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Chinese economic transformation, uneven regional development, and the Shenshen special economic zone Rigo, C. Lorraine 1996

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CHINESE ECONOMIC TRANSFORMATION, UNEVEN REGIONAL DEVELOPMENT, AND THE SHENZHEN SPECIAL ECONOMIC ZONE by C. LORRAINE RIGO B. Arts., New York University, 1983 World Politics Diploma, London School of Economics and Political Science, 1991 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUHIEMENT FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES (Department of Political Science) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA August 1996 ©C. Lorraine Rigo, 1996 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of The University of British Columbia Vancouver, Canada DE-6 (2/88) 11 ABSTRACT This thesis examines the role played by cities in the People's Republic of China's (PRC) economic development and urbanization trends over the last 45 years or so, with special reference to uneven regional development and the growth of the Shenzhen Special Economic Zone (SSEZ). The Chinese government has developed an extensive, modern external sector in the economy which has been actively implemented in fourteen cities along China's Pacific coastline and in the four Special Economic Zones. It has also opened three huge deltas in the Pacific coastal areas to further direct investment. After a review of the relevant theoretical literature, a comparison is made between the role of cities in the Maoist period of development and the post-1978 Dengist regime. Since the political and economic reforms of 1978, China's coastal cities, including the SSEZ, have served as a catalyst of economic development. The Renaissance of the coastal regions in the 1980s through the prominence of the Special Economic Zones has been particularly instructive in explaining inland-to-coastal migration and the persistence of uneven regional development in China. For the most part, Chinese economic reform in the post-Maoist era has meant regional discontinuities, a high concentration of growth in a few large urban areas, and a lagging rural economy that remains in many respects backward. Thus, the 'economic gap1 in wealth and incomes between the hinterland and the coast has widened. Moreover, the rapid development of Shenzhen has led to exponential economic growth which has been accompanied by inequalities that have impacted on the living and working situations of migrant workers in the area. From the empirical evidence provided, the thesis concludes that cities have played a key role in the post-reform era, as demonstrated by the way in which the People's Republic has opened up to the outside world. With China's efforts to court the inflow of foreign direct investment and technology, the development of cities in every class size will prove to be more crucial to Chinese economic transformation and regional development. However, special attention is needed to ameliorate the problems associated with rapid urban growth and regional inequality. iii TABLE OF CONTENTS Abstract ii Table of Contents iii List of Figures and Tables v Acknowledgment vii Chapter One Introduction: Chinese Economic Transformation: Implications for the Space Economy 1.1 Introduction 1 1.2 China's Space Economy: Cities and Regional Unevenness 3 1.3 The Shenzhen Special Economic Zone and Spatial Polarization 8 1.4 Research Framework and Methodology 15 1.5 Summary of Chapters 15 Chapter Two Theoretical Review of Urbanization Models and Evidence 2.1 Introduction 17 2.2 Western Models of Urbanization 17 2.3 Socialist Regional Development Strategies 25 2.4 Asian Models of Spatial Development 32 2.5 China's Development Dilemma, Defining Rural-Urban Space 42 2.6 Summary 58 Chapter Three Spatial Reform from a Maoist Perspective 3.1 Introduction 62 3.2 Economic Development Objectives in the Marxist Era 62 3.3 Socialist Transition 1949-1978 70 3.4 Summary 89 Chapter Four The 1978 Economic Reforms and China's Special Economic Zones 4.1 Introduction 93 4.2 1978 Economic Reforms 94 4.3 Open-Door Policy and Special Economic Zones 114 4.4 Economic Reform Contradictions and Spatial Outcomes 122 4.5 Summary 132 Chapter F ive Shenzhen 5.1 Introduction 134 5.2 Pre-1978 Shenzhen 134 5.3 Post-1978 Shenzhen 138 5.4 Employment in the SSEZ 141 5.5 Urbanization and Human Settlements: Land Use and Housing 148 5.6 Summary 160 Chapter Six Conclusions 6.1 Introduction 163 6.2 Summary of Research Findings 163 6.3 Implications for Theory 166 6.4 Implications for Policy 170 6.5 Suggestions for Further Research 173 Bib l iography 175 V LIST OF FIGURES AND TABLES Figures Page 1.1 The China Treaty Ports 5 1.2 The Open Coastal Cities and special Economic Zones in China 9 1.3 The Administrative Domain of Shenzhen Municipality 12 2.1 Population Growth in Large Chinese Cities, 1937-1949 50 2.2 Population Growth in Large Chinese Cities, 1953-1970 50 2.3 Population Levels and the number of Large Chinese Cities, 1986 50 2.4 Per Capita Gross Value of Industrial and Agricultural Output 53 (GVIAO) by County 2.5 Western Regions, Central Regions, and Eastern Coastal 53 Regions of China 3.1 Regional Pattern of Industrial Production in Pre-Communist 65 China 3.2 The Per Capita Gross Value and Agricultural Output (GVIAO) 66 for 1981 and 1983 3.3 China's Maj or Mega-Urban Regions 74 4.1 Migration Patterns, 1982-1987 100 4.2 Location of Fourteen Open Cities and the Four Special 119 Economic Zones 4.3 The Four Core Coastal Economic Regions 126 4.4 Rural-Urban Linkages and Urbanization and Cities 129 4.5 New and Old Cities 130 4.6 Number of Cities by Size, Region and Date 131 5.1 The Location of Shenzhen Economic Zone 13 5 vi Tables 2.1 Southeast and East Asian Urbanization Trends and Projections 35 4.1 China's Trade in East Asia and The Pacific 116 4.2 China's Share of Gross Value of Industrial Output 125 (GVIO) by Region 5.1 Employment Structures in Shenzhen and Shenzhen 144 Municipality, 1979-1986 5.2 Percentage Distribution of Migrants by Type of Origin 154 and size of Destination in 1986 vu A C K N O W L E D G M E N T In writing this thesis, I have accumulated debts to different groups of people and family members. First, I thank my committee members, Professor David W. Edgington, Professor Trevor J. Barnes, and Professor Masaru Kohno for their patience and intellectual contributions to this work. I would like to extend a special note of appreciation to Dr. Edgington, my thesis supervisor, for his tireless commitment to perfecting my thesis and for contributing immensely to my intellectual development. Also, I thank Yvonne Brown who has influenced my thinking and deepened my understanding of my work and the works of others. Second, I gratefully acknowledge the financial and emotional support of Esperanza Rigo, Caridad Rigo James, Stephen Foster Rigo, Scott Pegg, Franco Scardino, and Sarah Dench. M y greatest debt is owed to my colleagues and friends who have given me the strength to continue my program at the University of British Columbia. A l l of their sacrifices will be long remembered by me and others. I extend a deep appreciation to Amanda Ocran, Annabell Webb, Ayesha Nizamani, Carol Rice, Julie Fieldhouse, Kim Williams, and the members of the Alliance of Feminists Across Campuses. Also, I thank the following men for their feminist views and support: Haider Nizamani, Ian Wallace, Jeremy Iveson, Kevin Dwyer, Matt James, Michael Smith, and Uli Rauch. C. Lorraine Rigo Vancouver, British Columbia 1 CHAPTER 1. INTRODUCTION CHINESE ECONOMIC TRANSFORMATION:. IMPLICATIONS FOR THE SPACE ECONOMY 1.1 Introduction Following the formal enactment of economic reform by the Third Plenum of the 11th Central Committee of the Chinese Communist Party, Premier Deng Xaioping initiated a distinctive new program of economic modernization that reformed the Maoist model of economic and social development.1 With the advent of these reforms, Chinese policy-makers have charted a historically unprecedented course in the pursuit of economic development and socialist construction within a 'socialist-market economy'.2 The implication of this shift is that the former Maoist vision of spatial developmental policy, one that insisted upon regional self-sufficiency, has ended. What has emerged in its place is a developmental strategy based on a determination to revitalize the national economy through polarized growth, which privileges the coastal areas and advocates regional comparative advantage, and an international economic policy under which foreign investment is encouraged in four Special Economic Zones (SEZs) and a number of established coastal port cities. The significant growth of the SEZs in the 1980s largely lrrhe Maoist development model is defined in this study as a strategy of economic modernization that the Chinese Communist Party under the leadership of Mao Tse-tung employed after they took power in 1949 and until Mao's death in 1976. Internal policies utilized to attempt to achieve economic efficiency in the People's Republic over nearly three decades, slufted and varied in degrees in different sub-periods. The core of the instruments, however, generally consisted of a reliance on redistiibutive measures that redirected development away from the coast to the interior's lesser developed provinces. Additionally, the development policies of the Maoist era were predicated on the notion that the advancing trend of urbanization had to be controlled and the growth of larger cities constricted. One policy promulgated to achieve this end was the household registration system which effectively created two separate co-existing orders of space and citizenship: urban space over rural space. For more on Mao's developmental strategies see A. James Gregor, Marxism, China, & Development (London: Transaction Publishers, 1995); and Rhoads Murphey, "Chinese Urbanization Under Mao," in Brian J.L. Berry (ed.), Urbanization and Counter-Urbanization (London: Sage Publications, 1976). 2Carl Riskin, "Market, Maoism, and Economic Reform in China," in Mark Selden and Victor Lippit (eds.), The Transition to Socialism in China (Armonk, NewYork: M.E. Sharpe, Inc., 1982), p. 313. 2 substantiated the Dengist belief that harnessing international business for national economic growth through financial inducements to foreign investors would achieve a measure of success. Within this framework, China's coastal regions have materialized as a catalyst for economic development. However, many problems have emerged and have been widely reported. These include the growing economic disparities between the coastal and the inland provinces, rising urbanization levels on China's eastern seaboard, and mass rural-to-urban migration.3 In rural China, uneven development together with the lack of state investment has led to the relative decline of the agrarian economy. Lower wages, lack of access to economies of scale to build local markets, poor infrastructure and transport, and restrictive migration policies that limit intra- and extra-provincial mobility of China's peasants to more urbanized areas, have cumulatively resulted in approximately 80 percent of the Chinese population remaining in a state of poverty.4 The progressive dismantling of hitherto powerful institutions such as rural communes, together with massive rural-to-urban migration to employment centers on the coast, suggest that a review of the role of cities5 in China's post-1978 development might be particularly instructive. This thesis addresses this issue through a case study of the Shenzhen Special Economic Zone. Moreover, in this work the phrase the role of cities when not otherwise defined refers to how cities (their class, size, and distribution) and related processes such as urbanization and urban and population growth function in the 3Edward Balls," Migrant Labour Moves to Cities," The Financial Times (London), 18 November 1993, "Migrants Close China's City-Country Gap," The Japan Times, 3 March 1995; and "A Vacancy Awaits," The Economist, 18 March 1995, p. 19. 4Carl Goldstein, "Get Off Our Backs," Far Eastern Economic Review (Vol. 154, No. 28, 1993), p. 68. 5For more material on the definition of cities see Pamela Barnhouse Walters, "Systems of Cities and Urban Primacy: Problems of Definition and Measurement," in Michael Timberlake (ed.), Urbanization in the World-Economy (New York: Academic Press, Inc., 1985), pp. 63-85; John Friedmann, "On the Contradictions between City and Countryside," in Hendrik Folmer and Jan Oosterhaven (eds.), Spatial Inequalities and Regional Development (London: Martinus Nihoff Publishing, 1977), pp. 23-45; and John Mollenkopf, "Community and Accumulation," in Michael Dear and Allen J. Scott (eds.), Urbanization and Urban Planning in Capitalist Society (New York: Methuen, 1981), pp. 320-337. 3 broader economic context of Chinese development in the Maoist and Dengist eras. Related to this, cities are defined in this thesis as the basic units of urban systems with economic and spatial dimensions that differ significantly from the hinterland. Furthermore, a comprehensive study of changes in the Chinese urban landscape from 1979 is beyond the scope of this study. The emphasis of this thesis is to assess the urban implications of China's post-1978 reforms through the rise of the new urban population in Shenzhen since the early 1980s and its experiences. In particular, the thesis attempts to focus on the degree to which the new urban landscape has improved the 'peasant-workers' (i.e. new migrant workers) standard of living and quality of life as compared with the pre-1978 regime. Related to the substantive issues of reform and examined in this work has been the way which the Chinese capitalist approach to development has impacted on uneven geographical development, resource allocation, population movement, and the human condition. The remainder of this chapter provides background that supports the rationale for the research and sets the parameters by which the investigation will take place. Important features are that the study examines China's space economy. It also provides an explanation for the Shenzhen Special Economic Zone and the strategy of spatial polarization implemented by the Dengist regime. This chapter delineates the research framework and methodology; and finally, summarizes the chapters to follow. 1.2 China's Space Economy: Cities and Regional Unevenness One of the important aspects of the space economy of the People's Republic is that the roots of regional differentiation can be traced back to imperial China. For four millennia China has had an urban experience and certain geographers have estimated that this experience, when compared with other nations, has existed longer than any other society. Rhoads Murphey, for example, concluded that given China's land mass and long documented history, in all probability there has been no other country that has had more cities and urbanites. Population and geographical records reveal that a thousand years ago 4 cities such as Sian (Xian), Kaifeng, Hangchow (Hongzhou), Nanking (Nanjing) and Peking (Beijing) have each, at one time or another, been the largest cities in the world with populations of nearly one million.6 These traditional cities were also centers of commercial activity on and off China's shores, including both inter-provincial and overseas flows. In absolute terms, this trade almost certainly exceeded trade totals in Europe or elsewhere until the nineteenth century. Western observers were impressed by the size and number of Chinese cities and by the hive of organized commercial activity.8 It was this foreign interest and the setting up of treaty ports cities by colonial interests in the 19th century that disrupted and to a large extent negatively influenced the Chinese urban development process.9 As that very system began to unravel, primarily as a result of Western political and economic imperialism, it was replaced with what Chinese historians call '100 years of Humiliation'10, and from that era emerged the treaty port system. With the beginning of the treaty port era came a tendency for urban growth and over-centralization in the coastal regions of the country. The full force of the Western impact was concentrated in these Chinese cities that were designated as treaty ports (see Figure 1.1). For the most part these cities were characterized by unplanned urban growth °Rhoads Murphey, The Fading of the Maoist Vision: City and Country in China's Development (New York: Methuen, Inc., 1980), p. 18. 1Ibid., p. 20. %Ibid. 9 Ibid., pp. 28-31. 10 The period known as 100 years of Humiliation not only refers to the country's semi-colonial period, but also to China's century-long confrontation with the imperialist West. This period of urbanization and rural neglect accounts partially for the Chinese Communist's perception of the city and its appropriate nature and role in the rural-urban dynamic of the country's development. Officially, the treaty port era started with the Treaty of Nanking in 1842 which ended the so-called Opium War between China and Britain and gave foreigners privileges that superseded the rights of native Chinese citizens. This was evidenced by the fact that foreign nationals were free to occupy and control their own trading bases on the Chinese coast for the penetration of the China market, hence the term humiliation. The treaty system lasted until the end of the Second World War and the defeat of Japan. Rhoads Murphey, op. eit, in note 6, p. 25. Figure 1.1. The China Treaty Ports THE CHINA TREATY PORTS O Original Ports Opened in 1842-44 <D Ports Opened by 1865 3 Ports Opened by 1900 O Ports Opened by 1920 • Major Cities That Were Never Treaty Ports Source: Rhoads Murphey, The Fading of the Maoist Vision: City and Country in China's Development (New York: Methuen, 1980), p. 32. 