Views of Economic Reform

Foreign-sector managers' views about economic reform in important ways are independent from the dominant ideology and policy of the reformist state. Their views are more market-oriented—and they favor change that goes farther—than the policies of the early and mid-1990s. There is some regional variance; managers working in the SEZs of Guangdong Province and in Hong Kong are more reformist than those working in other areas. But managers' views do not range across a wide spectrum. Attitudes toward the need for more extensive economic reform than what had occurred as of the first half of the 1990s ranged from mildly to vehemently in favor of far-reaching marketization of the economy.^[51]

Foreign-sector managers see a need for broad changes in the economy, the most crucial of which are the introduction of significantly more

[49] See Siklar (1976); Becker (1983). Nationalist sentiments are likely to intensify as this elite develops and defines itself more clearly.

[50] Payne (1994), in one of the few studies on the ideology of members of the business elite in developing countries, finds that in Brazil, a large subset of industrialists supported democratization of the regime in the 1980s.

[51] See appendix 2 for a description of the interviews on which this analysis is based. Some reformers in the central government, and in certain localities—particularly in Guangdong and Fujian—undoubtedly hold views similar to those of foreign-sector managers. Managers' views are measured against policy that actually was in force in the early 1990s.

market forces into the Chinese economy than existed in the first half of the 1990s. They desire much greater competition—competition among enterprises, among people, and with other countries.^[52] While acknowledging that some competition has been fostered by the reforms, they believe it should be much more extensive. They favor vastly greater enterprise autonomy in the state sector. Significantly, in light of what we will see is their extensive reliance upon clientelism, they claim they would prefer less dependence upon personal "relationships" in doing business. The pace of these changes should be orderly, but swift. Some managers also emphasize the need to change the way people think, saying that updating "software" (ideology, behavior, etc.) is more crucial for producing lasting change than updating hardware (technology and equipment).

Foreign-sector managers interviewed in 1991 made few direct calls for private ownership; they tended to frame their views about the need for change in terms of increased marketization rather than the private ownership of capitalism. Even these opinions, however, were somewhat vague. For example, one JV manager in Beijing specified that socialist ownership should remain dominant in China, but when asked to identify a model for change suggested what he termed the "market socialism" of (capitalist) West Germany! By 1995, foreign-sector managers had become more committed to privatization, but were also more sophisticated about its dangers. Many argued strongly that privatization of enterprises was not only good but necessary for China if economic development were to continue. They worried about the drag placed on the economy by inefficient state-owned enterprises. At the same time, they believed that privatization should occur slowly and—in a fashion typical of post-1949 policy-making in China—should be allowed to happen in practice before being announced as national policy. To announce such a change would raise the opposition of conservatives in the Party and of local officials who would bear the brunt of the impact of increased

[52] Foreign-sector managers hold this belief in extensive competition, as well as in the value of foreign ties, in common with Shanghai's economic intellectuals writing in the 1980s. (Many of these writers had links to the reformers in the Party-state or were themselves "state intellectuals," and yet most of their ideas were more radical than those adopted by Party reformers.) See Edmond Lee (1991). Foreign-sector managers, in some respects, were more radical than the Shanghai intellectuals in that they cited as models for change the countries of Western Europe or the U.S., whereas the intellectuals often cited the hybrid market socialist systems of Hungary and Yugoslavia. (Both groups also sometimes looked to Taiwan and the other "dragons" of East Asia for models.)

unemployment. More importantly, to move too rapidly toward privatization would provoke social unrest. On this point the 1995 interviewees were nearly unanimous: a "Soviet-style" program of rapid privatization would prove disastrous. A safety net of social security would need to be in place before such a change should be contemplated.^[53]

