy in ruralWenzhouand the investigationon modernizationof ruralChina"),Jingjiyanjiu (EconomicSttldies), No. 6 (1986), pp. 3-18. 6. The productionvalue of the household industryaccountedfor 58.8%,60.5%and 59.5%of the total industrialoutput in Wenzhou in 1984, 1985 and 1986 respectively, accordingto local statistics. 7. Interestingly,in his discussionof the developmentof factoryindustryin medieval Europe, Weber pointed out that, among other things, the separationof a household from productionis one of the most importantconditionsin distinguishingfactoryfrom household industry.It seems that this process is universalin both east and west in the development of a factory industry. See Max Weber, GeneralEconomicHistory(New Brunswick,New Jersey:TransactionBooks, 1981), pp. 153-1 77. 8. Lin Bai et al. (eds.), Wenzhoudejueqi (The Rise of Wenzhou)(Nanning:Guangxi renmin chubanshe, 1987), p. 103. It should be noted that a private enterprise is officially defined as an undertakingwhich employs more than eight workers. The 10,000 private enterprisesmight not be exclusively industrialenterprises.They may include non-industrialundertakingswith more than eight employees in the service, transportand food sectors.. 295.

(5) 296. The China Quarterly. Table 1 indicate that since 1985 the industry and service sectors together have accounted for two-thirds of the total gross production value of Wenzhou. Since industrialization is dominated by private industry,it can be concludedthat the developmentof private industry is the key to Wenzhou's economic transformation. Table 1: The Changes in the Economic Structureof Wenzhou:The Proportionof Sectors in Gross ProductionOutput Year. Agriculture %. Industry %. Service %. 1978 1980 1984 1985 1986. 63.4 68.4 33.8 31.3 29.8. 17.5 26.7 47.4 52.55 53.5. 4.9 16.15 16.7. Sources: 1978 and 1984: ZhangDexi (ed.), Wenzhoumoshi (1986), p. 13. 1980 and 1985: He Rongfei, The EconomicStructureof Wenzhou, p. 98. 1986: Statistics provided by cadres in the municipalgovernment.. The development of a factory industryhas also created a process of "capitalization," a transition from self-employed petty bourgeois commodity producer to capitalist entrepreneur that has gone far beyond the processin ruralHungarywhich featuresonly small private household farming.9An adventurousentrepreneurin Wenzhou now usually employs more than 100 or even 200 workersand is willing to take risks for reinvestment. This newly emerged stratum of peasant entrepreneurhas not been allowed to function alone in the economic sphere. In fact, many prosperous entrepreneursin Wenzhou have been targeted for recruitment into the Party.l?The local authorities apparently believe that an entrepreneurwith Party membership is easier to control than otherwise. As far as the entrepreneur is concerned, Party membership means political protection.ll Because the higher efficiency and largermarginof profit in private 9. Ivan Szelenyi, Socialist Entrepreneurs:Embougeoisementin Rural Hungary (Madison, WI: The University of Wisconsin Press, 1988). 10. The Chinese Communist Party and governmenthave altered their favourable attitude toward the private economy since the incident of Tiananmen Square, increasinglyseeing entrepreneursin the privatesector as a threatto social and political stability. As a result, entrepreneursare no longer eligible for Party membership.See ShijEeribao ( WorldJournal),3 October 1989, p. 32. 11. In fact, many Party membershave joined the camp of capitalistentrepreneurs, using their political connections to advance their economic interest. A 1986 study pointed out 330 such cases, though I believe the real figuremust be higher. See Chen Ruiming, "Dui Wenzhou nongcunguyongdahu de chubufenxi" ("A pnmary analysis on the largeemployersin ruralWenzhou"),JingSiyanjiuziliao (Materialsfor Economic Studies),No. 8 (1986), pp. 28-36..

(6) The Private Economy and Local Politics in Wenzhou industry lead to higher wages,l2 about 80 per cent of the workers in both local state and collective enterpriseshave either asked for leave or taken second jobs in the private sector.l3Consequently,the influx of technicians and skilled labourers into the private sector has weakened the technical support and morale in both state and collective enterprises in Wenzhou. Many state and collective enterprises are now on the verge of collapse, and many devices have been designed to safeguard them, such as leasing them to individual contractors or converting them into joint ventures between private and collective partnership.Because of privatization, the weight of the state sector in the total industryoutput of Wenzhouhas declined from 31.44 per cent in 1980 to 18.45 per cent in 1985.l4. Marketization.Since 1980, the number of local market places has grown rapidly. It was reportedthat there were already472 throughout Wenzhou in 1985, among which 120 specialized factor markets featured one single or several particularcommodities.ls The growing number of market places has helped integrate local economic activities into the national economy by attracting many outside traders (gongxiaoyuan), brokers, merchants and expediters to meet locally. This means that the local small commodity production of household industry, based on the reprocessing of factory waste, is closely tied to the market. In fact, many household enterpriseshave already altered production lines several times in response to swift changes in market demand in the past decade. Besides producingfor distant markets through mail order,l6 many individual household enterprisesin Wenzhou rely mainly on peasant traders,who organize production through subcontracting. Local devianteconomicpractices.Privatization and marketization are made possible only because the Wenzhou municipal government has adopted an acquiescent attitude toward certain semi-legal or 12. It is estimated that the ratio of capital to output in the state sector is 1:2 in the textile industry, as opposed to 1:10 in the private sector of the same industry. As a result, the pay in the privatesector is much higherthan that in the socialist sector. See Yuan Enzhen, Wenzkoumoshiyu fuyu zhilu (The Wenzkou Modeland the Road Towards Abluence)(Shanghai:Shanghaishehui kexueyuanchubanshe, 1987), p. 10. 13. Lin Bai et al. (eds.), Wenzhoude shichang(Marketsin Wenzkou) (Nanning: Guangxirenmin chubanshe),1987, p. 54; Zhao Renwei, "Wenzhounongcunshangpin jingji fazhanzhonggeren shourude chajuwenti" ("The problemsof income gap in the developmentof the commodityeconomy in ruralWenzhou"),Jingi yanjiuziliao,No. 8 (1987), pp. 36-42. 14. Zheng Honglian, "Wenzhou chengxiangjingji yunxing tedian ji tizhi Beijing" ("The characteristicsand institutionalbackgroundsin ruralWenzhou"),Jingi lilunyu jingJiguanli,No. 2 (1987), pp. 51-56. 15. Lin Bai et al., TheRise?f Wenzhou, p. 26. 16. One 1987 report indicates that about 30%of householdenterprisesin Jinxiang township markettheir productsby mail order.These householdenterprisessend their cataloguesand order forms to state and collective enterprises,departmentstores and supply and marketing companies in other areas which may be interested in their products.See Lin Bai et al., Marketsin Wenzhou, pp. 99-101.. 297.