6 that belonged more to a western modernizing world, than to the Asian order of developmental growth whose oceanic peripheries they occupied.11 As revealed in Figure 1.1 there were about a hundred of these treaty port cities established in the period from 1842 to 1945. But the major ones were those that benefited from foreign investment as they contained foreign management and manufacturing plants. These included: Shanghai, Tientsin (Tianjin), Wuhan (Hankou), Sheyang (Murkden), 12 Talien (Darien), Chungking (Chongqing), Tsingtao (Qingdao), and Nanking. While these port cities were not expressions of full colonialism, in the Chinese case, they did serve as an affront to Chinese pride. They monopolized a growing external trade and had by the end of the nineteenth century become virtually the only centers of machine manufacturing and the only locations where Western commercial institutions took root. The consequences of the treaty port system in China's space economy during this period served to create an important dualism within the fabric of the society, notably between the modernizing centers and the more traditional rural regions inland. Spatially, as the port cities became increasingly isolated islands of growth this seclusion served to sever whatever ties existed previous to the semi-colonial period between the coast and the vast 13 rural hinterland. The legacy of the system was that it rendered the national governmental structures powerless, resulting in regionalism and provincialism rather than a unified national regime. Within this framework, and occurring simultaneously with the economic pressure of the increasing rural-urban divide and the Western control of coastal economic centers, the combination of both problems led to a power struggle between the pro-western and urban-based Guomindang and the rural-based Communist Party. Al l were Rhoads Murphey, "The Treaty Ports and China's Modernization" in Mark Elvin and G. William Skinner (eds.), The Chinese City Between Two Worlds (Stanford: Stanford University Press, 1974), pp 18-19. 12 Murphey, op. cit., in note 6, p. 25. 13 Ibid., p. 28. 7 issues that contributed to the impetus for the dramatic ideological and economical transformation in 1949. In the aftermath of the Guomindang defeat in 1949, the Chinese Communist Party (CCP) with Mao Tse-tung at the helm came to power denouncing the treaty port model. The Party resisted the Western notion that with colonialism would come the technological and economic development necessary to rescue China from its hitherto primitive existence. Instead, Mao and his adherents blamed the colonialists for Asia's unsatisfactory economic and political progress and decided that the only path to development was economic autarky. The Party also sought to implement measures to reduce the antagonisms between the rural and the urban areas of China. In the Mao era (1949-1976) the rural model of industrialization dominated. During this period, emphasis was placed on redistributive measures in an attempt to equalize regional economic development. The scope of industrialization was spatially extensive, and rejected external relations with the West that involved trade and foreign direct investment.14 During that period the notion of regional self-reliance15 was advanced in Communist China as a means to achieve greater economic and social equality. The aim was to reduce the differences between city and countryside, worker and peasant, and mental and manual labor.16 The distinction between the Maoist model of industrialization and the present Dengist approach17 to modernization is the reach and the scope of each. For example, in 14Dali Yang, "Patterns of China's Regional Development," The China Quarterly (No. 122, 1990), p. 231. l5In Carl Riskin's China's Political Economy: The Quest for Development Since 1949 (Oxford, England: Oxford University Press, 1987), pp. 201-222. In this chapter the author explains the Chinese concept of self-reliance. Riskin carefully examines the various levels of self-reliance and how they manifest themselves in the Chinese context. 1 6 Murphey, op. eit, in note 6, p. 59. 17When Deng Xiaoping ascended to power in 1978 he with the co-operation of the Chinese Communist Party relaxed the bureaucratic command system of government that had previously ruled the PRC for nearly thirty years. The new Marxist regime liberalized the economy by mixing capitalist and socialist institutions, gradually re-introducing incentive and the profit motive into Chinese society. Also, the Party reformed the household responsibility system releasing peasants under certain conditions from the 8 contrast to Mao, the core reformers of the present Chinese leadership have encouraged political and regional decentralization by granting a level of decision-making powers to the provinces and granting a level of autonomy in business transactions that have been combined with the increasing use of the capitalist mode of production. While Mao's approach to development involved a greater quantity of political than economical solutions to uneven regional development, the focus of the Dengist model is on concrete and measured results. The reformists have attempted to solve the rural-urban question and issues of spatial inequality by promoting a strategy that emphasizes regional comparative advantage, and in the short to medium term, accepts regional disparity as a natural course of the new development approach under a regime known as 'socialism with market principles'. This approach is most widely manifested in the Special Economic Zones. 1.3 The Shenzhen Special Economic Zone and Spatial Polarization China's Special Economic Zones were established in 1979 in four locations: three in Guangdong Province ~ Shenzhen, Zhuhai, and Shantou — and one in the Fujian Province, Xiamen 1 8 (shown in Figure 1.2). These locations were opened together with China's 14 open coastal cities and were modeled loosely on Export Processing Zones which have countryside. In a major departure from Maoism, the Dengist government has redirected the focus of development from agrarian China back to the coastal region, initiating a Renaissance of coastal China. The post-1978 reform era emphasizes regional comparative advantage, accepts regional disparities as inevitable, and encourages foreign direct investment and international interaction. For more material on this issue see G. J.R. Linge and D.K. Forbes, "The Space Economy of China," G.J.R Linge and D.K. Forbes (eds.), China's Spatial Economy (Oxford, England: Oxford University Press, 1990), pp. 10-34; and Richard Kirkby and Terry Cannon, "Introduction," in David S. G. Goodman (ed.), China's Regional Development (London: Routledge, 1989), pp. 1-19. 18Susan L. Shirk, How China Opened its Door (Washington: D.C: The Brookings Institution, 1994), p. 35. 9 Figure 1.2. The Open Coastal and Special Economic Zones in China Source: Adapted from Francis Yee, Economic and Urban Changes in the Shenzhen Economic Zone 1979-1986 (Ph.D. dissertation, Department of Geography, University of British Columbia, 1992), p.4. 10 been found mostly in lesser developed countries.19 Besides access to low cost land and labor, SEZs have provided foreign investors with subsidies such as special state funded infrastructure, lower rates of taxation, reduced tariffs, and less bureaucracy. They have been designated as areas of maximum growth potential that have achieved their advantage through preferential state treatment. Spatially, SEZs are polarized centers of economic activity that theoretically promote comparative advantage.20 From the viewpoint of Chinese policy-makers, SEZs are perceived as instruments to ease China's autarkic economy gradually into the international market. The rationale behind the SEZs according to Dengists, was that through a more open-economy strategy, these locals would act as laboratories for innovative domestic reforms in production, management, and technology. The optimal benefit the SEZs offered to eager reformers was that they would rebuild China's foreign trade regimes, earn foreign exchange, promote technology transfer, introduce management techniques, and provide training, and education to a large labor pool. The ultimate objectives of the central government were that the SEZs would ultimately aid the country in its transition from a socialist to capitalist economy and diffuse knowledge and capital to the rural hinterland. In practice, SEZs have helped forge divergent growth trajectories between themselves and their immediate provincial hinterlands and those lesser advanced inland areas. Arguably, the critical difference in any Chinese development plan since 1949 consistently has been the level of central government support. In the case of Special 19Kwan-Yiu Wong and David K.Y. Chu, "Export Processing Zones and Special Economic Zones as Locomotives of Export-led Economic Growth," in Kwan-Yiu Wong and David K.Y. Chu (eds.), Modernization in China: The Case of the Shenzhen Special Economic Zone (Oxford: Oxford University Press, 1985), pp. 1-8. Briefly, Wong and Chu have defined Export Processing Zones as an adaptation of the Free Trade Zone system. Such commercial zones have been in existence since the 18th century. Spatially, they are normally located in a specific geographical area such as a port. The concept of the Free Trade Zone has been modified as a means of stimulating export-oriented industrial development in lesser developed countries (LDCs) and the zones that were designated as Free Trade Zones were renamed Export Process Zones (EPZ). 20See Francis Yee, Economic and Urban Changes in the Shenzhen Special Economic Zone 1979-1986 (Ph.D. dissertation, Department of Geography, University of British Columbia, 1992). 11 Economic Zones, the Chinese government has explicitly supported development measures in these selected cities. These predominately coastal municipalities have each mushroomed into sizable cities that are identifiable entities, yet isolated to a considerable extent legally and physically from the rest of the country. While their initial goals may have been to promote development in China as a whole, the outcome of their existence have been anything but aspatial; they have contributed to a growing imbalance of wealth distribution in China (see Chapter 4). Moreover, as argued in this study, the quality of life for many workers has significantly deteriorated when compared with pre-1978 conditions. This study especially focuses on conditions in the Shenzhen SEZ (see Figure 1.3) which sits on the coastal area of south-east Guangdong Province adjoining Hong Kong. Formerly, Shenzhen City was administratively integrated with Bao An County (Baoan County). With its SEZ designation what had been Bao An County was in 1983 renamed Shenzhen Metropolitan Region and was divided into two parts: The Shenzhen SEZ and • 21 the rural remains of the old Bao An County. The city covers 2020 sq. km, of which the 22 SEZ is 327.5 sq. km (49 km by 7 km). As will be shown in Chapter 5, urbanization, or some form thereof, has unfolded tragically in Shenzhen for many residents and migrants. The World Bank has concluded that China's dynamic economy is responsible for the 23 country's present floating population of 100 to 150 million. Since its official designation as an SEZ in 1979, Shenzhen has changed from a small market town to a booming metropolis.24 Containing roughly 2.6 million people (as estimated in 1994), by most standards Shenzhen has achieved a reputation as a financial center with an annual •"Erza F. Vogel, One Step Ahead in China: Guangdong Under Reform (London: Harvard University Press, 1989), p. 136. 2 2Sun Huasheng, "Urban Development in Shenzhen SEZ," Habitat International (Vol. 15, No. 3, 1991), ?3 2 6 " Balls, op. eit, in note 3; and "The Road from Tiananmen," The Economist, 4 June 1994, p. 20. 2 4David R. Phillips and Anthony G.O. Yeh, "Special Economic Zones," in David S.G. Goodman (ed.), China's Regional Development (London: Routledge, 1989), p. 115. 13 estimated population growth at 8.76 percent between 1989 and 1994; and is expected to rival Hong Kong in the industrial sector, at some point in the near future. Following 1986 the city's gross domestic product (GDP) grew by an average of 49 percent per year, reaching $5.15 billion in 1992.25 The per capita GDP in 1993 was US$1,925, fifty percent 26 higher than it was two years earlier. While this nominal increase in personal income appears substantial it is argued in this thesis that major development problems exists relating to the lack of adequate infrastructure, proper housing, and social services such as healthcare. These problems have made the Zone unable to meet the needs of the massive in-migration that has been occurring at a frenetic pace. Statistics indicate that by the mid-1980s some six million peasants were leaving less prosperous regions to work temporarily elsewhere and mainly in more prosperous coastal cities, such as Shenzhen.27 Since 1978 28 the changes to the household registration system, a mainstay of China's Marxist-Leninist past, has rendered the policy powerless in stemming the flow of migrants that pour into Shenzhen because of the increased interprovincial migration. With this sketch of volatile regional outcomes of the post 1978 reforms as a background, this thesis examines the spatial attributes of China's economy and in particular makes an assessment of the role of cities in Chinese economic development. It measures the impact of the contemporary hybrid 'market-socialism' economy on human settlements by examining the Shenzhen SEZ. The main approach here is to measure the economic and other functional and transactional relationships that underlie the emerging 29 pattern of growth and spatial change. For geographers and other students of Chinese "Kim Keung, "The Rise of Shenzhen," Asia, Inc., December 1993, p. 58 26Ibid. 27Mark Yaolin Wang, "China's Core Economic Regions and Their Hinterlands," Western Geography (Vol. 4, 1994), p. 50. 8I define the function of the household registration system as well as its history and relationship to urbanization patterns in both the Maoist period and throughout much of the post-1978 reform era in chapters 2, 3, and 4 of this thesis. 2 9 C . W. Pannell and Greogory Veeck, "China's Urbanization in an Asian Context: Forces for Metropolitanization," in Norton Ginsburg, Bruce Koppel, and T.G. McGee (eds.), The Extended Metropolis: Settlement Transition in Asia (Honolulu: University of Hawaii Press, 1991), p. 113. 14 affairs, China is an especially interesting case of how a socialist regime in a developing country is driving the reform process and economically restructuring the country with a spatial development plan that institutionally supports favoring the coastal regions over the interior provinces. Shenzhen qualifies as the case study because it most clearly demonstrates the spatial economic changes brought on by market socialism. Specifically, the thesis examines the new economic environment created by reforms, such as the reduction of the state enterprise sector and welfare privileges for urban workers in the Shenzhen SEZ. The core of the thesis analyzes important areas that are often hidden in many accounts of China's de-communization, including massive rural in-migration to major industrial locations and the increased number of temporary workers found in urban centers without proper housing or job security. Here, the author must acknowledge and admit to the difficulties associated in studying Chinese economic transformation and urbanization at a distance. The disadvantages of examining an area from the outside has resulted in this thesis relying on Chinese compiled data that in some cases is flawed. Some of the confusion that has resulted in data problems mainly relate to poor bookkeeping and secrecy behind the "bamboo curtain" for almost a quarter of a century up to the early 1980s. Complications in interpreting statistics arise in several areas, for instance in defining what is urban and what is rural, which are clearly contentious concepts for the Chinese.30 Controversies result from disagreement over the meaning of such divisions and the interpretation of various data series that are available, as well as development and population statistics that are missing for certain periods.31 30Mark Yaolin Wang, The Socioeconomic and Spatial Transformation of the Shenyang-Dalian Extended Metropolitan Region of China, 1978-1992 (Ph.D. dissertation, Department of Geography, University of British Columbia, 1995), p.55. 3 Unfortunately this author, similar to other more established scholars before her, has been unable thus far to solve the problems associated with poorly complied Chinese statistics. Therefore, she can offer no concrete solutions or remedy at this time. For further explanation on problems related to official Chinese 15 1.4 Research Framework and Methodology Several approaches have been used to support the arguments and ideas developed in this work. These approaches are both descriptive and analytical. Descriptive tabular data have been taken from established written scholarship presented and published in this area by scholars such as Jones, Yang, and Yee. 3 2 This tabular data assists in establishing a quantitative foundation for some of the assertions and positions put forward in this thesis. Certain of these tables have been classified and mapped in order to provide a spatial view of the uneven development inherent in the post-1978 period. Tabular data are informative in that they give an idea of the scope of reforms in post-Maoist China. A comparative perspective is used to measure the success of the Dengist reform process as compared to the Maoist development strategy. The emphasis in this study has been on examining the shifts in official perceptions and policies as to the role of urbanization, and to evaluate how this has impacted the daily lives of workers in one of China's most rapidly growing cities. 