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In 2004, when Stanford sociologist Xueguang Zhou deliberated on his next research project, he realized he had grown out of touch with China as radical reforms were enacted and massive economic growth transformed the nation. So he immersed himself in fieldwork in a northern Chinese rural township to see the changes firsthand.

That fieldwork led Zhou to delve into the workings of China’s massive bureaucracy in an attempt to answer the question: How is China governed? The empirically-informed theoretical framework Zhou developed to address this question is the subject of his new book, The Logic of Governance in China: An Organizational Approach (Cambridge University Press). We spoke with Zhou, the Kwoh-Ting Li Professor in Economic Development, a senior fellow at the Freeman Spogli Institute for International Studies, and APARC faculty, about the book and some of the insights it offers into the institutions and mechanisms in the governance of China. Watch the conversation:

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How does policy formulated in Beijing translate to and get executed at local levels? The problem of how to govern China from a centralized seat of power has been, as Zhou says, “a fundamental tension” for thousands of years. Beijing tends to move “decision rights and resources” to the center, although these are exactly what is needed for effective governance at the local level.

Through his years of fieldwork, Zhou was able to develop a “bottom-up kind of approach to understanding how China has been governed by macro policies [...]  implemented through local bureaucrats.” This approach, he says, is largely missing from studies of contemporary Chinese society, which tend to focus on Beijing’s top-down decision-making. Zhou’s framework explains how — given the fundamental tension between Beijing’s “all-encompassing role” and local governance — domestic policy gets effectively carried out at the municipal or even village levels.

A Paved Road to Every Village

One phenomenon through which Zhou looks at how national policy translates to the local level is the case of the “Paved Road to Every Village” (PREV) project. When this project was launched by the provincial government in 2004, there were ample large highways in the region, but villagers were still forced to traverse rutted dirt roads that were prone to flooding in the rainy season, a clear obstacle to growing the agricultural economy. 

 

The growth and energy of the Chinese economy have not been a result of direct government activity, but rather of government use of private entrepreneurs to participate in public projects, financing, and development.
Xueguang Zhou

Project funding, however, was complicated. Beijing was supplying 70,000 renminbi (RMB) per kilometer of road, but the actual cost was RMB 240,000/km, so villages had to come up with the rest (for context, the average per capita annual income in the region was 3,000 RMB). Facing such a deficit, many villages simply refused to take part in PREV. Zhou’s fascinating case study looks at two village leaders — one entrepreneurial, one reluctant — who decided to take up the challenge.

To explain how projects like this get funded in China, Zhou expands on Hungarian economist Janos Kornai’s concept of “soft budget constraints.” Kornai saw that in a socialist economy, state ownership of enterprise meant that factories or companies experiencing financial difficulties had to be rescued by the state. As Zhou explains, the “concept is upward, demanding new resources” from the state. In the Chinese context, however, local authorities move downward to, for example, the companies in their region. That’s why Zhou calls the phenomenon inverted soft budget constraints: at the local level, officials attempt to enlist private enterprises to underwrite government projects. Why would they be willing to do that? Businesses understand that if they do fund such projects, then the officials will later provide “privileged access” to the resources for other government projects.

This reliance on local enterprises to accomplish national programs illustrates another important lesson for Zhou, who says that the growth and energy of the Chinese economy have not been a result of direct government activity, but rather the government has made use of “private entrepreneurs [...] to participate in this kind of public project, financing, and development.”

This process, however, does not always work as expected. Officials can end up compelled to rely on informal social ties to purchase required items like cement, sand, and equipment on credit, which can incur huge collective debts that the village is unable to repay. In the end, these debts can do great harm to the financial viability of small villages. This sort of ad hoc funding is problematic, Zhou observes, because both entrepreneurs and villagers “want to live in a more certain environment,” where necessary projects are well-financed, rather than resorting to a desperate attempt to gather resources by any means possible.

The Distribution of Authority in the Bureaucratic State

In another case study, one that looks at environmental regulation, a doctoral student Zhou had been directing was embedded in a municipal environmental protection bureau during the implementation of a five-year plan by the central government’s Ministry of Environmental Protection (MEP) to control sulfur dioxide and chemical oxygen demand (an indicator of water pollution level). 

Such plans translate to thousands of projects nationwide, making the task load impossibly large for the central government to handle alone. To explain how authority rights are distributed among levels of government Zhou developed a “control rights” theory. In this case, that means the central government (principal) would retain the right to set pollution goals, the provincial bureau (supervisor) might retain the right of inspection, while the local governments (agents) might have the right to performance appraisal and incentive provision. Zhou holds that these control rights are distributed according to the different modes of Chinese governance, ranging from “tightly controlled,” where the central government retains all rights, to a federalism mode, where all rights are given away to the supervisor level.

Bargaining and Collusion

Zhou uses this and ancillary models to understand bureaucratic coping behaviors. One of those is bargaining. He offers examples of how municipal or county officials reacted to poor pollution inspections by bargaining with the provincial levels and redirecting blame to others, often successfully changing report results in their favor. 