(7) 298. The China Quarterly illegal economic practiceswhich deviate from the existing state policy but are indispensible to the smooth operationof the private economy. One of the most fascinatingof these is business afEliation,on which a private household enterpriseor a peasanttraderhas to rely in orderto obtain legal status for business transactions. Since the household enterprises and individual traders are not officially recognized as economic entities with corporate status in a socialist economy, they cannot legally engage in business with other enterprises. They therefore need to borrow for a fee, an official identification from a local collective or state enterprise, together with titled stationery, officially issued invoices and a bank account, all provided by the collective enterprise,in orderto undertakebusiness deals. In this way, the practice of business aiEliation also helps to disguise the dubious sources of products produced by the household enterprises. Anotherexample of deviance is the local capital market.Ninety-five per cent of the total capital needed by the local private sector has been supplied by "underground"private financial organizations, such as money clubs, specialized financial households and money shops that have set their own interest rates since the very beginning. In order to compete with these private financialorganizations,as early as 1980 a local collective credit union, without informing the superior authority, abandoned for the first time the fixed interest rate and adopted a floating interest rate which fluctuated in accordance with market demand but remainedwithin the upper limit set by the state. Despite the dubious legality of the floating interest rate, the local state bank branchesand all the credit unions in Wenzhouhad alreadyadopted it before the central state oflicially ratified it in 1984.17 A third example is the practiceof land transferamong peasants. In the early 1980s, as the local peasants took up manufacturingand commerce, many abandonedfarmingand leased the land to others or simply hired farm labourers. The practice of land transfer among peasants, likened to the traditional landlord/tenantrelationship,was prohibited by the state at that time. However it became inevitable as the private economy emerged and the municipal governmenttended to look the other way. Land transfer was eventually of5ficially sanctioned by the state in 1983. Such semi-legal or outright illegal economic practices tolerated by the local government in Wenzhou are numerous. It is reasonableto assume that without the bold steps taken by local officials to shelter deviant economic practices, it would have been very difficult for the private sector to come to dominate the local economy in Wenzhou. 17. Wenxian Yanjiushi, "Zhonggong zhongyang guanyu yijiubasinian nongcun gongzuo de tongzhi" ("The instructions on the rural administrationin 1984 by the CentralParty"),in WenxianYanjiushi(ed.), ShierdayElaizkonggongwenxianxuanbian (Collections of Central Documents since the Twelfth Congress (Beijing: Renmin chubanshe,1986), pp. 424-441 at p. 430; Liu Zhenguiand ChenJianfa,"Weishide silu chuangzaoxing de shijian: Wenzhoushi fazhan jiating gongshangye de diaocha" ("Pragmaticthinking and creative practices"),Renmin ribao, 8 July 1986, p. 2..

(8) The Private Economy and Local Politics in Wenzhou Explanation of the Rise of PrivateIndustryin Wenzhou The sweeping privatization and marketizationof the local economy in Wenzhou is not only unique in China but apparentlyalso against the very principle of socialism. A number of views have been offered by both Chinese scholarsand local officials in attemptsto explain how this could come about. They can be roughlycategorizedinto five basic arguments: historical, economic, geographic, state policy and local policy. Historical reasons. Many mainland Chinese scholars suggest that today's Wenzhou is simply the historical continuation of its past. Private business, commerce and petty commodity production were old economic practices in historical Wenzhou.l8The city was also a major tradingport in south-eastChina as early as the tenth century.l9 However, after the communist takeover, the practices of household handicrafts and private businesses were severely denounced and suppressed in the political campaigns of collectivization, the Great Leap Forwardand the CulturalRevolution. Those which managedto survive were driven underground.However in Wenzhou, as the state eased its tight control, household industry and private business once again prospered.According to some scholars and oiMcials,20it is this covert entrepreneurialskill and spirit amongthe peasantswhich made today's Wenzhou possible.2l Economic reasons. Accordingto many Wenzhou cadres, the rise of the private economy was necessitated by the poor conditions of economic life in Wenzhou. Since mountains comprise 78.2 per cent of its total area and plains only 17.5 per cent, there is little arable land relative to the large size of the labour force, and much of Wenzhou's population were living under the poverty line. Most peasants needed extra income from sidelines or handicraftsto subsist, and the private sector boomed once the political ban was lifted.22Moreover Wenzhou, located right above Fujian province, was regardedas part of the military front against Taiwan and had thus received little state investment in agricultureand industrysince 1949. This led to a weak 18. Wu Xiang, "Lun fazhanzhongde Wenzhou nongcun shangpinjingi" ("On the developing of the commodity economy in ruralWenzhou"),Renmin ribao, 4 August 1986, p. 5; He Rongfei, "Wenzhou moshi de xingcheng:teding lishi tiaojianxia de chanwu (l)" ("The formation of the Wenzhou model (1)"), in Lin Bai et al., (eds.), Wenzhoumoshi de lilun tansuo (TheoreticalInvestigationsof the WenzhouModel) (Nanning:Guangxi renmin chubanshe, 1987), pp. 89-91. 19. Yuan Enzhen, The WenzhouModel and the Road TowardsAJ%luence. 20. Dong Xihua and Zhou Jinghao,"Jingshenyinsu de zuoyong"("The effect of the spiritualfactor"),in Lin Bai et al., TheoreticalInvestigations,pp. 113-16. 21. In an official briefingin 1987 at Wenzhou municipal government,many cadres reported the local tradition of entrepreneurshipas one of the most important conditions that contributedto the boom in private industryin today's Wenzhou. 22. Gu Yikang, "Wenzhoumoshi de xingcheng:teding lishi tiaojianxiade chanwu (2)" ("The formation of the Wenzhou model (2)"), in Lin Bai et al., Theoretical Investigations,pp. 91-93.. 299.

(9) 300. The China Quarterly industrial foundation in both the state and collective sectors, as well as weak central control over Wenzhou'seconomy, comparedto areas receiving significant state investment such as southern Jiangsu. Accordingly, as opportunities emerged after the reform, it was no accident that the private economy in Wenzhou grew more quickly than the local socialist sector.. Geographic reasons.Wenzhou is located in the mountainous coast of south Zhejiang and is surroundedby mountains. Its traffic routes inland are restricted to several rough roads throughmountains, and its contact with other coastal cities relies upon underdeveloped maritime shipment.23Many Chinese scholars regardthis geographic isolation as the most important factor in explaining the rise of the private economy in Wenzhou.24On the one hand, isolation reduced central intervention. On the other, it prevented Wenzhou from exposure to the benefits of large industrial cities, such as capital investment, technical support and market demand. This is in sharp contrast to areas like southern Jiangsu which has received long-term -capital and technical support from the metropolitan area of Shanghai.25Accordingly,while southern Jiangsu is subjectedto rigid state control and its economy is dominated by collective industry, Wenzhou is relativelyfree from state intervention and its economy is more privately oriented. State policy reasons.Many Wenzhou officials attribute the rapid growth of the private economy in Wenzhou entirely to the state's reform policies in the late 1978 Third Plenum of Congress.Without the state's loosening of its control, accordingto these ofEcials,private business would not have been restored.26 Local policy reasons. For many Chinese scholars, the Wenzhou cadres' pragmatismand willingness to take risks are the keys to the 23. It is reported that a newly-built airport in the suburbanarea of municipal Wenzhou has been open to commercialflightssince July 1990. Renmin ribao, 19 June 1990, p. 1.. 24. In my discussionswith a groupof researchersfrom ZhejiangShehui Kexueyuan, JinjixueYanjiusuo(The Instituteof Economics,ZhejiangAcademyof Social Sciences) in 1987, they pointed to the geographicisolation from central control as the most importantcondition determiningthe rise of the private sectorin Wenzhou.They used the popularChinesedictum, "The Emperoris as far as the sky"(tiangaohuangdiyuan) to describethe geographicisolation of Wenzhou. 25. Zhou Xiaohan, "Sunanmoshi he Wenzhoumoshi de bijiaoji zhongguonongcun fazhan de xuanze" ("A comparisonbetween south Jiangsuand Wenzhoumodels and the selectionsamongthe pathsof Chineseruraldevelopment"),ZheViang xuekan,No. 2 (1987),pp.4-9,atp.5. 26. Lin Bai et al., The Rise of Wenzkou;Liu Zhenguiand Chen Jianfa, "Pragmatic thinking";Yang Yi, "Fangchulaide he chuanxialaide," in Lin Bai et al., Theoretical Investigations,pp. 94-96..