1.5 Summary of Chapters The predominant urban-centered models of regional development from previous Western experiences set the stage in Chapter 2. Theoretically, it also reviews and discusses patterns of development and urbanization experiences in communist developing countries and urban and regional development models proposed for the developing countries of Asia. It also provides an explanation as to why China is a special case. Spatial reform during the Maoist period from (1949-1978) is the focus of Chapter 3. Chapter 4 covers the structural economic changes which emerged after the reforms of 1978. It analyzes the shift in regional development as seen in the eyes of Dengist policy-makers and investigates to what degree geographical space and the Special Economic Zones have played a role in the statistics see Harry Xiaoying Wu, "Rural to Urban Migration in the People's Republic of China," The China Quarterly (No. 139, 1994), p. 669. 32Gavin Jones, "Urbanization Issues in the Asian-Pacific Region," Asian-Pacific Economic Literature (Vol. 5, No. 2, 1991); Yang, op. ext., in note 14; and Yee, op. cit., in note 20. 16 PRC's current modernization strategy. Chapter 5 of the thesis focuses on the human dimension of urbanization in the SSEZ. It explores residential settlements, the city's emerging industrial structure, together with employment opportunities and outcomes. Tabular data and maps are used to draw attention to problems associated with urban population growth. Finally, Chapter 6 attempts to coalesce the various and divergent concepts employed to analyze Chinese economic transition by summarizing the study's research findings and indicating what are their implications for policy, theory, and further research. At this juncture, the thesis comments on the significance of all of the above for other lesser developed Third World nations. 17 CHAPTER 2. URBANIZATION, ECONOMIC DEVELOPMENT, AND THE CHINESE EXPERIENCE 2.1 Introduction To understand the role that the Shenzhen SEZ has played in post-reform China necessitates a review of the relevant literature dealing with the relationship between urbanization and economic development. Equally important is understanding the background of the rural-urban dichotomy in China and the urbanization process under both Maoist and Dengist principles. With that concern in mind, the chapter sets out to do two things. First, it reviews the literature which deals generally with the link between urbanization and economic development, and then it sets this framework against the distinctive character of China's spatial development. The chapter then provides evidence as to why China's spatial development is distinct from that of the general Asian experience. To that end, the following pages begin by examining the socialist and capitalist contributions to urbanization theory by reviewing Western, Socialist, and Third World models which explain the role of cities in economic development and modernization. Understanding these models are instrumental in placing in context contemporary Chinese regional differentiation and the concentration of urban systems in China's coastal region. 2.2 Western Models of Urbanization A wide body of literature suggests that higher levels of urbanization33 are positively associated and indicative of a nation's level of industrialization. In response to the growing persuasiveness of capitalism, modernization theory emerged in the post-Second World War period as a Western perception of universal industrialization. Walt Rostow led the 3 3The author thinks that terminology needs to be addressed at the outset of this chapter. Urbanization in this thesis refers to the rise in the proportion of total population living in urban areas. On the other hand, urban growth refers to increasing population living in urban areas. According to Jones the two are quite distinct. Urbanization can take place over a range of urban population growth rates, from high to low. Additionally, urban structures have to do with the morphology of a particular city. For more see Jones, op. eit, in note 32, p. 5. 18 modernization march and was most recognized for his classic work, the Stages of Economic Growth ( I960) . 3 4 He operationalized how the integrated processes of development and interdependence within the global economy worked to the benefit of national entities so as to achieve the status of industrialization and mass consumption along the lines then prevalent in North America. An abbreviated version of Rostowian theory suggests that economic underdevelopment in poorer countries was a temporary condition remedied in approximately sixty years by a linear process of modernization.35 Despite the contribution of more than a generation of literature contradicting his work, what has remained most striking in Rostow's analysis has been the author's identification of a formula for economic growth which he perceived, at the time, to be equally accessible to all nations. Second, that interpretation of his work has implied to this study that the process of industrialization combined with interacting in the capitalist world economy guaranteed development and that economic growth was inevitable. Rostow positioned the economies of all nation-states into one of five stages: the traditional society, the preconditions for take-off, the take-off, the drive to maturity, and the age of high mass-consumption. According to his model these were the components of the Western trajectory to modernization and could be followed by all developing countries. His research indicated that industrialization was a destination, achievable only i f nation-states followed the correct road map. On the sub-national plane, in this process cities emerged as part of the modernization scheme. While Rostow did not explicitly mention cities in the context which it is employed in this thesis, he did imply that as urban economic development progresses to the stage of maturity there is a decrease in the composition of the agricultural work force and the percentage of people living in rural areas.36 Therefore, 3 4W.W. Rostow, The Stages of Economic Growth (Cambridge: Cambridge University Press, 1960) 3 5 /£^ . , p. 10. ^Ibid, p. 71 19 Rostow compliments John Friedmann's specific characterization of cities as urban systems that are spatially organized as subsystems of society that have been identified by a high relative density of urban population and a predominance of non-primary (specifically non-agricultural) activities.37 Moreover, their temporal dimension, according to Friedmann was expressed as a high rate of change, and their performance was assessed from primarily an economic point of view. 3 8 The major contradistinctions drawn between the city and the countryside were along economic and social grounds. For Friedmann, rural populations were groups of people who earned their living predominantly through agriculture. They were also people who were grouped and bound together by the following traits: familial ties, shared experiences, homogeneity in dialect or language, religious beliefs, and customs.39 Other elements of Western modernization theories described cities as evolving from a complex system of trade relations. Thus, interaction between cities within the urban system was the first prerequisite for industrializing regions, resources, and the develop-ment of commercial sites and urban infrastructure. Cities and urbanization according to the modernizationists have also been closely linked to the growth of industrialization, though the nature of this relationship was recursive and complex. For instance, technological change in the industrial revolution brought about high rates of increase of per capita product, and increasing efficiency in production associated with the major structural shifts in European economies. Along with improvements in technology and shifts in production went higher rates of expansion of foreign trade. Closely following in tow were changes in the international division of labor and shifts in the regional allocation of resources.40 Dear and Scott have pointed out that in 37Friedmann, op. cit., in note 5, p. 31. ™lbid. 39Ibid, p. 33. 40Dean Forbes and Nigel Thrift, "International Impacts on the Urbanization Process in the Asian Region: A Review," in Roland Fuchs, Gavin Jones, and Ernesto Pernia (eds.),Urbanization and Urban Policies in Pacific Asia (London: Westview Press, 1987), pp. 68-69. 20 the contemporary capitalist world when city systems are created, they are created via the processes of exchange and migration and therefore they generally emerge as an integrated hierarchy of centers of different functions and sizes.41 The authors described this market transaction in the following terms: [fjrom this process emanates the characteristic internal geographical pattern of capitalist cities: a dense commercial core; a tendency to ever-widening peripheral scattering of industry; and socially segregated neighborhoods. These are differentiated principally along the lines of cleverages within the prevailing division of labor, i.e. into blue collar and white collar residential areas or urban and rural. ^ 2 The predominant theoretical position and the widespread assumption was that Europe, the United States, Canada, and a limited extension outside of the Anglo-Saxon world, have had cities that shifted from an agrarian economy to an urban industrialized one with ease. Clearly, for these countries the interconnectedness between municipalities in the early modernization era and economic development is indeed evident. The cumulative result of urbanization in European-American cities, along with a few Third World exceptions, have been that they were theaters of accumulation, where the urban system has been traditionally linked to the global system through a network of higher and lower connections that are managed through capital. As McGee and Armstrong explained, larger metropolitan areas acted as the central places for processes that have led to an increasing concentration of financial, commercial and industrial power, and decision-making since cities are the reflection of the wider socio-economic system.43 Of course, much of the scholarship in support of this viewpoint has ignored the more complex issues of Third World development. Advancements in the regional and social sciences have indicated that modernization theorists who arrived at those earlier conclusions neglected to take into account racism, colonialism, imperialism, the 41Michael Dear and Allen J. Scott, "Towards a Framework for Analysis," in Michael Dear and Allen J, Scott (eds.), Urbanization & Urban Planning in Capitalist Society (London: Methuen, Inc., 1981), p. 9. 42Ibid, p. 10. 4 3 Warwick Armstrong and T.G. McGee, Theaters of Accumulation (London: Methuen, 1985), p. 41; and T.G. McGee, The Urbanization Process in the Third World (London: G. Bell and Sons, Ltd., 1971) p. 18. 21 bifurcation of the world-economy, the impact of multinational corporations, transnational organizations (such as the Catholic Church), trade barriers, the levels of poverty within the Euro-American market economies, the displacement of pre-existing societies, and class struggle.44 In short, interaction within the global economy placed underdeveloped countries, their economies, and their cities in a subordinate position as compared with the needs of the European industrial capitalists that penetrated and disrupted local economies through colonial cities. Global economic trends combined with the subordination of peripheral economies have produce the present division of the world system into the developed West as against the underdeveloped Third World, or the North versus the South phenomena. The legacy of these arrangements have meant that underdevelopment has been co-terminus with non-development or distorted development. Furthermore, it was a development that accommodated the needs of larger capitalist economies, designed to produce only one or two commodities as needed by the Western markets (the center) rather than overall development to meet local needs (the periphery). More precisely, it has meant the proliferation of shantytowns instead of organized human settlements. Instead of well balanced urban systems, what has emerged is a concentration of economic and potential power in primate cities such as Calcutta, Lagos, and Mexico City, incapable of providing adequate shelter, water and sewage disposal, let alone jobs for their residents.45 ' Once Third World cities failed to replicate the patterns of European development, the legitimacy of the modernization paradigm came into question. Newer paradigms, ^Victor Lippit, "Socialist Development in China," in Mark Selden and Victor Lippit (eds.), The Transition to Socialism in China (Armonk, New York: M.E. Sharpe, Inc., 1982), pp. 116-158; Immanuel Wallerstein, "Crisis as Transition," in Samir Amin, Giovanni Arrighi, Andre Gunder Frank, and Immanuel Wallerstein, Dynamics of Global Crisis (New York: Monthly Review Press, 1982), pp. 11-54; Ronald H. Chilcote, "Dependency: A Critical Synthesis of the Literature," in Janet Abu-Lughod and Richard Hay, Jr. (eds.), Third World Urbanization (Chicago: Maaroufa Press, Inc., 1977), pp. 128-139; and Samir Amin, "Underdevelopment and Dependence in Black Africa ~ Origins and Contemporary Forms," in Janet Abu-Lughod and Richard Hay, Jr. (eds.), Third World Urbanization (Chicago: Maaroufa Press, Inc., 1977), pp. 140-150. 4 5 L. S. Stavrianos, Global Rift (New York: William Morrow and Company, Inc., 1981), p. 274. 22 which examined capitalist development in a global context, saw much of the world dependent upon and dominated by a small number of societies that had led in the nineteenth century capitalists' transformation of Western Europe and its extension in North America. These social scientists were identified as Dependency theorists.46 They argued that the deteriorating terms of trade that involved lesser developed countries compromised any potential they might have had for industrial development and general economic growth. Third World economies, it was suggested, lost more through the fall of prices of primary materials in the international market than they received in aid from all contributing countries. Thus, the theorists defined this colonial state as: ... a situation in which the economy of certain countries is conditioned by the develop-ment and expansion of another economy to which the former is subjected. The relation of inter-dependence between two or more economies, and between these and world trade, assumes the form of dependence when some countries (the dominate ones) can expand and can be self-sustaining, while other countries (the dependent ones) can do this only as a reflection of the expansion, which can have either a positive or a negative effect on their immediate development.47 Based on these convictions, Dependency theorists advised that industrialization and economic growth for lesser developed economies necessitated that the Third World dissociate itself from the grip of international capitalism, and that it achieve self-sufficiency. As the research and evidence in chapter three of this study shall illustrate, Mao Tse-tung struggled to achieve a level of autarky in response to seeking a suitable developmental plan particular to China's economic characteristics. World-systems theorists, such as Wallerstein, generally agreed with these assertions. They maintained that capitalists on a whole in both the global economy and at the national level, achieved their unfair advantage in the social system with the assistance 4 6For a discussion about Dependency theory that is contrary to the view that is presented in Chapter 2 see Stephan Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrialized Countries (London: Cornell University Press, 1990), pp. 16-22. 47Chilcote, op. eit, in note 44, p. 128. Dependency theorists generally agree that the condition of economic dependence generally takes place under unequal terms of trade primarily between the core and the periphery. This condition and the economic transactions that it generates are part of the explanation employed to describe underdevelopment in the Third World. However, Dependency theorists vary in their explanation of this relationship and how to remedy it. 23 of the political structure. Their central objectives were: firstly, the implementation of non-market advantages over competitors through monopolies, subsidies, mercantilist protections, provision of infrastructure, and the destruction of the political support of competitors; and second, the containment of the demands of the working classes.48 The arguments of Wallerstein and his colleagues can be summarized in the following passage: [c]apitalism is referred to glibly as a system of free enterprise based on free labor... and we often fail to recognize the most obvious of the historical facts about the capitalist world-economy: that, in the five hundred years of its existence, at no time have factors of production been fully 'free' nor the law of value fully realized.... Even today in the core-zones of the world-economy, such as the United States, Western Europe, or Japan, all land and natural resources are not alienable, all labor is not performed for cash remuneration, all products are not sold and exchanged through money market, and gigantic barriers limit the free flow of commodities, capital, and labor between states.49 The conclusions that have been drawn from the works of World-systems and Dependency theorists have implied that to an increasing extent the expansionary nature of the capitalist production system, in a geographic sense, has incorporated more and more countries into its system through its trade and investment regimes.50 Furthermore, these conclusions have drawn a connection between the events that take place within the world-economy and the manner in which cities reflect a conjuncture of processes that occur at the global and country levels. Scholars already mentioned earlier in this chapter agree that their combined impact on urban systems has been measurable. Expressions of capitalism and economic and urban growth have been mostly portrayed through the integration of the core and periphery regions of the world and their cities into the global economy. A central component of this political-economic integration has been, particularly in the case of Third World cities, the emergence of rapid urbanization which has been associated with greater diversification of the economy. This has, therefore permitted the differential incorporation of the capitalist production system 48Wallerstein, op. cit., in note 44, p. 23. 