Another strategy is collusion, which he argues “has become an informal but highly institutionalized practice,” one that is “common knowledge.” This was witnessed, for example, during provincial family-planning inspections. To prevent possible fraud or manipulation of data, provincial inspectors would have teams conduct unannounced “sudden attack” inspections. But local officials used “guerrilla tactics” to surveil and disrupt the provincial team’s efforts. Upon discovering that a provincial inspection team has arrived, local officials might record the team’s license plate numbers and share those with other officials elsewhere, and then begin shadowing them, providing mobile phone updates on their routes and possible next destinations.

Other collusive strategies might include the manipulation of data, or even ranking counties with good performance at the bottom of a list so that they are more likely to be the ones inspected, with the result being a glowing report

Zhou’s goal is not to expose these behaviors but to understand them. If we look closely at apparently contradictory bureaucratic patterns and cases, he says, then “we can theorize about the rationales behind why they behave this way, and under different circumstances, they behave differently.”

China’s zero-COVID policy is an example of campaign-style mobilization, a political instrument that Beijing has routinely deployed to achieve policy objectives and to reassert control at the local level.
Xueguang Zhou

Protest in the Chinese Context

In the last part of his book, Zhou looks at how individuals and social groups respond to authoritarian rule. How can large-scale collective action arise in China, where organizing outside of state-sponsored collective actions is forbidden? Zhou answers that the state — by imposing similar conditions across the country and reducing the majority of Chinese citizens to the same level — fosters the cultivation of similar grievances. At some point, this erupts into open protests, or alternatively, what Zhou calls “collective inaction,” like noncompliance with official campaigns. 

The recent protests in China against COVID measures are a perfect example of this phenomenon. After years under the strict zero-COVID policy, masses of Chinese citizens have similar grievances, leading to open protests. Zhou observes that “China’s zero-COVID policy is an example of campaign-style mobilization, a political instrument that Beijing has routinely deployed to achieve policy objectives and to reassert control at the local level.” But with this approach, there is a danger that local officials can become overzealous. In the case of the COVID pandemic, officials have been highly motivated to avoid responsibility for outbreaks.

By revealing the logic behind China’s governance, my book was probably a threat to China’s charismatic leaders, and also to the Leninist party, the very foundation of that party governance.
Xueguang Zhou

A Threat to China’s Charismatic Leaders

Another idea in Zhou’s book is that of charismatic leadership, which he asserts is “essential to the legitimacy of the Chinese state.” The Chinese Communist Party must continue to persuade citizens that they must “put all [their] power into the hands of one person or one ruling party.” As the deification of Xi Jinping in recent years shows, this is accomplished by depicting the leader and party as all-knowing and possessing “a mighty power to do all the right things.”

​​"Every bureaucracy seeks to increase the superiority of the professionally informed by keeping their knowledge and intentions secret," political economist and sociologist Max Weber wrote in his treatise Economy and Society. The 'official secret' is the source of power and the specific invention of bureaucracy, he said, “and nothing is so fanatically defended by the bureaucracy as this attitude.”

Zhou’s empirically-informed findings and unified theory, however, shed light precisely on the secretive workings of the Chinese bureaucracy. This may explain why the original Chinese version of Zhou’s book, published in 2017, was “unshelved” after its initial print run, a euphemism for withdrawing a book from circulation and essentially making it disappear. When asked what he thought was the reason for the book’s disappearance from the Chinese market, Zhou invokes Weber’s idea of disenchantment, and suggests that by revealing the logic behind China’s governance, his book was “probably a threat to China’s charismatic leaders, and also to the Leninist party, the very foundation of that party governance.”

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In a new book, Stanford sociologist and APARC faculty Xueguang Zhou offers a unified theoretical framework to explain how China's centralized political system maintains governance and how this process produces obstacles to professionalism, bureaucratic rationalism, and the rule of law.

Shorenstein APARC

Encina Hall E301

Stanford University

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Arifueya (Arfiya) Eri joins the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) as Visiting Scholar for the 2023 calendar year. Eri currently serves as Director and Senior Advisor of the Reform Institute (Kaikaku Ken) in Tokyo, Japan. She will be conducting research with Professor Kiyoteru Tsutsui on human rights, nationalism, and identity in Japan and the broader Asia-Pacific.

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Visiting Scholar at APARC, 2022-23
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Chirantan Chatterjee is an applied microeconomist and a Reader in the Economics of Innovation at the University of Sussex. He is also a Visiting Fellow at the Hoover Institution, Stanford University, and Visiting Faculty, IIM Ahmedabad, India. His research interests are in the economics of innovation, pharmaceutical economics, and global health. He has published in top peer-reviewed journals like Management Science, RAND Journal of Economics, Journal of Development Economics, Journal of Health Economics, Research Policy, Production and Operations Management, Journal of Business Ethics, Journal of Environmental Economics & Management and Social Science & Medicine among others. His new co-edited book on Covid-19 and Grand Challenges for Health, Innovation and Economy is forthcoming in 2023 with World Scientific. Chatterjee's research has in the past been supported by the NSF during his dissertation work at Carnegie Mellon University from where he obtained his PhD in 2011. His current research is supported by the Wellcome Trust India Alliance & Johns Hopkins Alliance for a Healthy World. Chatterjee has also consulted for the United Nations, World Bank, and the World Health Organization on Covid-19, Universal Health Coverage, and Incentives for Medical Innovation. View more on his personal website at www.chirantanchatterjee.com.