(10) ThePrivate Economy and Local Politics in Wenzhou speedydevelopment of the private sector.27Many of Wenzhou's economicpractices, such as business ai)filiation,land transfer among and the floatinginterest rate, were all regardedas deviations peasants fromstate policies in the beginning.They were neverthelesstolerated bylocal cadres, and in the long run became prevalent and acquired ofEcialsanction. It seems that the Wenzhoucadres implementedstate policiesin accordancewith their own interpretation,which took local interestsinto account. Even though they did not overtly support deviantpractices, they did not take any serious action against them, andthis made the private economy possible.28 These five reasons are importantin understandingthe development of Wenzhou in general and of the rise of the private economy in particular.However, the first four seem more to explain the developmentof the private economy in Wenzhou after the 1978 reformthan to suggest why Wenzhou was the first major instance of private industry in China. For instance, southern Jiangsu and Guangdong,like many other regions in south China, have long been wellknown for their peasantsidelines in the silk and textile industries, andare characterizedby a severe shortageof arable land. Why does collectiverather than private industry dominate their local development, even today? The historical and economic accounts apparently cannotprovide a satisfactoryanswer. On the other hand, geographic isolation and the lack of state investment are common to mountainous areas across China. Yet the private economy has achieved predominancein Wenzhou far sooner than in other regions. If the prevalenceof private industry in Wenzhou can be attributed mainly to the 1978 reform policy, why has the same phenomenon not occurredin other places which have also been affected by the reform policies?Even if all four factors are combined, there are other regions in China which share them but which have not developed private economy. For instance, Ningbo and Shaoxing in east Zhejiang,which are less than 100 miles from Wenzhou, are dominated by collective industry. These accounts are therefore necessary, but not suflicient, for explaining Wenzhou's development. Another factor must be added: the local cadres' "open-mindedness" and willingness to shelter the local private interest from state interference, as the local policy account has pointed out. It seems that this fifth factor is the key to explaining why Wenzhou was the first area in China to develop a predominant private economy. However, there are three serious problems with this account as it is presented by Chinese scholars. First, in failing to specify what motivates local cadres to be open"Pragmatic 27. Lin Bai et al., The Rise of Wenzkou;Liu Zhenguiand Chen Jianfa, Theoretical al., thinking";Yang Yi, "Fangchulaide he chuanxialaide," in Lin Bai et Investigations. Chen Jianfa, 28. Lin Bai et al., TheRise of Wenzhou,pp. 229-252; Liu Zhenguiand thinking." "Pragmatic. 301.

(11) 302. The China Quarterly minded and pragmatic, it falsely depicts Wenzhou cadres as exceptionally altruistic. Secondly, it fails to specify when the local cadres' open-mindednessand pragmatismbegan, seemingto imply that it was only after the 1978 reform,which is false. Thirdly,in failing to specify why Wenzhou cadres could behave like this under an unforgiving state, it rendersa voluntaristaccount which is hardlyplausible under the currentregime. Altogether,it fails to explain why Wenzhoucadres are more likely to take political risks and to toleratedeviant economic practices than cadres elsewhere in China. Accordingto interviews with Wenzhoupeasants,it appearsthat the local cadres' motives lie in the coincidence of interest between them and peasants in the private sector, rather than in their altruistic orientation. Moreover, their inclination to be open-minded and pragmatic began long before the 1978 reform. It probably began as soon as they came to power in 1949. Finally, it is the legacy of a unique local revolutionaryhistory that has enabled Wenzhou'scadres to be more open-minded and pragmaticunder a repressivestate than cadres elsewhere. These three points, effectively modifying the simple-minded account of local cadres by Chinese scholars, will be discussed later. Before proceeding to these points, local deviation from state policies in the form of political protection of private industry in Wenzhou needs to be furtherelaborated. Local Protectionof PrivateIndustry Very few private factory enterprisesinterviewed in Wenzhou were willing to be identified as "private,"despite the state's passing of the 1988 regulationson private enterprisesin which a private enterprise was officially recognized as a corporate body for the first time.29 Instead, most private factory enterprisesin Wenzhou like to be called either "local collective enterprises" or "partnership enterprises" (hegu-qiye).There appearsto be greaterpsychologicalsecurityin joint ventures because the higher degreeof collectivization provides a kind of "safety in numbers" in volatile Chinese politics. Moreover, a partnershipenterprise,though privatelyowned, is treated as equal to a collective enterprise by the municipal government and therefore enjoys the same favourabletreatment. For instance, a newly-opened privatejoint venture in a poor areaenjoys a tax exemption for the first three years, and its income tax rate is the same as that for collective enterprises,30which is much lower than the offficialrate for private 29. See Renminribao,30 June 1988, p. 3. Aecordingto a Chinese oflieial from a poliey research institute under the State Couneil (1990), the passing of temporary regulationson private enterprisesseems to have no substantialeffeet in inereasingthe entrepreneurs'confidencein state policy or in reducingpoliticaldiscriminationagainst the private sector. The majorityof peasantentrepreneurswouldthereforenot botherto changethe registrationof their enterprisefrom collective to private. 30. Wenzhoushi xiangzhen gongye guanliju, Wenzhoushi xiang lzeszqiyezhengce huibian(Collections of Policieson Wenzhou Rurallndustry)(Wenzhou:Wenzhoushi xiangzhengongye guanliju, 1987), p. 18..