49Ibid, p. 23 50Forbes and Thrift, op. eit, in note 40, p. 67. 24 into the various sectors of an economy. Urban centers provide the location for the transmission of capitalist investments in manufacturing industries and for the shift of power within large corporations to regional offices that encourage the growth of major financial centers in metropolitan areas. The result has been the evolution of 'world' cities in Third World regions. Thus, Third World cities of world class status have been the predominant agents in the internationalization of capital by serving as entry points and preferred sites for new factories and assembly plants.51 These cities have been principally located in countries that either have large domestic markets or have embraced export promotion strategies as a method to enhance national development — for example Mexico, Brazil, Colombia, Venezuela, India, South Korea, Malaysia, Singapore, Hong Kong, Taiwan, Philippines, Indonesia, Thailand, Egypt, Kenya, and Nigeria. 5 2 Consequently, what has often been missing from the modernization literature dealing with urbanization and economic development has been the realization that discontinuities in rural and urban growth are periodic norms that all countries have strived to overcome, and that such growth and development has been contingent on the global space economy occupied by the state. Following an examination of global capitalism, its impact on the national space economy and Third World development, the study now moves to explore the development of socialist societies, the Marxian economic development viewpoints, their impact on cities and regions, and how this model can be related to the Chinese developmental process. 2.3 Socialist Urban and Regional Development Strategies The relevancy of the Marxist model of urbanization and development to the discussion concerning post-1978 China and its transforming economy is twofold: commencing with 51Lata Chatterjee, "Third World Cities," in Richard Peet and Nigel Thrift (eds.), New Models in Geography (London: Unwin Hyman, 1989), p. 133. 52Ibid. 25 the First Five-Year Plan (1953-1957) to the Ninth Five-Year Planning period (1996-2000) China has been governed by a Communist regime. Given the length of time the socialists have held political power, the assumption here is that the state has left ideological imprints on the country's space economy. More importantly, it is incumbent upon this work to survey the literature that details the Marxist contributions to urbanization and the development of urban systems in socialist countries. The objective of classical Marxism has been associated with the erasure of many forms of inequity in economics and social interaction. To mediate between the inequality and affluence that has oftentimes occurred in geography, and to bring about the order and regularity that has been desperately sought, Marx, Engels, Mao, and other adherents of socialist development strived for the abolition of the antitheses between town and country, which for them was one of the tenets necessary for communal life. 5 3 A predominant objective for socialists in the Third World has been to ultimately control those space-forming activities, such as migration, urbanization, industrialization, social mobilization, and acculturation, that all assume a spatial dimension. More specifically, the literature reveals that they have sought to reduce the rate of urban growth, particularly the degree of urban primacy.54 Unlike Rostow, many economists, sociologists, and political scientists interested in the developing world regard accelerated development as causing rapid urbanization, which equaled in their eyes an alarming rural-urban duality that is found in many countries. Many Marxist scholars regard cities — specifically larger cities ~ as parasitic bodies siphoning the countryside of people and resources into an increasingly unhealthy urban environment. "Karl Marx and Friedrich Engels, "The City, The Division of Labor, and the Emergence of Capitalism," in Janet Abu-Lughod and Richard Hay, Jr. (eds.), Third World Urbanization (Chicago: Maaroufa Press ' 1977), p. 23. 54Chatterjee, op. cit., in note 51, p. 140. 26 Urbanization has also been associated with mounting costs and an inability to give employment to the rapidly growing labor force.55 Clearly, Marxists-Leninists and Maoists have understood the dangers of separating the urban from the rural. For them, the separation of town and country is understood as the separation of capital and landed property, and as the beginning of the existence and development of capital independent of landed property — the beginning of property having its basis in labor exchange.56 Apart from ideological criteria, a concrete approach to spatial development for many socialist countries has been predominately based on the need to transform fundamentally both the rural and urban society and the economy, and to reduce the progressive differentiation of space, as well as the rural-urban gap. Perhaps a separate issue, but nonetheless one that does correlate to the ideological, is how geography corresponds to the Marxist vision of spatial development. To provide an explanation for the developmental process and relationships involved in socialist attempts at reducing the rural-urban development gap, scholars such as Sklair and Szelenyi have established that socialist development occurs within the context of pro-urban policies and anti-urban practices, and that particular urbanization differences are exhibited between the advanced and the developing socialist states. As Sklair's research has shown, geographers and related scholars: ... identify four patterns of socialist urbanization that can be discerned from the historical experience of eastern Europe and the socialist Third World. These are, briefly, deurbanization, where the authorities set out to depopulate the cities and force the displaced into the countryside, thereby changing the class structure; zero urban growth, where emphasis is on rural industrialization; under-industrialization, where administrative blocks delay the growth of cities; and intensive urbanization, where urban industrial population declines relative to the service sectors and the other urban non-industrial groups. 55Stanislaw H. Wellisz, "Economic Development and Urbanization," in Leo Jakobson and Ved Prakash (eds.), Urbanization and National Development (Beverly Hills: Sage Publications, 1971), p. 40. 56Marx and Engels, op. cit. see note 53, p. 23. 57Leslie Sklair, "Problems of Socialist Development: the Significance of Shenzhen Special Economic Zone for China's Open Door Development Strategy," International Journal of Urban & Regional Research (Vol. 15, No. 2, 1991), p. 200. 27 Furthermore, Marxist researchers have indicated that there existed a binary vision between how socialist and capitalist systems respond to urban growth and cities. Among the predominant differences between capitalist and socialist patterns of urbanization is that market economies, unlike socialist societies, industrialize with a greater spatial concentration of population.58 On one side, with the capitalist mode of production, there has been the sense that economic development has a positive association with urbanization as industrialization and economic growth. Cities provide the concentration of population growth from which industrial labor may be drawn. Thus, many geographers have argued that capitalist development was predicated on the power of private capital, market forces, and entrepreneurial activity according to principals of profit maximization. The role of the state or, its agent, the government, in this regard has been in many cases according to Chatterjee "to smooth the process of accumulation and manage class struggle."59 On the other side, Marxist society, in developing countries as in more industrialized ones, is concerned with equality of space and opportunity. With these tenets, it allows the state to determine how territory is used. Therefore, on the state level socialist development has been predominately characterized by nationalization, and a centrally-planned command economy with state-owned enterprises in the industrial sector and full employment. Historically, from a geographic perspective, socialist developing countries were generally not as highly urbanized as the more advanced economies. Sklair suggested that the relationships between town and country under socialism have been fundamentally different to those under capitalism. Under socialism, Sklair identified at least two distinctive territorial characteristics: a slower rate of urban growth and a reduction in 58Ivan Szelenyi, "East European Cities," in Greg Guldin and Aidan Southall (eds.), Urban Anthropology in China (New York: E.J. Brill, 1993), p. 53. 59Chatterjee, op. tit., in note 51, p. 132. 28 urban primacy, both of which have been connected to the struggle to transform consumer cities into producer ones.60 Forbes and Thrift advanced the Sklair observation to include four additional distmguishing features concerning urbanization processes in socialist states. For them urban growth patterns have been systematically impacted by the level of resources, the type of socialism practiced in a given country, the degree of exposure to capitalist influences, and the prevailing class structure.61 Furthermore, anti-urban policies, have more territorial meaning and are not necessarily anti-city. Rather, for countries with Marxist regimes there has been the desire to seek regional balance without favoring rural or urban movements. Policies in these countries have been therefore directed to limited urban growth, have taken the form of population redistribution, equity in the allocation of state investments and resources, and aid allocated to lesser developed regions by regulating the labor market, investment infrastructure, and production. The possibility that such measures could have been taken, stems from the fact that centrally controlled governments and their administrative units have been the sole arbiters and decsionmakers in these issues. This power has been reinforced by having had absolute control of financial structures. Hence, the socialist plan has been continually to reverse the trends of urban systems that have been predominantly characterized as wasteful, corrupt, crime-ridden, and less efficient and to turn them into productive systems, managed in terms of growth, and self-sufficiency in foodstuffs. In other words, it is an approach that strives to 'urbanize the country and ruralize the city'. 6 2 ouSklair, op. eit, in note 57, p. 199 61Dean Forbes and Nigel Thrift, "Introduction," in Dean Forbes and Nigel Thrift (eds.), The Socialist Third World, Urban Development and Territorial Planning (New York: Basil Blackwell, Ltd., 1987), pp. 5-6; Enzo Mingione," The Urban Question in Socialist Developing Countries," in Dean Forbes and Nigel Thrift (eds.), The Socialist Third World, Urban Development, and Territorial Planning, (New York: Basil Blackwell, Ltd., 1987), pp. 27-52; and Cal Clark, "Regional Inequalities in Communist Nations: A Comparative Appraisal," in Daniel Nelson (ed.), Communism and the Politics of Inequalities (Lexington, Massachusetts: Lexington Books, 1983), pp. 73-103. 62Forbes and Thrift, op. cit., in note 61, p. 11. 29 Maoist economics emerged out of the very same Marxist principles that sought regional balance, restrictions on internal population movement, and the instituting of de-urbanization policies. Since 1953, in the post-revolutionary period, elements of the ruralization trend have been visible in regional policies or practices in the People's Republic of China. While, de-urbanization, and the prevention of urban growth was a salient feature of Chinese regional planning in the 1950s, in East European Marxist regimes the anti-urbanization policies resembled those of their Chinese counterparts in intent, but took on alternate forms.63 The major differences between Asian, Latin, and European socialist countries in terms of their policies for containing urbanization have occurred for various reasons. For instance, in the case of post-war Vietnam or Cambodia, little urban growth occurred because it was seen as a strategy to bolster communist power against any attempts of insurgence from the urban bourgeoisie. In China and Cuba, the data suggested that the urban population from the early 1960s until the mid-1970s remained unaltered.64 Specifically, in China the constant in urban growth was part of the industrialization plan that created a significant proportion of the new industrial jobs within communes. In the same frame, Cuba also followed a strategy of industrialization that prevented the massive growth of urban populations. In general, socialist countries make distinctions between consumer and producer cities, the former being considered parasitic. In an attempt to model urbanization in socialist societies, geographers have determined that the central characteristic of Marxist theory has been the increasing degree of sophistication of the state's organization of production as evidenced by the strategies employed to economize on the cost of urbanization and to block rural-urban migration by a variety of direct or indirect measures. 63Szelenyi, op. cit., in note 58, pp. 50-51. 64Ibid. 30 The implication is that the attempts of the state to bring all activity into public ownership reduces the economic diversity of cities and therefore their chances of growth. Therefore, the function of socialist cities have been predicated on the notion that the state is the controlling factor. Urban systems under socialist rule have operated by restricting markets and regulating regional processes primarily through central planning. However, regardless of how the equality ethos is sometimes expressed in socialist societies, there is evidence in the literature that suggests that these cities, like their capitalist counterparts, have produced and are involved in the reproduction of the asymmetrical allocation of resources to certain social classes over others and the status of one's occupational and ethnic groups matters in Marxist space.65 With the function of state and socio-economic control firmly in the grip of the ruling Party, the author argues that the differences in socialist cities may vary because of culture, political interpretation, and the differences in Gross National Product (GNP). There is little doubt that centrally-command economies and their cities are dramatically different in areas of socialist Africa as compared to socialist China as compared to socialist Europe. Following Szelenyi's work on East European cities and examining the work of other scholars on Third World socialist cities, we can see that there are parallels between the two, and a tendency for each type of socialist nation to pursue equity in socio-economic and organizational structures of human settlements. Overall, in centrally-command planned economies the general trend is to use capital investments in infrastructure and industry with the purpose of transforming consumer cities into producer ones. For example, in the period between 1954 and 1960 the Hanoi government increased the output of large, small, and handicraft industry several fold; other measures included 65Ibid, p. 56. 31 the limiting of the labor force in service and trade occupation and efforts to make the city self-sufficient in food. 6 6 In general, in such cities, there is a decreased level of consumerism which has been remarkable. Expenditures for consumption activities, such as housing and retail establishments, were diminished in favor of job-creating expenditures in the industrial and agricultural sectors.67 Also, such reduction in expenditures of consumption activities has been manifested in the decline of the diversity of shops, advertisements, eating establishments, and street vendors. In the socialist world, the inner-cities for the most part are publicly-owned which means that urban land technically does not have a value. The result during the Maoist era was that planners could operate without the constraints of land prices. As a result, urban planners were often found to be more generous in their use of space for public functions such as parks and often paid more attention to aesthetic rather than narrow economic considerations.68 The additional benefit of the public ownership of land is that rents are inexpensive and are linked to wages. In terms of socio-economic development, quality of life issues were addressed differently in Marxist urban planning. Thus, for the most part, prior to the economic collapse of the 1980s there appeared to be less deviance or overt types of deviance such as crime, prostitution, and homelessness in socialist urban places, and a reduction of visible human marginality was achieved. Furthermore, Marxists on the whole, were able to shrink and keep limited the gap between affluence and poverty with redistributive policies. Socialist governments often have been characterized as bureaucratic and authoritarian, mostly because they control the public ownership of the means of production. Nonetheless, such governments have promulgated directives that ensured some measure of equality could be inferred from the laws they implemented. Furthermore, 66Chatterjee, op. eit, in note 51, p. 141. 61Ibid. 68Szelenyi, op. cit., in note 58, pp. 54-55. 32 the comrnitment to house, to feed, and employ all citizens, coupled with a stricter system of police surveillance, often equipped socialist economies to achieve their goals while managing the growth of urban systems. Additionally, in the past such regimes were able to restrict the flow of peasants who traditionally have been the bulk of migrants moving to large cities and to correct the large income differential between more industrialized regions over lesser developed ones. For this thesis the concern is how to show that the literature on socialist cities presented here relates to China. With that in mind, the discussion of urbanization in socialist and capitalist societies, city systems, and human settlements has to be placed in the context of China as an Asian developing socialist country. With these objectives, the study now investigates industrialization patterns and the management of urban growth as it has traditionally appeared in the Asian context. 