Foreign-sector managers are more specific about reforms they wish to see applied to the foreign sector itself. They feel that the "open" policy in general should be expanded as much as possible. When speculating about changes that should be made at a high level of policy, many—especially those working in JVs—think foreign businesses should be allowed to sell more of what they produce in the domestic Chinese market rather than being forced to export. They often link this view to their more general advocacy of competition. The suggestion for increased domestic sales is also consistent with the desire of many foreign investors.^[54] Managers in 1991 also complained about the related difficulty in gaining access to foreign exchange; they believed that the Chinese yuan should be freely convertible. Those interviewed in 1995 approved of the rapid (if controlled) steps the government had taken in recent years toward convertibility, not only because these steps were introducing another market element to China, but also because they ended the need for foreign-backed enterprises to balance their foreign exchange accounts, thus freeing them from the need to export.^[55] Managers further desire liberalized import- and export-licensing requirements and the ability to make direct contacts with suppliers/end-users rather than being forced to go through foreign trade corporations at the ministerial level.^[56]

Although foreign-sector managers believe that broad reforms such as domestic sales and currency convertibility are important, their most passionate complaints concern narrow problems they face when conduct-

[53] It was striking how frequently fears of social unrest by workers and immigrants to cities were expressed by members of the business elite.

[54] Most foreign investors prefer domestic sales rather than exports so that they can crack the untapped market in China, and can avoid undercutting their exports from other bases in Asia. See Pearson (1991), pp. 31-34.

[55] During the first half of the 1990s the government devalued the yuan to close to the point where most economists believed it would fall under a freely convertible regime. Nonetheless, foreign exchange balancing requirements for foreign enterprises were not lifted.

[56] Although there were some moves to reduce the role of foreign trade corporations in the mid-1980s, their role was revived in the late 1980s and early 1990s. Interviewees were reacting to this revival in 1991.

ing day-to-day business. Many managers want the Chinese government to issue exit visas more easily so they can travel freely on business; they miss important business opportunities abroad because it routinely takes several months for a visa to be issued. Other widespread complaints, particularly among RO managers, concern personnel issues. Foreign-sector managers in ROs resent that they must hire employees—and be hired themselves—through FESCO, and they resent administrative barriers to free hiring (even though these barriers are much lower than in the state sector).

The most radically reformist attitude toward economic reform concerns what foreign-sector managers see in the international economy that they do not want China to adopt. For the most part, managers see virtually nothing in the operation of the world market that they would reject as inappropriate for China. One mentioned that not all Western management methods are appropriate to China at this time; she pointed out that economic forecasting is not much use, for example, because Chinese managers cannot obtain the data necessary to carry it out. Only a small minority of managers believe that certain behaviors, goods, and values they perceive as "foreign" to China (such as drugs, lax sexual norms, and prostitution) should not be allowed in China. Interestingly, this view was voiced with greatest frequency among managers working in Guangzhou and the SEZs, where such behaviors are apparently more widespread. But these characteristics are not central to, or even necessarily related to, the operation of market economies. In general, then, foreign-sector managers place virtually no limits on foreign participation in the Chinese economy.

Two further points about foreign-sector managers' views of economic reform should be noted. First, two managers, both of whom do substantial business through the government, recognized that greater reliance on markets could hurt their businesses, for it would force them to find new marketing and supply channels and would prevent them from drawing on established connections in the planned economy. Yet these managers nonetheless were highly supportive of further marketization. This suggests that more than narrow self-interest can underlie the desire for reforms. Second, when asked whether their views are shared by other managers in the foreign sector, most interviewees responded positively. Many believe, moreover, that their views are common among young people. But they also believe that state enterprise managers are less reformist than they themselves are, citing the fact that foreign-sector managers usually rely more on a well-functioning market

than do state enterprise managers, who still can depend on quotas for inputs and sales. For the same reason, foreign-sector managers believe state enterprise managers are likely to be more protectionist in their views of international trade.^[57]

Thus, the predominant views of foreign-sector managers toward economic reform mark them as a group that favors change beyond what is embodied in extant policies, and beyond what is desired by their counterparts in the much less autonomous state sector. Although their greatest passion is reserved for narrow problems, such as personnel and visa issues, they also would like to see broad-based reforms that will take China much farther down the road to a market economy.