(12) The Private Economy and Local Politics in Wenzhou enterprises. It seems that the local government in Wenzhou is sheltering private industry from political discrimination, and this protective policy serves to promote local development in Wenzhou.3l The local governmentsnot only protect private factory enterprises, but also show support for household industries. For example, about 90 per cent of the peasant households in Liushi township in Leqing county are involved in the household production of low-voltage switches. They use reprocessed copper wire instead of silver as the contact for electricity flow in the switches, but electricalresistance is stronger in copper than in silver, so the life of switches produced in Liushi is rather short. They do not use silver because it is subject to state distributionand not available in the market.The poor quality of low-voltage switches producedin Liushi was exposed in Renmin ribao in 1984. Since then, the township government of Liushi has made several efforts to upgrade the technical skills and equipment of the local industry,and establisheda test station to enforce quality control. Despite all this, in June 1987 a joint order issued by six ministries in the State Council finally decreed that the household enterpriseswere prohibited from producing low-voltage electrical products without a licence from the Mechanical Industry Ministry. Clearly, no single household enterprise qualifies for the production licence. However, this caused no interruption whatsoever in the production of lowvoltage switches among the household enterprises.It is obvious that the cadres of Liushi did not enforce the policy. If it were put into effect it would destroy the entire household industry in the Liushi district. Another example of protection of private industryby local cadresis the business afEliation mentioned above. According to the local peasants, the practice of business aiMliationbegan as early as the 1960s in Yishan district, but its scale expanded in the late 1970s. One case indicates that a build-upof largequantities of unsold reprocessed cotton cloth produced by the local household enterprisesforced local cadres to look the other way when the local collective marketing company licensed peasants with political connections as expediters who would travel long distances to sell the troubled products. According to a Yishan official, the first Party secretaryof the Yishan district appealed to the authority of Cangnan county in 1978 to permit peasant household enterprises,commercial business and long distance transport,without daringto mention the business afliliation long involved in the local economy. In 1981, as state officials were sent down to Yishan to inspect the rise of the household industryand the prosperity of the market economy, they concluded that even if business affiliation resuscitated local commodity production and helped to raise the local income, it had deviated from state policies. Accordingly,the Party secretaryof Yishan district was reprimanded, 31. In fact, anxious about the politically risky capitalist tendency in the local economy, the municipalgovernmentof Wenzhouhas been encouragingjoint ventures ratherthan individually-ownedlarge enterprises.. 303.

(13) 304. The China Quarterly and the practice of business afEliation was prohibited. Without its help the textile industryin Yishan soon became stagnant.Within one and a half months, the Party leaders in Yishan district had to appeal to the municipal authority to restore the experiment in business aiMliation.It took six years for the municipal government to make a decision. In October 1987, after Wenzhou had long been designated by the state as one of the experimental coastal cities, the municipal governmentfinallypromulgateda series of provisionalacts regulating both parties in the practice of business affiliation. At that time, with the acquiescence of each level of local government, it had already been widely practisedeverywherein Wenzhou. It should be noted that althoughbusiness affiliationhas now been approvedby the Wenzhou municipal government,it still lacks the official sanction of the central state. Why are the local cadres in Wenzhou so tolerant of private and household enterprises?One apparentreason, which is alwaysavoided by local cadres and Chinese scholarsin their versions of the Wenzhou story, is that local authorities and cadres themselves benefit, either legally or illegally, from the huge income generated by the private economy. The Benefits to Local Authoritiesand Cadres The rapid growth of private industry and commerce in Wenzhou has enriched local coffers. For instance, the tax revenue generatedby the local industrial and commercial sectors has accounted for more than 90 per cent of total annual revenue for the Wenzhou municipal government in recent years.32 In addition, each year the local governments have received many "voluntarydonations" and locally imposed fees from privateenterprisesfor public utility and infrastructure construction, such as roads and bridges, water and electricity supply, sewage and drainagesystems, and parksand recreationareas. Even the construction of new office buildings of the township and district governments are dependent upon "the goodwill" of the enterprises.In fact, most of the enterprisesI interviewedare burdened with "donations"and various unauthorizedfees imposed by the local governments.Their only function seems to be to reducebureaucratic harassment. The development of the private economy has apparently also brought tremendous personal income for local cadres. For example, 2,000 of the 7,000 new apartmentbuildings in Longgang,a new town constructed entirely with private funds, belong to them.33They also. 32. He Rongfei, The EconomicStructureof Wenzhou,p. 152. 33. Xia Xiaojun, "Wenzhoumoshi yu changzhenhua:dui Wenzhoujizhen fazhande diaocha he sikao" ("The Wenzhou model and urbanization"),Nongounjingji wengao (Articlesof Rural Economy),No. 4, pp. 19-27..

(14) The Private Economy and Local Politics in Wenzhou own one-quarterof the four-storeyapartmentbuildings in Qianku, a near-by commercial town.34These figures suggest that an economically privileged group has emerged among the local cadres. All these facts contradict what cadres told me everywhere in Wenzhou. According to them, the beneficiaries of the reform are peasants, whereas cadres are victims because their salaries are fixed. In fact, I was told, some Wenzhou cadres have taken moonlighting jobs in the private sector to supplement their salaries.A few of them have even left governmentjobs and made their way into the private economy.35Moreover, to increase their income and to improve their morale, the Wenzhou municipal government has permitted the local cadres' spouses and other family members to run private businesses. More often than not, however, the real operatorsbehind the scenes of these businesses are the cadres themselves. The good personal connections they have with the local bureaucracyobviously benefit their private businesses, which otherwise are subjectedto bureaucratic harassment.Not surprisingly,the privatebusinesses run by cadres' families prosper much more easily than those run by ordinary peasants. This explains why so high a percentage of new apartment buildings in the localities are owned by cadres. Another means of making money, more dubious than running a business after office hours, involves the so-called "power share" provided by the local partnershipenterprises. Although partnership enterprises have been nominally treated as collective enterPrisesin Wenzhou, as private businesses they are actually afflicted with a confidence crisis. In fact, private undertakingshave been the main target of attack in many political campaigns since 1980, and the majority of entrepreneursin Wenzhou are fearful that their private businesses and property might be confiscated and they might be denounced once the state changes reform policies.36To reduce the anxiety and fend off bureaucratic harassment, many large private partnershipenterpriseshave developed the "power share."By means of this device, owners of private enterprises give free shares to powerful cadres in exchange for political protection and favours. Since political backing is one of the most important conditions for a private enterprise to survive and succeed in China, it seems safe to guess that most private enterpriseshave offered the "power share"to 34. This figurewas providedby a local cadrewhen I took a tour of Qiankutownship. 35. For instance,a cadreleft his job as a township Partysecretaryin Yongia county, and undertooka business in a commercialorchardinstead. See Lin Bai et al., (eds.), Wenzhou duihualu (The Dialogues in Wenzhou),(Nanning: Guangxi renmin chubanshe),pp. 40-41. 36. This indeed happened in the 1982 campaign "Crackingdown on economic criminals,"and in the 1986 campaign"Againstbourgeoisliberalization."In the 1982 case, eight of the richest peasant entrepreneursin Liushi township were indicted and subsequently seven of them were arrested on the charge of"fraudulent capitalist activities."In the 1986 case, many richentrepreneursof Wenzhoufled as faras Eastern Europe. After so many political campaigns against the private economy, the local peasantentrepreneurs'confidencein state policies has been shaken,despite subsequent reversalsby the state.. 305.