2.4 Asian Models of Spatial Development From a Third World developmental perspective, Asian industrialization, the links of countries in that continent to the capitalist global economy through regional and urban systems, and how cities in this region are shaped, are among the concerns of this section. To achieve congruence and in order to have an informed discussion about the Chinese spatial development process, and to better understand cities in the People's Republic, it is imperative that the study form connections with the wide literature on Asian urban and regional development. With that in mind, the discussion turns to the commonalties and differences found in Asia's Lesser Developed Countries (LDCs) and Newly Industrialized Economies (NTEs). The study seeks to decipher the complex processes that are specific to Asian urbanization and to distinguish between ones that occur in the region from processes that are generally identified as Third World urban development. The primary focus is to detennine the domestic and external influences that have impacted regional development in various Southeast and East Asian countries and how these forces have converged to 33 shape urban systems and cities in each. Such determinations will enable this work to model an urbanization process in the Asian region that is distinct or parallel to that of China. The rising level of urbanization in Third World societies has sharply increased the sizes of their urban population and the number of their cities — especially big cities — which have emerged in the last decade. The explosion of urban populations in developing countries by 1985 had reached 1.1 billion and the level of urbanization had increased to 31 percent from 17 percent in 1950.69 United Nations' statistics have projected that the urban populations of the LDCs are expected to reach 4.1 billion by the year 2025 and to include over half of all L D C people.70 In terms of cities, the United Nations projection is that the number of cities with populations exceeding a million in these countries will more than triple from 146 in 1985 to almost 500 by 2025, and that 114 of these cities will have populations in excess of 4 million. 7 1 Asian L D C s exhibit many of these urbanization tendencies as well as the growth in the number of cities, as do many parts of the Third World. However, what is most notable about Asia is the unusual demographic magnitude of the urban transformation. Outstanding among the differences are examples such as China and India that have vast populations with no existing equal in other world areas. Furthermore, South Korea, Japan, Indonesia, and Bangladesh have rapidly expanding urban systems arising within densely populated countryside.72 Thus, McGee has suggested any cross-cultural generalizations of the role of cities in such a vast region as Asia would pose many difficulties and would lead to flawed assumptions because of the diverse nature of urban traditions and the variety of 69Sidney Goldstein and Alice Goldstein, "Permanent and Temporary Migration Differentials," in Lincoln H. Day and Ma Xia (eds.), Migration and Urbanization in China (London: M.E. Sharpe, 1994), p. 43. ™Ibid. nIbid. 72Frank J. Costa, Ashok K. Dutt, Laurence J.C. Ma, and Allen G. Noble, "Trends and Prospects," in Frank J. Costa, Ashok K. Dutt, Laurence J.C. Ma, and Allen G. Noble (eds.), Urbanization In Asia (Honolulu: University of Hawaii Press, 1989), p. 3. 34 functional types of urban centers.73 Moreover, the pre-existing religious, linguistic, and ethic heterogeneity in Asiatic society is only outmatched by Africa which is more heterogeneous. Nonetheless, Lo and Salih have argued that there are existing similarities between the Asian model of urbanization and that of the Western paradigm. In general, these identified parallels have been that both experienced a change of a structural economic nature, that has specifically manifested itself as the transition from a rural economy to an industrial-based urban system.74 The major differences between the West and Asia has been that the period under which each society experienced the transformation, for certain local's in the Asia-Pacific, has been between 1960 to 1980.75 While, urbanization trends between Asian and Western economies share some similarities, there are many differences as well. Scholars such as Costa, Dutt, Ma, and Noble have noted that in Asian cities the settlements are more compact; there exists a greater reliance upon, and development of, basic public transportation; and there is a much greater mixing of land uses and hence the use of less clearly defined spatial components.76 Additionally, urbanologists have shown that Asian societies have, as shown in Table 2.1, urbanization levels that remain well below those in the world as a whole, and also somewhat below the figure for developing countries in South America as well . 7 7 This is somewhat surprising given that urbanization is normally correlated, at least in the Western world, with increasing levels of real income, and that East and Southeast Asia are better off economically than northern Africa, where levels of urbanization are slightly higher. The distinction that geographers such as Jones have raised for this specific region 7 3 T.G. McGee, "Catalysts or Cancers?," in Leo Jakobson and Ved Prakask (eds.), Urbanization and National Development (Beverly Hills: Sage Publications, 1971), p. 157. 74Fu-Chen Lo and Kamal Salih, "Structural Change and Spatial Transformation: Review of Urbanization in Asia, 1960-80," in Roland J. Fuchs, Gavin W. Jones, and Ernesto M. Pernia (eds.), Urbanization and Urban Policies in Pacific Asia (London: Westview Press, 1987), p. 38. 75Ibid. 76Ibid. 77Jones, op. eit, in note 32, p. 6. 35 is that within the Asian Pacific, urbanization is clearly correlated with levels of economic development.78 As such, differing levels of urbanization and development in Asian countries from the mid-1980s onward have been attributed mostly to the level and type of interaction between the nations concerned and the world economy. As we have seen, in terms of spatial relationships between nations worldwide, Third World countries are certainly subordinate in the world system hierarchy. According to Armstrong and McGee, the Asian Third World's economic experience was relegated to being large suppliers of raw or semi-processed materials to the developed countries and importers of manufactured goods from them, just as Stavrianos intimated a decade earlier.79 Table 2.1. Southeast and East Asian urbanization trends and projections Percent Urban 1960 1970 1980 2000 World Total 33.6 37.2 39.9 48.2 Southeast Asia 17.6 20.2 24.0 35.5 Indonesia 14.6 17.1 22.2 36.5 Thailand 12.5 13.3 17.3 29.4 Philippines 30.3 33.0 37.4 49.0 Malaysia 25.2 27.0 34.2 50.4 Burma (Myanmar) 19.3 22.8 23.9 28.2 Cambodia 10.3 11.7 10.3 14.5 Vietnam 14.7 18.3 19.3 27.1 Laos 7.9 9.6 13.4 25.1 East Asia 25.0 26.9 28.1 32.6 China 21.7 20.1 21.3 25.1 Japan 62.5 71.2 76.2 77.7 Rep. of Korea 27.7 40.7 56.9 72.9 DPR of Korea 40.2 50.1 59.7 72.9 Source: Adapted from Gavin W. Jones, "Urbanization Issues in the Asian-Pacific Region," Asian-Pacific Economic Literature (Vol. 5, No. 2, 1991) p. 6. 7SIbid, p. 7. 79Armstrong and McGee, op. eit, in note 43, p. 104. 36 It is important to recognize that there are many more internal factors that have influenced development, urbanization, and the formation of cities in Asia apart from those emanating from the global economy. Among them are population redistribution policies, trajectories of economic expansion and growth, political autonomy, provisions for infrastructure, and regional balance within national borders. However, by bringing these two broad forces together, the author maintains that both internal and external forces have created a dynamic of individual development and urbanization experience for each country in the region. The combined impact of the processes have been reflected in the varying ways in which these two forces have been articulated, which accounts for the diverse findings and for the heterogeneity of spatial development in the Asia-Pacific. The internationalization of trade and capital flows has remained first among the external factors that have impacted indigenous urbanization and development patterns in East and Southeast Asian economies. Forbes and Thrift have suggested that the combined effects of the expansion of trade between industrialized and developing countries; the development of regional trade regimes; the maturation of international finance and capital markets; and levels of de-industrialization in the old centers of manufacturing, simultane-ously with the rapid growth in industrial output in the developing countries, together have had a long lasting, visible, and major effect on Asia's lesser developed economies.80 Briefly, contemporary Asian economies emerged from the combination of several periods spanning several hundreds of years of interaction in a submissive role between various countries and the world economy. Each phase, colonialism, decolonization, and subsequently the internationalization of production, have shaped the individual countries throughout the entire region. However, variations in how global influences are articulated should not be surprising given the diversity in internal factors such as political persuasion, religion, culture, and ethnicity in each country. 80Forbes and Thrift, op. eit, in note 40, pp. 75-76. 37 In an effort to devise theories that expounded upon the relationship between development and urbanization in the region and on the differences between countries in Asia in terms of urban primacy, Armstrong and McGee, identify four types of urbanization processes that have occurred in the area81, and Lo and Salih make the distinction between three types of spatial transformation that complement the Armstrong and McGee analysis. These pattern distinctions that concern this study, from Lo and Salih, include and are divided among: (a) the Southeast Asian type, which may be further divided between the Malaysia-Thailand subtype and the Philippines-Indonesia subtype; and (b) the East Asian Newly Industrializing Countries (NICs), such example include the city states Singapore and Hong Kong and the states of South Korea and Taiwan. Nonetheless, the centerpiece of the geographers arguments support the dependency paradigm. Since discussion of the finer points and distinctions between variable types a and b contribute little to the central arguments elaborated throughout this study, the approach hereafter in regard to Asian urbanization and cities proceeds along general lines, and where appropriate examples are provided. Overall, the data from peripheral countries revealed that the primary characteristics of cities in the Third World, including Asia, has shown that international forces with varying degrees of influence, with emphasis on the degree of investment dependency, have been identified as determinants of the speed of urbanization and urban growth which has given way to overurbanization. The prevalence of overurbanization, as its contemporary interpretation describes, is the existing imbalance between the urbanization rate and the level of industrialization within Third World countries. It is argued that the consequences of colonization, the decolonization process, then imperialism, and later the internationalization of production and capital, resulted in the reproduction of the global division of labor which also produced overurbanization. Simultaneously, the overurbanization limited the spread of 81For more on those arguments see Armstrong and McGee, op. eit, in note 43, pp. 104-110. 38 industrialization and encouraged rural-to-urbah migration to the core of developed regions of the nation. For example, Thailand's pattern of development and population distribution reveals very high levels of polarized industrialization and by some estimates it is viewed as the most extreme in Southeast Asia. 8 2 It has the lowest level of urbanization with a suggested realistic level of 25 percent, but the highest concentration of 72 percent of its urban population in the largest city, the national capital of Bangkok.8 3 While other cities in Thailand grew only moderately, Bangkok has been growing at an annual rate of 5.5 percent since 1970.8 4 With the heightened pace of economic development in the 1970's the rate of increase in rural-to-urban migration rose and most of it was bound for Bangkok. The first of two of the most outstanding features related to the out-migration trend, and one that Thailand shared with Indonesia and the Philippines, was a marked increase in seasonal migration.85 The second feature, shared in particular with the Philippines, was the rising numbers of young women moving to the capital.86 This was again associated with expanding employment opportunities, but in the service and factory employment.87 Therefore, urban industrialization in cities reinforced the illusion of ample employment opportunities which, combined with the displacement of rural labor due to the increasing poverty of the peasantry, fueled the processes of migration and urban 82Lorraine Corner, "Urbanization, Migration and Development: China and Southeast Asia Compared," in Lincoln H. Day and Ma Xia (eds.), Migration and Urbanization in China (Armonk, New York: M.E. Sharpe, 1994), p. 224. ™Ibid., p. 225. MIbid. *5Ibid. *6Ibid. 87The in-migration of young women into capital cities or more industrialized areas of lesser developed countries is a trend that has been discussed broadly in the literature. As for migration trends in China and specifically in the Shenzhen Special Economic Zone, the works recommended for more detailed information are: Phyllis Andors, "Women and Work in Shenzhen," Bulletin of Concerned Asian Scholars (Vol. 20, No. 3,1998), pp. 22-41; and Fan Dai, "The Feminization of Migrants in the Pearl River Delta," paper presented at the Annual meetings of the Association of American Geographers, Charlotte, North Carolina, April 9-13, 1996. 39 expansion. In the subtype b category mentioned earlier, in part the same analysis would apply to the Republic of Korea (hereafter South Korea), despite the difference between Thailand's GNP and that of one of Asia's industrial powerhouses. South Korea has experienced very rapid urbanization concomitant with its economic transformation. In general, the national government has focused its efforts on promotion of economic growth instead of on controls on urban growth and structure.88 The cost of rapid government-led economic development demonstrated clear signs of urban bias in planning and policymaking.89 Evidence of this trend emerged in policies that promoted a rapidly growing set of satellite cities within the province in which Seoul is located and the growth of industries in the largest centers outside of the Capital Region, particularly the Southeast, between and around Taegu and Pusan. Scholars characterized the bulk of these Asian nations, as generally experiencing uneven development and manifesting urbanization patterns which are identified as expressions of dependent industrialization which have resulted from the continuing incorporation of the peripheral countries into the world capitalist economy. Uneven development causes dependent urbanization to vary from core urbanization. It aggravates urban primacy and causes increased centralization of activities in the major cities of the national space. For instance, the international forces that have impinged upon Asian urbanization processes and the development of cities appeared first as exposure to the European colonial forces. As each countries colonization and decolonization experiences have been different in each case, correspondingly so has its development and urbanization experience. 88Jones, op. eit, in note 32, p. 14. &9See Mick Moore, "Economic Structure and the Politics of Sectoral Bias: East Asian and Other Cases," Journal of Development Studies (Vol. 29, No.4, 1993), pp. 79-128, for a contrary view. The central theme of Moore's argument is that as South Korea has become relatively wealthy over recent decades, it has also shifted from urban to rural biased policies. Moore's explanation for this shift is based on the changing patterns of political interests and coalition-forming possibilities induced by the changes in the economic structure characteristically associated with economic growth. 40 Urban systems accommodate the roles designated them and are characterized as having an employment structure heavily concentrated in the tertiary sector, while overall levels of urbanization remain low.90 "Rapid population increases, resulting from rural-to-urban migration and high rates of natural increase in the cities, have further exacerbated this situation."91 This predominant supposition has lead to considerable doubt as to the possibility of any type of positive urban transformation occurring in many Third World countries. Statistical evidence supporting the central precept of low urban development throughout Asia has suggested that comparatively the major distinctions in urbanization experiences are between the East Asian (South Korea and Taiwan) and that of the capitalists countries of Southeast Asia (ASEAN without Singapore and Brunei). The statistics have shown that these countries have experienced accelerated rates of rural-to-urban migration and rapid urbanization, commencing in the South Korean case in I960.92 Furthermore, the literature indicates that more than half of the populations in South Korea and Taiwan reside in urban settings with decreasing levels in their rural populations. The implication being that migrants are encouraged to migrate because of the high labor-absorptive capacity of urban industry that employs new migrants, producing labor shortages in some skilled manufacturing areas and hence a need for contract labor.93 In Southeast Asia, urbanization levels are dramatically lower with urban areas containing much less than 50 percent of those countries' population (and less then 25 percent in Thailand and Indonesia).94 However, Forbes and Thrift maintain that the small level of urban growth in Southeast Asian countries has been faster than the growth capacity of the urban industrial 90Armstrong and McGee, op. eit, in note 43, p. 104. 