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This is a chapter from the volume Economies, Institutions and Territories: Dissecting Nexuses in a Changing World, edited ByLuca Storti, Giulia Urso, and Neil Reid (Routledge, 2022).


Historically, local elites play a central role in governance in traditional Chinese society. This social stratum has been conspicuously absent in the People’s Republic of China since 1949. This chapter revisits and examines the role of local elites in China’s governance and economic development. Conceptually, the authors argue that stable bureaucrats in China’s local governments who stay in a locality in their career play the role of local elites, with a double identity as state agents and as representatives of local interests. Empirically, they examine patterns of “movers” and “stayers” in bureaucratic mobility in over 100 counties (districts) in Jiangsu Province and identify the location and distribution of those local officials as local elites in administrative jurisdictions. On this basis, they examine the effect of local elites on economic development.

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Chapter in the volume Economies, Institutions and Territories: Dissecting Nexuses in a Changing World.

 

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Ling Zhu
Xueguang Zhou
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Routledge
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This event is co-sponsored by the German Historical Institute, Pacific Office Berkeley and the ZEIT-Stiftung Ebelin und Gerd Bucerius. 

After the founding of the People’s Republic of China, the Chinese Communist Party (CCP) faced a major predicament. Since the new leadership did not allow a free exchange of opinions, the problem was how to obtain reliable information and prevent the circulation of rumors and “fake news.” To deal with this “dictator’s dilemma,” the CCP developed a two-pronged approach. Besides public news items that catered to the mobilizational aspects of party policies, it established secret feedback channels, the so-called neican, or internal reference, bulletins. These were strictly tasked with separating facts from opinion to provide the leadership with an objective account of developments in China and abroad. Over time, a distinct system for the controlled circulation of intelligence, an “information order,” took shape. In this talk, Leese will outline some general features of this information order and comment on whether it was able to circumvent the problem of information bias in authoritarian systems.

Speaker

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Daniel Leese is professor of Chinese history and politics at the University of Freiburg, Germany. He is, among others, the author of Mao cult. Rhetoric and Ritual during China’s Cultural Revolution (CUP 2011) and Mao’s Long Shadow: How China dealt with its Past (in German), which won the ICAS Best Book Award and was shortlisted for the German Non-Fiction Award. He currently works on a new project that traces what the party leadership knew about domestic and international affairs through secret communication channels.

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Jude Blanchette holds the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS). Previously, he was engagement director at The Conference Board’s China Center for Economics and Business in Beijing, where he researched China’s political environment with a focus on the workings of the Communist Party of China and its impact on foreign companies and investors. Prior to working at The Conference Board, Blanchette was the assistant director of the 21st Century China Center at the University of California, San Diego. 

 

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Panel Discussions
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CP_Nov2_Bill Kirby

America’s preeminence in higher education is relatively new, and there is no reason to assume that U.S. schools will continue to lead the world a century from now. Will China challenge its position in the twenty-first? The modern university was born in Germany. In the twentieth century, the United States leapfrogged Germany to become the global leader in higher education. Today, American institutions dominate nearly every major ranking of global universities. However, America’s supremacy in higher education is under great stress, particularly at its public universities. At the same time Chinese universities are on the ascent. Thirty years ago, Chinese institutions were reopening after the catastrophe of the Cultural Revolution; today they are some of the most innovative educational centers in the world. Will China threaten American primacy?

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The book is available for purchase here

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William C. Kirby is T. M. Chang Professor of China Studies at Harvard University and Spangler Family Professor of Business Administration at Harvard Business School. He is a University Distinguished Service Professor. Professor Kirby serves as Chairman of the Harvard China Fund and Faculty Chair of the Harvard Center Shanghai. At Harvard he has served as Director of the Fairbank Center for Chinese Studies, Chairman of the History Department, and Dean of the Faculty of Arts and Sciences. His current projects include case studies of trend-setting Chinese businesses and a comparative study of higher education in China, Europe, and the United States. His recent books include Can China Lead? (Harvard Business Review Press) and China and Europe on the New Silk Road (Oxford University Press). His latest book, Empires of Ideas: Creating Modern Universities from Germany to America to China (Harvard University Press), is now available.

Discussant

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Andrew G. Walder
Andrew G. Walder is the Denise O'Leary and Kent Thiry Professor at Stanford University, where he is also a senior fellow in the Freeman Spogli Institute for International Studies. Previously, he served as chair of the Department of Sociology, and as director of the Walter H. Shorenstein Asia-Pacific Research Center and of the Division of International, Comparative and Area Studies in the School of Humanities and Sciences.

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