(15) 306. The China Quarterly cadres. When I conducted field researchin Wenzhou, the owner of a large private enterprise insisted on handing me a free stockshare, because my "shareholding" would be considered as a foreign investment, which adds political protection to enterprisesin contemporary China. The vulnerableposition of private industry in a socialist economy and the way private enterprises pursue political support have undoubtedly exacerbated bribery, extortion and other kinds of corruption among local cadres. The chaotic taxation system in Wenzhou provides a good example. One private factory in Liushi township which produces spare parts for radios is burdened by a progressiveincome tax, whereasanotherfactoryin the same township which produces switches for television sets is subjectedto a mild flat tax of one per cent of the productionvalue. This unequaltaxation led the owners of the former factory to suspect that they were being punished for not bribing the local tax office sui5ficiently. It therefore appears that cadres are willing to shelter private industry not because of altIuism, but because this serves their own interests rather well. Either they themselves engage in private industry, or they gain illegal benefits from peasants' private businesses, or both. It seems that it is this coincidence of interestbetween the local cadres and peasants in the private sector which inclines the cadres to toleratelocal deviant practicesand bypassstate policies, and to allow private industry in Wenzhou to take the lead in local development. In other words, there is a conflict between the state's interest in socialism on the one hand and peasants' interest in the private economy on the other. This conflict not only provides local cadres opportunities for illegal gains in law and policy enforcement, but also forces them to stand with peasants in resisting state policies that might harm the local economy. However, conflict of interest between the local authorities and the state has actuallybeen a serious problemacrossChina since 1949, and localism based on the coincidence of interestbetweenlocal cadresand peasants is a common occurrence everywherein rural China. Since cadres at team, brigade and even commune levels are recruited primarily from the grass roots, their interests are tightly intertwined with those of local peasants.37Quite often the local cadres have to adopt a variety of measures to manipulate, deceive and disguise in order to resist state encroachment and thus to protect the local. 37. Michel Oksenberg,"Localleadersin ruralChina, 1962-65: individualattributes, bureaucraticpositions, and political recruitment,"in A. Doak Barnett(ed.), Chinese CommunistPoliticsin Action(Seattle:Universityof WashingtonPress, 1969);Vivienne Shue, The Reach of the State: Sketchesof the ChineseBodyPolitic (Stanford:Stanford University Press, 1988); John P. Burns, Political Participation in Rural China (Berkeley:University of CaliforniaPress, 1988)..

(16) The Private Economy and Local Politics in Wenzhou interest.38Indeed, the ways in which the local cadresof Wenzhou deal with private industry, including joining it, power share, bribery and overlooking local deviation from state policies, is not unique to Wenzhou. Rather, they seem to have become widespread in rural China. For example, the agriculturalresponsibility system, the first step in ruraldecollectivization, began in Anhui province nine months before the state officially sanctioned it.39 If the coincidence of interest between the local cadres and peasants is indeed common in ruralChina, then the question still remainsas to why Wenzhou was the firstplace to be dominated by private industry. The answer lies in the fact that the coincidence of interest between local cadres and peasants has been worked out more thoroughly in Wenzhou than elsewhere. The reasons for this are Wenzhou'searlier beginningand the strongerability to assertlocal interestsin the face of state pressure.These points are now considered.. The Economic History of Wenzhoufrom 1949 to 1978 My research in Wenzhou suggests that the partnership between local cadres and peasants in running local sidelines and petty commodity production began not in 1978, as the local cadres try to insist, but much earlier, when the private economy was under severe state pressure. For instance, the first experiment with private household farming took place in Wenzhou in 1956, a result of strong local resistance to collectivization. This experiment began in the villages of Yongia county, where the land was divided and a production contract was assigned to either productionteams or individual peasanthouseholds, a variant of today's agricultural responsibility system. Household farming,regardedas a setbackto communism, was later denounced as anti-revolutionaryand the cadres who supported it, including the deputy Party secretary of Yongia county were purged in the 1958 Great Leap Forward movement. Nevertheless, peasant household farming was never completely eradicated in Yongia county in the following years. As soon as each political campaign subsided it returned.40This back-and-forth struggle, with peasant household farmingpushed from below and collectivization imposed from above, 38. John P. Burns, "RuralGuangdong's'second economy' 1962-1974," The China Quarterly,No. 88 (December 1981), pp. 629-644; Anita Chan and Jonathan Unger, "Greyand black:the hidden economy of ruralChina,"PacificAffairs(Autumn 1982), pp.452-471; Shue, The Reach of the State. 39. Andrew Watson, "Agriculture looks for 'shoes that fit': the production responsibilitysystem and its implications,"in N. Maxwell and B. McFarlane(eds.), China's ChangedRoad to Development(Oxford:PergamonPress, 1984). 40. From 1966 to 1973, small household farming was found among villages in Yongjia county until the local cadreswho toleratedit were purgedin 1973 and 1976. For details see Lin Bai et al. (eds.), Wenzhoude ganbu(Cadresof Wenzhou),(Nanning: Guangxi renmin chubanshe, 1987), p. 85.. 307.

(17) 308. The China Quarterly meant that the commune system imposed by the state never really took root in Wenzhou.41 Moreover, peasant sidelines, such as spinning and weaving in Yishan district, had remained an important source of income since 1949, despite a series of attacks from the state in the political campaigns of collectivization, the Great Leap For+vardand the Cultural Revolution. In each of these campaigns the work teams organized by the superior authority were sent into the locale to assume the local power, and many local cadres who supported the peasant sidelines and petty commodity productionwere immediately denounced and purged. Despite these purges, peasant sidelines and handicrafts resurfaced after each campaign subsided, and the local cadres took part in them, side by side with the peasants.42In addition, many skilled workers in Rui'an county, capitalizing on the chaotic infighting among factions in the municipality during the Cultural Revolution, stealthily initiated traditionalhandicraftsin knittingand hemp cord manufacturing, and some even built up underground factories producing machine tools and other small commodities for the distant market.43 It is clear that both peasant household farming and petty commodity production in household industrieswere common practicesin Wenzhou most of the time after the 1949 revolution, even in Mao's era. In fact, in the early 1970s, many workersin collective enterprises had already contracted work from their enterprises to produce at home rather than on the shop floor.44The collective enterprises functioned as a subcontractingsystem. In other words,long before the state initiated the current economic reform in 1978, Wenzhou had already quietly practised individual household farming, household industry and private marketing whenever the state turned its attention away. It is this kind of long-termundergrounddevelopment that enabled the private economy of Wenzhou to boom once the path to reform was opened in 1978, and eventually enabled Wenzhou to become the first place in mainland China to embracea predominant private economy. So, one cause of the unique predominanceof the private economy in Wenzhou was its early start. More precisely, the private economy became predominant in Wenzhou first because it was never effec41. Zhou Xiaohan, "A comparisonbetween south Jiangsu and Wenzhou models," p. 5.. 42. Accordingto a Yishan peasant,many Yishan cadresand their families had been engagedin the local textile industryin the past 40 years.Moreover,cadrescould always make more money from their business than peasants because they could get higher prices when they sold their products to the local supply and marketingcompanies because of their position in the local hierarchy. 43. Lin Bai et al., TheRiseof Wenzhou, pp. 32-33. 44. Accordingto the recollectionof a local specializedhouseholdmember,when she worked for a local collective enterprise in Wenzhou city in 1975, she contracted production from the enterpriseand worked at home instead. When political control tightenedlateron, she closed the householdenterpriseand returnedto the shop floorof the collective enterprise..