9 1 Ibid. 92Forbes and Thrift, op. cit., in note 40, p. 76. ^Ibid. 94Ibid. 41 sector to employ the new work force. This is a recurring phenomenon that is seen in parts of China's Special Economic Zone and specifically in Shenzhen. Consequently, many rural migrants moving to cities, tend to find employment only in the informal sector. What follows this pattern is an increase in the disparities in income distribution between the wage and non-wage work force, and the creation of problems of urban service provision and urban income.95 Each results from the duality found in the differences between the bazaar employment sector and the firm-type of employment that co-exists in the urban industrial sector. In general, the basis for the Asian models of development is growth based on rural-to-urban migration, characterized as cityward migration. What has accounted for this shift in population has been the wide and persistent urban-rural income disparities and rapid economic growth in the urban core and the reclassification of areas previously defined as rural. Therefore, Jones has surmised that natural population increases in the urban core has provided a floor for the urban population growth rate, and rural-urban migration and reclassification supplement this growth.96 To summarize the main points of this section concerning urbanization and development in Asia: first, the urbanization process in the Asian region varies between countries; second, the growth of capital markets and the internationalization of labor has had a significant impact in the area, which according to Armstrong and McGee, has been significant in shaping the urban patterns of the region; and third, regional industrialization has impacted the urban employment structure in several countries throughout Southeast and East Asia. The study now turns its attention to the issue of development and how its relationship to urbanization is specifically expressed in China. Key questions raised are: Is Chinese development exacerbating pre-existing regional uneven conditions? Can the 95lbid. 96Jones, op. eit, in note 32, p. 9. i 42 Chinese central government establish a distribution system within its borders that will guarantee that people in the countryside as those in urbanized areas will have access to their basic needs, food, shelter, employment, and healthcare? Beyond these inquires, the thesis examines urban-to-rural migration and developmental strategies initiated prior to 1978. The aim here is to specifically identify the distinction between recorded urban growth, between real growth due to changing government policies, and the upsurge in industrial and other developmental processes in towns both large and small, and growth that was simply an artifact of changing definitions. 2.5 China's Urban and Regional Development Dilemma When compared with the market led patterns of urbanization developments in the Asian-Pacific nations, China in the reform era has remained a special case. The noted distinctiveness from the general pattern of Asian spatial development is due to over forty years of constant economic reconstruction and reinterpretation of Marxist-Leninist-Maoist ideology. Even the current Chinese Communist regime has also had to resolve the dilemma of balancing the Party's desire to industrialize rapidly with maintaining balanced and equitable economic growth. With regard to China's unique industrialization patterns, the cause and effect of the relationship between industrialization and urbanization and how each has manifested itself in the Chinese landscape causes scholars such as Ma to suspect that current modernization efforts underway in China resemble those of a country seeking to achieve industrialization without high levels of urbanization.97 Thus, this section reviews the major differences in the pattern of urbanization and industrialization that distinguish China from other developing nations and the overall effect of the two forces on the growth and development of Chinese cities in the Maoist and post-reform eras. The approach here is chronological. First, the study examines the treaty port era which sets the background for the subsequent policies that emerged during the Maoist 97Laurence J.C. Ma, "Introduction: The City in Modern China," in Laurence J.C. Ma and Edward W. Hanten (eds.), Urban Development in Modern China (Boulder, Colorado: Westview Press, 1981), p. 1. 43 era of industrialization and that was characterized by a set of pro-rural-self-sufificiency and anti-urban policies. Second, there is a brief look at the Dengist reforms that encourage some forms of urbanization over others. The arguments presented at this juncture are outlined in a general fashion, as the following Chapters, 3 and 4, deal with the more substantive issues related to cities, urbanization, and economic development. Additionally, the soundness of the theories expounded upon throughout this chapter are empirically tested by employing the Shenzhen Special Economic Zone as the test case as presented in Chapter 5. Urbanization levels in Third World Asian countries are low by world standards and China's urbanization levels are comparable to those generally found in the region. The process of urbanization in the People's Republic has progressed slowly and the level of urbanization is rather low. From 1949 to 1983, the percentage of China's urban population rose from 10.6 to 14.6 percent according to official figures, while that of the world (depending on the source) was between 39.9 and 42.2 percent around 1980.9 8 Much of China's reduced urbanization is attributable to Maoist population redistribution policies, national development strategies that focused on developing industrial centers near resources and on stimulating the growth and development of interior centers. Prior to 1978, the goal of Chinese State managers was a more spatially equitable pattern of economic growth and the reduction of large urban systems and cities to avoid such problems as overcrowding, the overlapping of urban services, and the over-concentration of urban industries in the coastal provinces that have remained in sharp contrast to the scarcity of industries in the inland provincial and Autonomous regions. In 1949, the post-revolutionary government was faced with an urbanization trend and system that emerged from the treaty port era. The semicolonial period represented a 98Shunzan Ye, "Urban Development Trends in China," in Frank J. Costa, Ashok K. Dutt, Laurence J.C. Ma, and Allen G. Noble (eds.) Urbanization in Asia (Honolulu, Hawaii: University of Hawaii Press 1989), p. 75. 44 century in which foreign powers grafted onto China's indigenous urban system an alien order that was to influence deeply not only the urban process but also the Chinese urban way of life. This foreign process provided revolutionary China with a negative set of lenses by which to view and measure the Western industrial model of concentrated urban growth. In that era, urbanization and urban growth grew in the coastal cities under Western domination. These territorial bases acquired through concessionary means on semiperman-ent leases were ideally located adjacent to nearly all existing Chinese trade centers of major importance. With Western-managed industrialization in the concession areas, these cities became the largest in the country upsetting the traditional urban hierarchy and representing a new kind of city, radically different from traditional forms, where foreign trade and manufacturing were paramount." A dependency relationship akin to that of the core-periphery model developed between the treaty ports and the rural countryside to the disadvantage of the rural sector. Western commercial practices formed the linkages that integrated the agrarian economy, but only to siphon off from it those products that were considered trade commodities for export. The exploitative nature of this relationship required few administrative responsibil-ities and was primarily for foreign rather than Chinese benefit. As industrialization pro-gressed what emerged in the coastal port cities after 1895 was an economically depressed urban-industrial proletariat who was equally seen by nationalist-minded Chinese as demon-strating the exploitative and oppressive character of the Western-style cities. 1 0 0 Once the Communist Party ascended to power under the leadership of Mao Tse-tung in 1949, the central government response to what became known as the era of humiliation (the treaty port era) was swift and dramatic. Thereafter, for more than two "Pvhoads Murphey, "Chinese Urbanization Under Mao," in Brian J.L. Berry (ed.),Urbanization and Counter-Urbanization (London: Sage Publications, 1976), p. 313. l00Ibid. 45 generations the Maoists struggled to fashion a Chinese model of development that was separate and apart from the Western imposed model prevalent in the coastal cities. Party planners pursued a path they thought was conducive to Chinese indigenous industrial-ization. It was a path characterized by population redistribution policies that assumed an identity of both demographic and spatial redefinition, formed in the name of national development. Specifically, the immediate aims of the Maoist government in the mid-1950's forward was to limit the general growth of cities while redistributing that growth for the purposes of defense and spatial balance, investment, and urban growth. Much of the planning involved shifting populations and industries from the coastal provinces that had benefited from the policies of the earlier Western trade, to the hinterland. Maoists enforced policies that aimed to transform the nature of large cities especially ex-treaty port locals, from consumer to producer cities. For Chinese policy makers consumer cities, mainly larger cities, represented a drain on the central government's funds that at the time heavily subsidized the urban sector. For them, big cities gave rise to many problems related to housing, employment, and infrastructure. The Party's experience with larger cities suggested to it that the concentration of both population and industrial activity in China's major urban systems had only "aggravated the shortages of land, water, energy, and transportation facilities as well as caused concern with problems of providing adequate food supplies should the population of cities increase too rapidly."1 0 1 As part of the central government's revolutionary industrialization process there was a recognized trend to curve urbanization, 101Sidney Goldstein and Alice Goldstein, "Town and City: New Directions in Chinese Urbanization," in R. Yin-Wang Kwok, William L. Parish, Anthony Gar-On Yeh, with Xu Xueqiang (eds.), Chinese Urban Reform: What Model Now? (Armonk, New York: M.E. Sharpe, Inc., 1990), p. 22. 46 and there was also the continuing policy of promoting small-towns over large city growth. 1 0 2 What can be clearly deduced from the literature on Chinese urbanization is that the household registration system was crucial among the urban policies of the Communist Party put in place in 1954. This policy was reinforced by other restrictive migration policies that prevented primarily rural residents from relocating permanently to urban areas. These two policy instruments served to redefine the relationship between rural and urban spaces and caused China's economy to become bifurcated into large-scale heavy industry and grain-producing agriculture with few middle layers or sectoral linkages between them. 1 0 3 The inevitable outcome was the creation of a spatial hierarchy that existed to the economic detriment of the agrarian economy and one that strongly influenced population growth and urbanization. Hence, under Mao and contrary to his original development goals, the rural-urban dichotomy expanded. The central government's interference in areas of internal migration, in conjunction with other policies that were determined discriminatory against the rural provinces, such as state procurements of agricultural goods, contributed greatly to that expansion and the continuation of regional differentiation. Therefore, one can easily extrapolate from the literature that in terms of industrialization and urbanization, which are highly complex processes which revolve around the issue of migration, the household registration system was crucial in Chinese developmental history. Anthony Gar-On Yeh and X u Xueqiang have defined the system as a sophisticated web of authoritarian rule that restricted mobility, especially peasant mobility, at every opportunity. Socially, it served to formally create distinctions in the Chinese populace and divide citizens as either part of the 102William L. Parish, "What Model Now?" in R. Yin-Wang Kwok, William L. Parish, Anthony Gar-On Yeh, with Xu Xueqiang (eds.), Chinese Urban Reform: What Model Now? (Armonk, New York: M.E. Sharpe, Inc., 1990), p. 9. 103Kyung-Sup Chang, "The Peasant Family in the Transition from Maoist to Lewisian Rural Industrialization," Journal of Development Studies (Vol. 29, No. 2, 1993), p. 224. 47 agricultural population or as urban residents. The previously mentioned authors argue that: [t]he system was made more effective by the widespread rationing of goods and state control of jobs and houses through the late 1970s. Without the proper neighborhood registration, one had no access to many highly subsidized and otherwise available consumer necessities — grain, cloth, oil, pork, bean curd, soap, and other goods. The predominandy publicly-owned housing was unavailable as was access to over 90 percent of all state- and neighborhood-controlled jobs. 1 0 4 The policy was an essential component of China's post-1949 urbanization policy which endeavored during the First Five-Year Plan to approximate the industrialization experience of the Soviets. For the Chinese leadership, urbanization in the industrialization process was an element contrary to socialist economic transition and a process that needed to be controlled. Therefore, in a parallel effort to control urban growth, the major principles of the registration system were: first, rural to urban population movement which was strictly controlled and prohibited in some respects. Second, movement from rural places to suburbs and from smaller urban places to larger ones was limited. 1 0 5 Third, the mobility between cities or places of similar sizes did not need regulating; and fourth, the government encouraged movement from large to medium, from medium to small, and from urban to rural locations.106 With these aims in mind, combined with an effort to stop the influx of the rural population into the expanding cities that were industrializing as a result of the First Five-Year Plan (1953-1957)107, Chinese authorities vigorously implemented the mechanism to 104Anthony Gar-On Yeh and Xu Xueqiang, "Changes in City Size and Regional Distribution 1953-1986," in R Yin-Wang Kwok, William L. Parish, and Anthony Gar-On Yeh with Xu Xueqiang (eds.), Chinese Urban Reform: What Model Now? (Armonk, NewYork: M.E. Sharpe, Inc., 1990), p. 46. 105Goldstein and Goldstein, op. cit., in note 101, p. 23. l06lbid. 1 0 7For more on the cities in this period see Yeh and Xueqiang, op. cit., in note 97, pp. 50-55. Briefly, the authors write that the expansion of cities within China's city system followed the Soviet model in which the First Five-Year Plan of (1953-1957) emphasized heavy industry, which remained concentrated in the infrastructure-rich Northeast and the old, large coastal cities. At the same time to reduce regional disparity the Chinese government's central de-urbanization policy favored decentralization of industries from established Northeast and coastal bases to the poorer inner parts of the country. As a result, large cities continued to develop. 48 stem the flow of migrants that originated from two migration streams: a rural-torurban movement pattern motivated by the government's employment of tens of millions of laborers from rural areas for industrial construction in the cities and a stream of similar magnitude that followed the traditional migration route from inland rural areas to border rural areas.108 Though the intent of the household registration system was to reduce the differences in the level of living standards that existed between rural and urban dewellers, it simply contributed to supporting the existing "wall" between the city and the countryside.109 With the agricultural industrialization failures of the People's Commune system that was initiated in 1958, the inception of the Maoist strategies of self-reliance and local initiatives that were emphasized especially during the periods of the Great Leap Forward (GLF) of 1958-60 (also known as the campaign of 'walking on two legs') and the Great Cultural Revolution of 1966-76, the divide between rural and urban existence became a yawning gap under which "geography became the major determinant of living standards and life chances in China." 1 1 0 After 1978, under the influence of Chinese government reformists, who implemented agricultural reform, some of the more restrictive of China's urban policies were also liberalized.111 Consistent with the new economic course, the Party permitted individuals, state-owned and collective enterprises, towns, and cities to actively engage in capitalist practices with little intervention from the central government. While in principle, the Party remained committed to restricting the growth of larger cities (a policy statement initially issued in the 1950s), in the post-1978 period it liberalized its restrictions on all city 1 0 8 Ma Xia, "Changes in the Pattern of Migration in Urban China," in Lincoln H. Day and Ma Xia (eds.), Migration and Urbanization in China (Armonk, New York: M.E. Sharpe, 1994), pp. 193-194. 