(18) The Private Economy and Local Politics in Wenzhou tively eradicated there by the socialist state. Moreover, Wenzhou's private economy was able to survive state suppression during the difficult years between 1949 and 1978 because it had a body of local cadres sympathetic to the private economy who were able to marshal a collective resistance to the state's encroachment.Some cadres have had to pay for their sympathy for the private economy with their careers in repeated political purges, but even this did not change the course of local development. It seems that as long as the state does not remove the entire body of local cadres, it will not be able to uproot this deviant local political tradition. Thus the question is how the body of Wenzhou cadres developed their unique capacity for collective resistanceagainst undesired state encroachmentin the face of repeated purges in the past four decades. The RevolutionaryLegacy In the mountainous area of Wenzhou I accidentally came across some historical monuments dedicated to the local communist guerrillaswho fought both the Japanese and Nationalists during the 1930s and 1940s.I was told later that the "liberation"of Wenzhou in 1949 relied mainly on the local guerrillaforces ratherthan on Mao's Red Army, and I wondered whether this unusual local politicomilitary history affected Wenzhou's economic development after 1949. My researchappears to confirm a linkage. Accordingto historical sources, the communists of Wenzhoubegan to organize branches as early as 1924, first at Yongia county.45They drew members primarily from local intellectuals. Because of the difficulty and sometimes impossibility of contacting the Central Authority of the Chinese Communist Party at Shanghai, which was then sufferingsevere suppressionby the Nationalist government,the Wenzhou communists were from the first basically self-guided and self-supplied.Branchessoon spreadfrom Yongia to other counties of Wenzhou, and members began to organize peasant associations and poor peasants'leaguesin villages, and indoctrinatepeasantsto oppose their exploitation by landlords. Eventually, branches in several counties developed their own militia and Red Guards and initiated many sporadicpeasantsuprisingson a local scale, all without a unified leadership or any direction from the Party centre. In 1930 a move was made to consolidate the communist organizations in Wenzhou. The local military forces were incorporatedinto a ThirteenthRed Corps under the command of an officerinvited by the locale.46It continued armed strugglesin Robin Hood fashion, without rigid political programmes,until it collapsed after being defeated in 45. Ye Dabing, Zhenan nongmin baodonghe hongshisanjun(Peasant Uprisingsin South ZheViangand the ThirteenthRed Corps)(Hangzhou: Zhejiang renmin chubanshe, 1982. 46. Ibid.. 309.

(19) 310. The China Quarterly an attempt to seize the seat of Pingyangcounty at the end of the same year. The remaining force then retreatedto the mountainous area of Pingyang county for safety. In 1935, the leader of the communist party in Pingyangproclaimedhimself to be the secretaryof the south and Zhejiang provisional special committee (zhenan-linshi-tewei), appointed many aides,47 all without the acknowledgement of the Party centre which was then experiencing the trauma of the Long March. Also in 1935, a branch-of Mao's Red Army, consisting of less than 500 soldiers, was left behind duringthe Long Marchand reachedthe mountainous border area between Zhejiang and Fujian provinces. The political commissar of this so-called "advance division"48(tingjin-shi)soon proclaimedhimself to be the secretaryof the provisional provincial committee of the border region between Zhejiang and without the acknowledgement Fujian (minzhebian-linshi-shengwei), of the Party centre.49In fact, three communist groups in Zhejiang proclaimed themselves to be the provincial committee at the same time.50After a period of hesitation and reluctance,the self-proclaimed secretaryof the south Zhejiangprovisionalspecial committee submitted to the command of the newcomer. In 1938, after the start of the Sino-Japanese war, the advance division finally established contact with the Party's South-east SubBureau and was ordered to leave Wenzhou to join the New Fourth Army in southern Anhui. The organization and armed force left behind were put under the command of Long Yao, a former member of the advance division, who was now named the secretary of the. 47. Huang Xianhe, "Zhenandiqu renmin baizhe bunao hongqi budao: qi 1930 zhi 1937 nan zhenan de dixiadang he hongun youjidui" ("The Communist Party and guerrilla force in South Zhejiang, 1930-1937"), ZheyEanggeming shiliao xuanji No. 7 ( 1982),pp. 71-88 at p. 87; (Selectionsof theHistoryof theRevolutionin ZheViang, Yang Jin, "Zhenanhongun youjidui he Shanghaidangzuzhilianxi de jingguo"('SThe liaison betweenthe South Zhejiangguerrillasand the CommunistPartyin Shanghai"), Dangshi ziliao congkan(The Journalof Party History,No. 3 (1981), pp. 44-48. 48. The "advance division" was originally the advance guard of the Tenth Red Corps, which had engaged in the guerrillawars on the borderbetween Zhejiangand Jiangxi after the main force of the Red Army left Jiangxi on the Long March. The advance division first came to the mountainousareas in south-westernZhejiangand built up a guerrillabase there before it was defeatedby the Nationalistpublic security forces. It then moved to south Wenzhouon the borderbetween Zhejiangand Fujian, attemptingto build a new base. See Su Yu, "Huiyi zhenan sannian youji zhanzheng" ("Recollecting guerrilla wars in South Zhejiang"), in ZhejiangshengJunqu (ed.), Zhenan Sannian (Three Years in South ZheViang)(Hangzhou: Zhejiang renmin chubanshe, 1984), pp. 1-42. 49. Ibid.p. 17; Ye Fei, ;'Mindongsuqu de chuangian he sannanyouji zhanzheng" ("The establishmentof soviet governmentin East Fujian and the three-yearguerrilla wars"),in Yi nanfangsannianyouji zhanzheng(RecollectingThree-yearGuerrillaWars in the South) (Shanghai:Wenyi chubanshe, 1987), pp. 306-351 at p. 337. 50. Yang Siyi, "Kangrishiqi zhedongdangpianduanhuiyi" ("Scatteredmemoriesof the CommunistPartyin East Zhejiangduringthe Sino-Japanesewar"),in Xinsijun he huazhonggenjudi yianjiu shi Zhejiangfenhui (ed.), Zhedongkangzhanchunqiu(The (Hangzhou:Zhejiangrenmin Memorandaof the Sino-JapaneseWarin East ZheViang) chubanshe, 1986), pp. 9-1 1 at p. 9..

(20) The Private Economy and Local Politics in Wenzhou south Zhejiang special committee.5l In the following years this organizationhad to look after itself duringwar and suppression,and after the provincial committee was destroyed by the Nationalist government in 1942 it once again lost contact with the Party centre.52. During these difficult years the Wenzhou Communist Party under Long Yao, strugglingfor survivalin a mountainousarea,had to adjust to local reality and therefore suspended radical revolutionary programmes.53It did not establish a Soviet government and carry out full-scaleland reform in its occupied area.54Rather,it contented itself with reducingthe heavy rents paid by tenants to landlords,abolishing oppressive taxes and debts owed by peasants and collecting "antiJapanese"levies from landlords.55To increase its availableresources, it even encouraged export of local forest products and helped merchantsto do business in its occupied area. This economic policy, aimed at promoting the local commodity economy, successfully gained the goodwill and confidence of local landed and commercial elites, who in turn supplied communist guerrillaswith much-needed resources, including weapons and ammunition.56 Thus, lacking support from the Party centre and independent of its control, the Wenzhou Communist Party and its guerrilla force developed an alliance with local landlords and business circles during the years before 1949. When the communist victory finally came to Wenzhou in 1949, it did not at first come with Mao's Red Army. With the help of the mutinous Nationalist garrisonand officials, the Wenzhou communist guerrillasunder Long Yao, now called the South Zhejiang Column, took Wenzhou and many other adjacentcounties before the TwentyFirst Corps of Mao's Third Field Army was able to arrive.57This ensured that members of the local party and guerrillaforce enjoyed a. 51. Long Yao, "Huiyi Zhenan youji genjudi de douzheng"("Recollectingguerrilla wars in the occupied areas of South Zhejiang")in Zhenan Sannian (Three Yearsin South ZheViang)(Hanzhou:Zhejiangrenmin chubanshe, 1984), pp. 43-86. 52. Su Yu, "Recollectingguerrillawars in South Zhejiang." 53. It is true that most communist guerrillaforces in south-eastChina at this time adopted a more moderatepolicy toward fiscal and land issues in order to survive and win the support of the locales. See Gregor Benton, "Communistguerrillabases in south-eastChina after the start of the Long March,"in KathleenHartfordand Steven M. Goldstein (eds.), Single Sparks:China'sRuralRevolutions(New York:M.E. Sharpe, Inc., 1989), pp. 62-91. 54. Only a small scale of land redistributionwas implementedearlierby the advance division in the remote border area between Zhejiang and Fujian. See Long Yao, "Recollectingguerrillawars in the occupied areas." 5S. Long Yao, "Recollectingguerrillawars in the occupied areas." 56. Su Yu, "Recollectingguerrillawars in South Zhejiang." 57. Zhang Ze, "Wenzhou chuxian gaikuang"("The early fall of Wenzhou to the communists"),ZheViangyuekan, Vol. 6, No. 1 (1969), pp. 28-29.. 311.

(21) 312. The China Quarterly greatershare of power in the new local authoritythan they might have otherwise.58. The historyof the Wenzhou CommunistPartyand its militaryforce thus distinguish it from other local partiesin severalways. The crucial distinction was that it was initiated by local cadresand was built from the bottom up, without direction and help from the Party centre. For most of the time before 1949 it did not even maintain constant contact with the Party centre. It thereforeenjoyed a very long history of independence and autonomy. In contrast, the local organizations and guerrillaforces in the communist strongholdsof north China had come under the rigid control of the Party centre since its arrival at Yenan in 1935 after the Long March.59Although many other local Communist Party organizations in south China also enjoyed a long history of independence and autonomy before 1949, they rarely had the chance to "liberate" their locales by themselves; and to be "liberated" by Mao's Red Army from the north meant that most important positions in the new communist local authority would be taken by Red Army veterans from outside the area. This was the case in Guangdong,where local communist guerrillashad long engagedin an independent armed struggle, but most of the local powerful political positions have been filled by outsiders from the north ever since liberation by the Red Army in 1949.6? With this understanding,a tentative explanation of the events in Wenzhou arises. In the years following liberation in 1949, the leading positions in Wenzhou's local authority would tend to be taken by native cadres who had joined the local guerrillasbefore 1949.61Since they are more likely than non-natives to have links throughrelatives, friends, neighboursand other local social ties, they are thereforemore vulnerable to social pressurein conducting their official duties. Also, they themselves are more likely to join the local private economy if the opportunity arises. Thus Wenzhou's local authority, in which native cadres dominate more than in other areas, is more likely than other local authorities to take into account local opinions and 58. Historicalresourcesshow that a conflictover the distributionof powerin the new local authoritytook place between the Wenzhou Communist Party and the TwentyFirst Corps, which arrived later, straightafter the "liberation"of Wenzhou in 1949. Nevertheless, many leading positions in the local authority were taken by the local Partymembers.For instance,both the firstPartysecretaryand the mayorof municipal Wenzhou,Long Yao and Hu Jingxian,were leadersof the local guerrillaforce. 59. Mark Selden, The Yenan Way in RevolutionaryChina (Cambridge, Mass.: HarvardUniversity Press, 1972). 60. Ezra F. Vogel, CantonunderCommunism:Programsand Politics in a Provincial Capital, 1949-1968 (Cambridge,Mass.: HarvardUniversity Press, 1969). 61. The native cadreshere refer to those who have Wenzhouoriginsand those who came from the adjacent districts or provinces but had joined the Wenzhou guerrilla force before 1949. For instance,the outsiderswho came with the advancedivision from Jiangxi province had stayed and workedwith the Wenzhouguerrillaforce since 1937. The common experience shared by Wenzhou natives and their Jiangxi comrades in their long-termstruggleagainstboth Japaneseand Nationalisttroopshad enhancedthe outsiders' localization. Those outsiders are therefore loosely regarded as natives because their interest was deeply associatedwith that of the local people..

(22) The Private Economy and Local Politics in Wenzhou interests, and the coincidence of interest between the local cadresand peasants is more deeply reinforcedthan it is elsewherein China. If the local interest in the private sector contradicts state policy, as has so often happened since 1949, Wenzhou's local authority is more likely to deviate from state policy in order to protect both local and its own economic interests. Furthermore,as the local Party of Wenzhou not only toleratedbut also encouraged commercial activities during its guerrillayears, it is probablethat after they took power the cadres were reluctantto carry out those measures of the state's radical policy which appeared to threaten the local economy. At the same time, the solidarity developed between comrades in an isolated and independentmilitary force duringthe guerrillaperiod obviously helped to unite local cadres in collective resistanceto state encroachment.This is why Wenzhou's cadres have been more "open-minded"and more willing to take risks in the past four decades in caring for local economic interests. This is also why repeated purges of leading local cadres before 1978 for failing to uproot capitalism did not prevent their successors from committing the same offence. This is not a problem of a few individual cadres, but one of local political tradition. Unless the state disposes of the entire body of local cadres,there seems to be no means of changing Wenzhou's course of development. It appears therefore that it is this revolutionarylegacy that has enabled the coincidence of interest between cadres and peasants to persist, in combination with such factors as the local handicrafttradition, geographicalisolation, the lack of arable land and state investment, and the 1978 reform policy, which made Wenzhou the pioneer of private economy before 1978, and eventually the first place in mainland China to be dominated by private industry.62 The Sporadic TotalitarianState: A TheoreticalRemark In studies of existing socialism, a socialist state has long been characterizedby the predominanceof the state bureaucracyover both the appropriation and distribution of economic surplus, as well as over the society as a whole.63Many scholarswould not hesitate to call this a totalitarian state. In this kind of conceptualizationthe socialist state is seen as almost omnipresent, and more often than not as suffocating the society under its iron-fisted control. The problem is 62. My explanation of the success of Wenzhou was confirmed in May 1990 by a Chineseofficialat a policy researchinstitute underthe State Council,who said that the cadres of Wenzhou have since 1949 been very proud of their capacity to resist the centralgovernment.Their couragein standingup againstthe central state is based on their ever-rememberedglorious history of the 1949 "self-liberation." 63. WlodzimierzBrus,Socialist Ownershipand Political System (London:Routledge & Kegan Paul, 1975); Eric O. Wright,"Capitalism'sfutures,"SocialistReview,No. 68 (1983), pp. 77- 126; Rudolf Bahro, TheAlternativein EasternEurope(London:Verso, 1984); Tsou Tang, The Cultural Revolution and Post-Mao Reforms:A Historical Perspective(Chicago:The University of Chicago Press, 1986).. 313.