1 0 9Fan Dai, op. cit., in note 87, p. 4. noJbid. 1 1 ^or more on Chinese urbanization in the post-reform era see Dwight H. Perkins, "The Influences of Economic Reform on China's Urbanization," in R Yin-Wang Kwok, William L. Parish, Anthony Gar-On Yeh, with Xu Xueqiang (eds.), Chinese Urban Reform: What Model Now? (Armonk, New York: M.E. Sharpe, Inc., 1990), pp. 78-106. 49 growth. Figures 2.1, 2.2, and 2.3 are evidence of this shift. A comparison of the three maps has shown that the growth of large Chinese cities and the population levels in those cities escalated between 1970 and 1986. Additionally, much of that growth in those cities occurred within the central and coastal regions. In a major policy reversal, the Party sought the 'proper' development of medium sized cities and encouraged the growth of small cities and towns. A major thrust for urban expansion involved the development of towns. Although these policies had been in effect sporadically since the late 1950s, they were reinvigorated in the early 1980s and have been reiterated in the Seventh Five-Year Plan (1986-1990).112 Where domestic migration, particularly rural-to-urban movement, was concerned, the rigid administrative mechanisms put in place by the Chinese bureaucratic command system to regulate population movement were loosened. Mobility under the Deng Xiaoping regime became half-open, meaning that, as articulated in the 1980s, the government position stated that any population movement from a rural to an urban place that was allowed must be compatible with economic development.113 Part of the policy reversal concerning internal migration was created by several factors, but especially the contract responsibility system of farming based on households, that was initiated in the winter of 1978. 1 1 4 The reform of rural institutions greatly increased individual incentive which simultaneously resulted in a major increase in agricultural production, and as efficiency improved it created an agricultural labor surplus. However, the open-economy policy that enabled China to break with its autarkic past and encouraged foreign direct investment (FDI) in specific locations (the fourteen coastal cities designated as special development zones (see Figure 1.2), the four Special Economic Zones, the opening up of the Pearl 112Goldstein and Goldstein op. eit, in note 101, p. 22. mIbid, p. 23. 114DongFureng, Industrialization and China's Rural Modernization (London: St. Martin's Press, 1992), p.33. 50 Figure 2.1. PopulationGrowth in Large Chinese Cities, 1937-1949 Figure 2.2. Population Growth in Large Chinese Cities, 1953-1970 Source: Clifton W. Pannell, "Recent Growth and Change in Source: Clifton W. Pannell, "Recent Growth and Change in China's Urban System, Urban Development in Modem China China's Urban System," Urban Development in ModernChina (Boulder, Colorado: Westview Press, 1981), p. 110 . (Boulder, Colorado: Westview Press, 1981), p. 110 Figure 2.3. Urban Population Levels in the Major Cities of China, 1986 Source: William L. Parish, "What Model Now?", Chinese Urban Reform.-What Model Nmv? (Armonk, New York: M.E. Sharpe, Inc., 1990), p. 2. 51 River Delta, the Yangtze River Delta, and the Southern Fujian Triangle Area that has centered on Zhangzhou, Quanzhou, and Xiamen as coastal economic zones) created new and expanding employment opportunities. As a result of the open-door policy, it could be argued that in economic terms China has come full circle from the treaty port days. With the development of an outward looking and industrializing economy, migration restrictions in China as they were articulated in the Maoist era became incompatible with reform efforts in the Dengist period and limited the Chinese government from exploiting one of its most valuable resources: abundant cheap and docile labor. Accordingly, the two general trends of internal migration in China involves two coexistent patterns: the one organized and planned, the other essentially spontaneous and unplanned115, and based on the need to recruit from the large pool of surplus labor available from the rural areas. The continued rapid economic growth that has been recorded in the People's Republic since the institutionalization of major policy reforms after 1979, and the improvement in agricultural production provided China with a strong base for further urban development. Central government support of cities of all class sizes, even larger ones, is expected to play a leading role in promoting regional economic growth. Similarly, coastal cities and Special Economic Zones have been called upon by the state to attract foreign investment, facilitate export, diffuse technology and skills, and form linkages with inland provincial regional urban systems, a move that "represents a major departure from the pattern of urbanization prior to 1978. " 1 1 6 China's Geographical and Regional Unevenness Historically, in China there has existed a differentiation between the developed and underdeveloped regions. Apart from natural environmental factors, human condition and population density, the economic performance and the level of urbanization vary greatly 1 1 5Xia, op. eit, in note 108, p. 197. 1 1 6Ye, op. eit, in note 98, p. 89. 52 from area to area. From the treaty port era that began with the arrival of the Portuguese in the sixteenth century, the Chinese coastal regions have been exposed to differing dramatic levels of capital and technology, while the remainder of the country has lagged behind economically. The rural-urban divide has been much greater because of the regional differences. For the most part, areas with access or ones within proximity to the eastern seaboard have traditionally been more advanced, this is seen in Figures 2.4 and 2.5. A comparison of the two reveals that in economic terms (per capita output) the coastal and central regions are far more advanced than the inland western provinces.117 Further complicating the dynamics of development possibilities has been that spatial economic integration would require mediating between the regions with greater resources over the ones that are resource poor. Some are endowed with coal reserves, others with iron ores; some provinces are located by the coast, others are landlocked. The predominate difference is that some provinces have a higher level of urban infrastructure while others are basically rural. 1 1 8 Independent of economic performance, there has been the varying minorities and nationalities that reside in many of the border regions. The differences in languages and customs, have obscured the possibilities of remedy or solutions. For instance, within the nation there are many closely related but mutually unintelligible languages of the Chinese language group, each with a regional focus which possesses many dialects.119 Additionally, the diffusion of technology and skills after the initiation of reform in the western and central regions as opposed to the eastern regions. Urbanization trends are exemplified in this regard, as the migration patterns have revealed that people typically migrate out of un-117Terry Cannon, "Regions: Spatial Inequality and Regional Policy," in Terry Cannon and Alan Jenkins (eds.), The Geography of Contemporary China (London: Routledge, 1990), pp. 50-54. 1 1 8 Wang Xiaoqiang and Bai Nanfeng, The Poverty of Plenty (London: Macmillan Academic and Professional, Ltd., 1991), pp. 23-65. 119Richard Louis Edmonds, "History: Historical Perspectives on the Current Geography of China," in Terry Cannon and Alan Jenkins (eds.), The Geography of Contemporary China (London: Routiedge, 1990), p. 62. Figure 2.4. Per Capita Gross Value of Industrial and Agricultural Output (GVTAO) by County Source: Terry Cannon, "Regions: Spatial Inequality and Regional Policy," The Geography of Contemporary China (London: Routledge, 1990), p. 30. Figure 2.5. Western Region, Central Region, and Eastern Coastal Region of China [ j Western Region {/^ ] Central Region \—~~] Eastern CoJSial Region Autonon-iOui ragioij Source: TcrryCannon, "Regions: Spatial Inequality and Regional Policy," The Geography of Contemporary China (London: Routledge, 1990), p. 31. 54 developed areas to more advance regions for education, skills, and income. This pattern is prevalent in China as verified by the level of migration to the country's eastern seaboard region and the level of skilled employees, the level of personal income earned which can be as little as twice as much or four times higher than the wages in the countryside. The conclusion drawn is that capitalists have been more interested in investing in areas that already have the ability to expand capital growth with rninimal risks. These factors have brought about the noted differences in inter-regional and regional economic performance and hence, in the patterns of economic activities. Defining Urban, Non-Rural, and Rural Space in China In China, in this era of economic liberalization and with the opening up to the outside world, there has been the recent availability of data on Chinese cities that has certainly facilitated the task of understanding their development aims. As of the 1990 census official statistics indicated that the country's urbanization level in 1990 reached 53.9 percent and that the total urban population was about 616.6 million versus 215.3 rnillion for the total 120 non-agricultural population. Unfortunately, these findings do not in themselves diminish the enormous complexity associated with studying Chinese cities and how they are conceptualized and organized. Nor does it ameliorate the immediate problem of establishing a uniform or linear pattern of urbanization for the East Asian country. Administrative changes alone have accounted for widely varied urban populations in China. The perpetual redefining of what constitutes urban and rural have also contributed tremendously to the continuing and shifting perplexity. Definitional problems, for the most part, result from misunderstandings. What exemplifies this problem has been the common mistake made concerning the Chinese-type suburban areas. In the Chinese culture how urban and rural are compiled and configured Wu, op. eit, in note, p. 673. 55 are not directly equal to non-agricultural and agricultural respectively. As Wu suggests, the urban-rural division is by administrative location, while the non-agricultural division is by occupation or hukou status.121 What has contributed to the confusion of urban places and populations have been their ever shifting roles. This remains true at least for the last two generations. Chinese census gathering practices employed a criteria that related to population size and on the percentage of individuals engaged in nonagricultural activity. The Chinese definition of urban, uniquely challenged the Western articulation and definition of urban places. Sometimes the term was a simple combination of where people lived and who was responsible for providing grain needs. Over a forty-year period, commencing with the post-revolutionary era to modernization, the criteria employed in defining urban places and urban population changed several times. In the post-revolutionary period in 1955, the definition was prepared in reference to Soviet and East European models.1 2 2 In the following decade, around 1963, according to Kojima, definitions added tougher urban criteria in view of the economic conditions of the times. In the 1980s, in geographic terms there was a period of intense economic reconstruction, the country's geography underwent especially significant changes that were generally in the direction of lowering standards for qualifying localities 123 as urban. 1 2 1For an extensive explanation of the hukou system see Tiejun Cheng and Mark Selden, "The Origins and Social Consequences of China's Hukou System, The China Quarterly (No. 139, 1994). Briefly, the hukou system is described as the centerpiece in socialist China's effort to create a spatial hierarchy of urban places that ultimately prioritized the city over the countryside. Hukou status resulted in the state controlling population movement, enforcing the permanent exile of urban residents to the countryside, and binding people to the village or city of their birth. 122Reeitsu Kojima, Urbanization and Urban Problems in China (Tokyo: PMC Publications, 1987), p. 3; R Yin-Wang Kwok, "Trends of Urban Planning and Development," in Laurence J.C. Ma and Edward W. Hanten (eds.), Urban Development in Modern China (Boulder, Colorado: Westview Press, Inc., 1981), p. 148. 123 Sidney Goldstein, "Urbanization in China, 1982-87: Effects of Migration and Reclassification," Population and Development Review (Vol. 16, No. 4, 1990), p. 676. 56 For Johnson identifying exactly what is urban in the PRC is an imprecise science. He opines that there are terms that can be used for administrative or statistical purposes which are by no means identical, nor are they accurate from a sociological perspective.124 The same dilemma faces Wu, who claims that "the spatial pattern of administrative division can vary greatly among urban places with similar economic and administrative functions."125 Furthermore, the size of the rural area and ,hence, the size of the agricultural population included in urban administrative divisions can also differ tremendously among urban places with similar size of urban proper or built-up areas. This means, that the territorial extent of administrative units of local government have been altered in many places to such a degree that the separation between rural and urban has been blurred, as rural areas surrounding towns and cities have been incorporated by urban authorities.126 Therefore, between 1964 and 1982 what accounted for the growing distortion in China's urban population data was the official measure of urban scale which was city and town population — this being the aggregate of all non-agricultural population in the designation of urban places.127 In 1982, China's census revealed that of the one billion persons enumerated, 206 million were living in 244 cities and 2,660 other urban places.1 2 8 From 1985 to 1989, the official record reflected a spiral in the urban total from 382 million to 571 million — or more than half the Chinese nation, while cities doubled in number in the late 1980s to 434. 1 2 9 Scholars of Chinese urbanization, such as Kirkby, Tang and Jenkins, have remarked that these numbers indicating significant urban growth in China in that time period are implausible because they reflect a high rate of urban growth and fail to 124Graham E. Johnson, "The Political Economy of Chinese Urbanization: Guangdong and the Pearl River Delta Region," in Greg Guldin and Aidan Southall (eds.),Urban Anthropology in China (New York: E.J. Brill, 1993), p. 176. 1 2 5Wu, op. eit, in note 31, p. 670. 126Wing-Shing Tang and Alan Jenkins, "Urbanisation: Processes, Policies, and Patterns," in Terry Cannon and Alan Jenkins (eds.), Geography of Contemporary China (London: Routledge, 1990), p. 203. 127R.J.R. Kirkby, "Dilemmas of Urbanization: Review and Prospects," in Denis Dwyer (ed.), China: The Next Decade (Essex, England: Longman Scientific & Technical, 1994), p. 132. 128Goldstein and Goldstein, op. eit, in note 69, p. 45. 129Kirkby, op. eit, in note 127, p. 132. 57 recognize the inaccuracies attached to the criteria employed to determine what is urban and what is non-urban. One explanation that accounts for the artificiality of urban population growth in the mid-to-late 1980s was a combination of the reclassification of places as cities as a result of shifting boundary changes that often included large rural areas and the relaxation of the criteria for classifying smaller locations as towns and therefore designating them as places.1 3 0 In an attempt to reduce the inaccuracies created by the use of the broader criteria for enumeration of the urban population, Chinese officials decided to eliminate the confusion and officially designate space in terms that reflected more accurately urban and rural human settlements and for the 1990 census the term urban was more narrowly defined. The Chinese enumeration of districts in the Mainland that are regarded as rural are defined as local neighborhood committees in built-up areas and village committees in agricultural areas.131 For purposes of clarification, the census leadership instructed that village committees, within city and town boundaries were to be classified as rural. With greater specificity built into the definition of what constitutes urban and rural, the 1990 census identified 297 million persons as urban, the equivalent of 26 percent of China's population.132 Yet, with all the data issued in regard to the percentage of China's urban population, the consensus among some scholars is that for them the 'true' number of urban people in China remains a mystery that has yet to be determined. Pace of Urbanization A resurgence in urbanization overall appears to be taking place in China starting with the 1978 economic reforms. Records indicated that between the late 1970s and 1990 China's urban population increased by 80 percent or a five percent annual rate of growth. 130Goldstein and Goldstein, op. cit., in note 69, p. 45. 131Judith Banister, "China's Population Changes and the Economy," in the Joint Economic Committee, Congress of the United States (ed.), China's Economic Dilemmas in the 1990's (London: M.E. Sharpe 1990), p. 246. 132Goldstein and Goldstein, op. cit., in note 69, p. 45. 58 Regardless of the perception of tremendous urban population growth in 1990, China's urban share was recorded at 22 percent, well below the level observed in most of today's developing countries.133 A number of indicators project that China's urbanization level for the millennia will be (if the present rates continue) 40 percent or more by the year 2000. Such rapid urbanization would have serious consequences for the environment in the world's third largest and most populous country, and would suggest a revolution in the consumer habits and lifestyles of Chinese people. Some social scientists forecast that by the year 2010 the country's urban population will grow from almost 28 percent of the total population to 50 percent. 