(23) 314. The China Quarterly that this cannot explain those phenomena that deviate significantly from apparentstate policy, such as what has occurred in Wenzhou. In contrast to the totalitarianapproach,a new idea has emerged in recent studies of socialist society in which the socialist state is portrayed as a functionally fragmentedbureaucracywhich contains tensions, bargainingand conflicts of interestbetween differentsectors and between differentlevels.64With this new approach,many scholars of China see an autonomous process in the lower echelons of state bureaucracy, in which state enterprises, local governments at the team, brigade and commune levels, and militia organizations in villages pursue their own interests at the expense of the state.65Some even see this socialist state at the local level as easily penetratedand influenced by society through patron-client networks or other informal relationships.66An extreme view is to regard the autonomous locale as existing in a form of honeycomb isolation, a historical legacy which characterizedthe relationshipbetween imperial central authority and the peasant periphery and which has continued to haunt rural China since the socialist transformation.67To a certain extent this new approach seems more promising for explaining the development of the private economy in Wenzhou since 1978. After all, it can certainly be attributed to the differences and conflicts of interest between the locality and the state. However this approachis not without problems. It would be difficult to explain, for example, why Wenzhou's private economy failed to prosperbefore 1978, and why other areas with similar economic backgroundshave failed to develop a predominant private economy. It seems apparent that a private economy failed to develop in Wenzhou before 1978, and in other areas even today, exactly because there is a totalitarian state nslstlng on socla lsm. Combining the strength of these two approaches leads to the .. .. .. .. 64. Ferenc Feher, Agnes Heller and Gyorgy Markus,DictatorshipOverNeeds:An Analysisof SovietSocieties(Oxford:Basil Blackwell,1983);Alec Nove, TheEconomics of Feasible Socialism (London:Allen & Unwin, 1985);KennethLieberthaland Michel Oksenberg,Policy Making in China: Leaders, Structures,and Processes(Princeton: PrincetonUniversity Press, 1988). 65. Andrew G. Walder, CommunistNeo-Traditionalism:Work and Authority in ChineseIndustry(Berkeley:Universityof CaliforniaPress,1986); AnitaChan,Richard Madsen and JonathanUnger, Chen Village(Berkeley:University of CaliforniaPress, 1984); Victor Nee, "Betweencenter and locality:state militia, and village," in Victor Nee and David Mozingo (eds.), State and Society in ContemporaryChina (Ithaca: CornellUniversity Press, 1983), pp. 223-243. 66. Jean Oi, "Communismand clientelism:ruralpolitics in China," WorldPolitics, Vol. XXVLL, No. 2 (January1986), pp. 238-266; Victor Nee, "Peasantentrepreneurship and the politics of regulationin China," in Victor Nee and David Stark (eds.), Remakingthe EconomicInstitutionsof SociaZism:Chinaand EasternEurope(Stanford: StanfordUniversity Press, 1989), pp. 169-207. 67. Shue, The Reach of the State. The tendency toward cellularizationof Chinese villages after the socialist transformationwas earlier discussed by William L. Parish and Martin King Whyte in Villageand Family in ContemporaryChina(Chicago:The University of ChicagoPress, 1978). But Shue'scharacterizationof the local autonomy of the peasantperipheryin socialist China is much moreextremethan what Parishand Whyte had described..

(24) The Private Economy and Local Politics in Wenzhou suggestionthat a socialist state such as China should be characterized as a sporadic totalitarian state with strong despotic power but weak infrastructuralpower.68With its strong despotic power, what the Chinese communist state has been able to carry out in the past 40 years are radical socio-economic transformationand the suppression of any group of people daring to challenge its power. The 1989 crackdown on the student movement for democracy in Beijing is a vivid example of the despotic power exercised by the state. On the other hand, the infrastructuralpower, the organizationalcapacity of the Chinese state, is so weak that it has not been able to sustain its radicaltransformationpolicy in the countrysideon a day-to-daybasis. The most revealing evidence of this paradox is that the Chinese state always relies on temporary work teams brought in from outside to carry out the required radical changes in a target locale during political campaigns.69Land reform, collectivization and many other political purges were accomplished in this way. In fact, even the political purges within the central state ministries, such as those after the Tiananmen Square massacre, have to be carried out by work teams from outside.70The state is simply incapable of forcing the native cadres to carry out in their own villages or work units a policy which is deemed too radicalor too bloody by the locale. The job has to be done by outsiders. However, a political campaign cannot last for ever. After radical changes or purges, the temporary task force has to leave so that its members can return to the units in which they regularlywork. Then the daily routine begins to returnto the victim village or unit, people graduallyrecover from the shock, and the radical policy imposed by the work team is gradually compromised. The magnitude of compromise varies from case to case. How far it can go depends, among other things, on the coherence and solidarity of the village or unit. If the compromise goes too far and the denounced old practice returns, another work team may be broughtin to repairthe damage. Thus the circle has repeated itself again and again in the past 40 years. The fragmentation and conflict of interest within the state bureaucracy always allow a certain degree of latitude from the totalitariancontrol envisaged by the radical top leaders. In this sense, although the Chinese state is indeed totalitarian, its totalitarian control is only sporadically fulfilled because of its weak infrastructuralpower. It seems that this concept of a sporadictotalitarianstate can best explain the vicissitudes of the private economy in Wenzhou. We have seen the ebb and flow of the private economy in Wenzhou before 1978. During the high tide of each of the state's political 68. Both concepts are derived from Michael Mann'sanalysisof state power. See his "The autonomouspower of the state:its origins, mechanismsand results,h'Archivesof EuropeanSociology,No. xxv (1984), pp. 185-213. 69. Jean Oi, State and Peasants in ContemporaryChina: The Political Economy of VillageGovernment(Berkeley:University of CaliforniaPress, 1989). 70. WorldJournal,29 December 1989, p. 1.. 315.

(25) 316. The China Quarterly campaigns the work teams organized by the higher authorities were sent in to take over local powerand to carryout attackson the peasant sidelines and private handicrafts.7lMany local cadres who supported the local private economy were denounced and purged. No one seemed able to resist the radical policy imposed by the work team. However, each time, after the campaignsubsided and the work team left, the old practice of private business gradually crept in again. Sooner or later, this privatization process became strong enough to provoke another attack from the state. This cyclical process shows that the strong despotic power of the state exercised duringa political campaign can indeed suppress social resistance to imposed radical socio-economic changes. But the state's weak organizationalcapacity prevents it from resistingcompromiseafterthe campaigns.It thus has to repeat the cycle of political campaigns in order to maintain the achievements of socialism. It is because of this sporadic fulfilmentof the state's totalitariancontrol that the private economy failed to take off in Wenzhou before 1978. However, the unique revolutionary history of Wenzhou cadres apparently created an unusually strong coherence and solidarity that enabled them to return to their own ways after each political campaign subsided, and therefore to allow private undertakings to re-emerge in Wenzhou when they were shunned in other places. Although the Wenzhou experience is unique in China, its causal explanation can, to a certain extent, be applied to the development of private economies elsewhere. The economic reform across rural China is generally initiated from below, originating from the coincidence of interest between the cadres and peasants. But cadres elsewhere,without the solidarityenjoyed by the Wenzhou cadresthat is a legacy of their revolutionary past, are less able to resist the undesirable encroachment of the sporadic totalitarian state. The development of a private economy elsewhere therefore occurs much more weakly and much later. Yet the basic dynamic is always there, waiting for an opportunityto materialize. In this sense, the sporadic totalitarian state in China, despite its iron-fistedcontrol over society, allows a piece of hope for reform from below-the forging of an alliance between the local government and peasants in the private sector to press for the realization of local interests as a whole.. 71. Lin Bai. et al., Cadresof Wenzhou, p. 51..

(26)