2.6 Summary The organizational structure of the chapter was written in such a way to accomplish two goals. First, it surveyed a wide body of literature on the role of cities in economic development according to conventional modernization theory, Dependency theory, and classical Marxism. Examples were given from the literature related to mature Western economies and the developing economies of East and Southeast Asia. Furthermore, the previous material has analyzed how urban systems are expressed in the capitalist and socialist sectors of East and Southeast Asian societies. For many scholars the peculiar circumstances of city growth in Asia magnify the issues and problems associated with urbanization only researched recently in the discipline. The second goal, which was central to the discussion of the evolution of Third World cities in Asian economies, was to provide a framework by which to analyze the supposition that spatial development in the People's Republic of China is unique. Moreover, to understand why the Chinese experience is particular and dissimilar from that of other Asian nations. What surfaced from the research was that in the China case a 1 3 3Wu, op. cit, in note 31, pp. 691-692. 59 distinct set of circumstances such as, inhabiting the world's largest population and coping with a vast land mass characterized by varying degrees of economic development are among its most distinctive characteristics. More importantly, the relevance of this chapter to the research question has been how cities in varying economic systems and relationships within those systems, reflect the conjuncture of processes at the global and national levels. For the study, major lessons drawn from the literature review are: first, the relationship between agricultural and industrial spheres which provide the dynamic of the urbanization process; second, the role of urbanization within the complex process of economic development; and third, how the competing theoretical approaches attempt to explain the combination of casual mechan-isms that impact on Third World cities and the visible manifestations they assume. In comprehending those urbanization processes connected to economic develop-ment, it is understandable why prior to 1978 the Chinese government pursued a path to national development that assumed three principal characteristics: population redistribu-tion through restrictive migration policies, attentive management of the growth of larger cities and the reduced growth of towns through reclassification. For the post-Liberation Chinese government when urbanization or urban growth appeared inevitable the rule was to redistribute the population or reclassify the area down to a smaller urban place. Before the Dengist reforms the Chinese authorities attempted to shift demographic movement and urban development from the coast to the lesser advanced provinces inland through the use of policy instruments, such as the household registration system. In the post-1978 reform era, and with less restrictive migration and city growth policies, the discourse that surrounds the complex question of appropriate urbanization strategies has shifted. Chinese policy-makers now recognize that urbanization is an inevitable feature attached to the developmental process, and that the main issues are the following. First, the pace of the country's transition from a rural based to an urban society. Second, the regional distribution of urban growth, and finally, the dismantling of the 60 current settlement hierarchy which is biased and inappropriate for a country seeking to achieve national economic growth. However, what remains to be seen is whether China will be able to manage the pace at which cities are growing in the areas of major population growth, or to control what appears as movement of transmigrational proportions from the inland to the coast. With the major post-1978 reforms in place the population of most cities are likely to increase. This is despite the tone of the Chinese government which is that it has expectations of growth but within set parameters. Finally, a conclusion reached from the research is that cities, both newly developed ones and larger ones established earlier in this century, will continue to play a central role in China's efforts to develop. To fully comprehend the urbanization and city growth phenomena that has occurred or has failed to fully mature in the People's Republic of China, it is imperative that the study chart the history of various developmental strategies under the guidance of Mao Tse-tung and the role of cities in the pre-1978 regime. Under Mao the term urbanization was rarely articulated, though it was of major concern. Instead, the Maoist regime stressed issues related to balanced regional economic industrialization enforced through policies that restricted city and population growth in China's coastal regions. Therefore, Chapter 3 chronicles the decades that preceded the Deng Xiaoping era, by examining the efficacy of the Maoist anti-urbanization policies utilized to forge a developmental path conducive to the Chinese condition. 61 CHAPTER 3. SPATIAL REFORM FROM A MAOIST PERSPECTIVE 3.1 Introduction Following a review of the theoretical literature the immediate concern of this chapter is the Maoist approach to spatial and economic development in the post-Liberation period from 1949 to 1976. In that regard, the aim is threefold: first, to examine the economic, spatial, and social preconditions that influenced the character of Mao Tse-tung's socialist econo-mic transformation; second, to provide an analysis and sequence of the major policies, programs, and institutions that the Chinese Party-State apparatus set in place following the founding of the People's Republic of China (PRC). Third, to determine the impact of the socialist development model on China's uneven regional development, urbanization, and specifically on cities in Maoist China. Given the enormity of the subject, space constraint prohibit a detailed accounting of the Maoist era. As such, this chapter limits itself to those aspects of post-1949 China that can effectively be integrated with and are relevant to the predominant themes already presented. The overarching purpose is to provide the necessary background for the following chapters that will also examine the role of cities in China's economic development process and rural-urban relations. 3.2 Economic Development Objectives in the Marxist Era With the victory over the Guomingdong government and the founding of the P R C in October 1949, the major imperative of the Chinese Communist Party (hereafter CCP) was to reduce radically the level of commodity exchange and market relations that thwarted the effective spatial and economic distribution of resources. To impose this reform, Mao Tse-tung and his army captured power from the ruling propertied classes, and then proceeded to destroy the semi-colonial and semi-feudal basis of the country. In the post-revolutionary period, the CCP attempted to build a socialist society whose primary 62 objective was the improved economic existence for workers and peasants. Invoked as a guide and applied as a methodology was Mao's reinterpretation of classical Marxism. 1 3 4 Within this adjusted Marxian framework, the casual sequence of socialist transition involved three steps. Firstly, the radicalization of the superstructure with secondary emphasis on economics. Secondly, the advancement of the continuous politicization of life or the 'politics in command' praxis. Finally, the generation in turn of the transformation of the productive forces and the transformation of the social relations associated with production. The impact of all three would inform pubic and internal policies that were to be directed at ruralization — the modernization of the Chinese agrarian economy ~ that required the building of a nonmarket economy superseded by communalism. Furthermore, there would be directives that would target urbanization in spatial planning, and government decrees would be designed to turn consumer cities and towns into producer ones. In sum, the importance of this Chinese model of modernization that emerged in the post-1949 era was that each of the listed components was to be integrated to fashion procedures and institutions by which the whole Chinese population and the party-state could commit to economic development and the improvement of the livelihood of all people, with special emphasize on peasants. As Frolic remarks, this emphasis emerged as the key index of China's uniqueness.135 Spatial Preconditions for Maoist Development In the area of equity, the Communist leadership sought the elimination of exploitation and inequalities in the moral and material sense, with equal consideration being given to the reduction of rural and urban disparities. In order to moderate the disparities associated with China's space economy pro-ruralization polices emerged in several forms. First, the 134Gregor, op. cit., in note 1, p. 18. 135Michael Frolic, "Reflections on the Chinese Model of Development," Social Forces (Vol 57 No 2 1978), p. 388. 63 persistent aim to mitigate the historic unevenness between the coast and the inland regions under the old treaty port system; second, the promotion of interior industrialization (with the enhancement of national security closely in mind); and third, the instituting of rural collectivization.136 Apart from the considerations of military security, and population growth, the central preoccupation connected to Mao Tse-tung's development effort was that 80 percent of the nation's total population resided in the countryside. Therefore, with the preponderance of the nation residing in rural areas, China's Maoists thought that the welfare and income of this dominant group clearly had a decisive impact on the country as a whole. 1 3 7 Consequently, the reduction in regional disparities so concerned Mao that it led him in 1956 to comment on the national dilemma in his speech on the 'Ten Great Relationships' and to make a commitment to equity in urban-rural planning. Mao insisted that: [t]he coastal industrial base must be put to good use, but to even out the distribution of industry as it develops we must strive to promote industry in the interior.... It does not follow that all new factories should be built in the coastal region. Without doubt, the greater part of the new industry should be located in the interior so that industry may gradually become evenly distributed . . . , 1 3 8 Qualifying Mao's attentiveness to issues related to the agrarian economy would necessitate divergence into his formative years as a political leader (1927-1949) and to give forum to political conjectures about that time period that have been discussed elsewhere.139 To compensate for this loss, the author suggests, simply, that the new Chinese government acknowledged with its anti-urbanism movement that its power base 136Mark Selden, "The Logic and Limits of Chinese Socialist Development," in Neville Maxwell and Bruce McFarlane (eds.), China's Changed Road to Development (New York: Pergamon Press, 1984), pp. 1-2; John G. Gurley, "The Formation of Mao's Economic Strategy, 1927-1949," Monthly Review (Vol. 27, No. 3, 1975), pp. 59-90; Linge and Forbes, op. cit. in note 17, p. 10; Clifton W. Pannell, "Regional Shifts in China's Industrial Output," Professional Geographer (Vol. 40, No. 1, 1988), p. 19. 137Chung-Tong Wu, "Chinese Socialism and Uneven Development," in Dean Forbes and Nigel Thrift (eds.), The Socialist Third World (Oxford: Basil Blackwell, Ltd., 1987), p. 54. ^Selected Works of MAO TSE-TUNG, Volume 5 (Oxford: Pergamon Press, 1977), p. 287. 139Such an account is available in many forms; one particular version I found useful was Gurley, op. cit, in note 136, pp. 58-132. 64 rested within peasant China. Hence, in the minds of the CCP the urgency of income levels within the agricultural community outweighed the necessities of the nation as a whole. 1 4 0 As Cannon, Linge and Forbes have noted, the Chinese Communists endeavored to address the disparities in the economic geography of post-revolutionary China. Although, these had their roots in the treaty port and semi-colonial period, they were exacerbated by a civil war and by anti-Japanese resistance. When the Communists ascended to power, as Figure 3.1 indicates, more than 70 percent of the industrial assets and output (including handicraft output) were concentrated in the coastal areas.141 By comparison the inland region was virtually devoid of modern industry. Specifically, the main concentration of industrial capacity was centered in the lower Yangtze River Basin focused in Shanghai and Jiangsu Province. Beyond this area, the entire coastal region had a growing concentration of urban population, industry, and commerce that was primarily in eight major urban enclaves, some having the distinction of being ex-treaty port cities. The gross value of the output of Beijing, Tianjin, Shanghai, Shenyang, Anshan, Benxi, Dalian, and Fushun, accounted for 55 percent of the total coastal region in 1975. 1 4 2 Yang comments that "China was a typical dual economy, in which a vast agricultural hinterland surrounded the few industrial cities."1 4 3 An example that clearly illustrates this problem is Guizhou Province. This western province is resource rich in coal reserves and aluminum. It also has rich deposits of lead, zinc, iron, cooper, gold, and silver, to name a few. 1 4 4 While, geographically this province is on the fringe of the interior region (see Figure 2.5), it is contiguous to one central and coastal province (respectively Hunan and Guangxi). Nonetheless, as shown in Figure 3.2, 1 4 0RJ.R. Kirkby, Urbanization in China (Sydney, Australia: Croom Helm, 1985), p. 4. 141Yang, op. cit., in note 14, p. 233. 142Ibid, p. 234. l43Ibid. 144Wang and Bai, op. cit., in note 118, p. 21 65 Figure 3.1. Regional Pattern of Industrial Production in Pre-Communist China Source: Clifton W. Pannell, "Regional Shifts in China's Industrial Output," Professional Geographer (Vol. 40, No. 1,1988), p. 21. 66 FlT,l«?' Th»»Cr C a p U a G r ° S S V a J u C Must** and Agricultural Output (GVIAO) for 1981 and 1983 ,n all Provmccs, Municipalities and Autonomous Regions 10 000 million yuan • 1981 G V I A O 1983 G V I A O 1983 average JZ a 3 CD 3 SZ *5 cn cn — Source: Wang Xiaoqiang and Bai Nanfeng, The Poverty of Plenty (London: Macmillan Academic and Professional, Ltd., 1991), p. 3. 67 Guizhou's provincial per capita gross value industrial and agricultural output is well below that of its two neighbors, the coastal province of Guangxi and the central province of Hunan. With Guizhou's proximity to the coast, the assumption has been that business mobility is possible. However, that mobility is possible only if there is transportation in the form of roads available. For this province the problems associated with lack of mobility arise from the lack of capital construction in the area and the limitations of the roads that do exist. About 50 percent of the brigades in the province as a whole cannot be reached by road. 1 4 5 Of the number of those that can be reached by road, they are cut off some of the time. Over 90 percent of Guizhou Provincial highways are among the only means of travel and communication; and yet, only 22.5 percent of these roads are standard, with substandard highways accounting for as much as 77.5 percent.146 In other words, the possibility of Guizhou residents reaching an economy of scale in order to sell their goods in the marketplace is somewhat remote. The irrationality of China's dual economy impacted the modernization strategies of the CCP in three prominent areas: industrial production, militarily, and in inter-sectoral resource imbalances. So vast was the regional differentiation that, in 1958, more than 50 percent of the national industrial output was concentrated in Shanghai-Jiangsu, in Hebei and in southern Manchuria. The inland-coastal dichotomy resulted in a relative lethargy of development in the hinterland that was incapable of supplying the raw materials needed for manufacturing at industrial production centers on the coast. The big distances contributed to the fact that rich resources remained buried in inland areas and could not be properly exploited because of China's underdeveloped transport system.147 l45Ibid, p. 62. l46Ibid., p. 63. 147Yang, op. cit., in note 14, p. 234. 68 Mao's concerns over a more equally distributed industrial pattern also stemmed from his worry over military planning and national defense strategy. The fact that industry was predominantly found in the coastal region made it highly vulnerable to foreign penetration and air attack from Taiwan. Therefore, the heavy concentration of industry in these regions represented a national security risk. Hence, the priority of the central government became to enhance population and industry in segments of the areas along the border between China and the Soviet Union (until relations between the two powers soured in the late 1950s) and to protect China against invasion from a Western regional or international power. 1 4 8 Mao's preoccupation with the perceived threat of armed conflict evolved into a defense strategy given the name the Third Line Concept or the Third Front. Briefly, the thrust of the Third Front strategy was that there would be a strategic area of defense whose major component was a militarized populated region used to guard the country. This rationale provided a major impetus to shift the focus of investment from the coastal zone to remote mountainous regions and away from existing cities. Reinforcing this policy, the Maoist leadership in the 1950's chose inland locations, Baotou, Xi'an, and Lanzhou, as the main economic, military, and administrative centers of north-west China. 1 5 0 The outcome of this policy in conjunction with others will be elaborated upon further in the next section. 148Linge and Forbes, op. cit, in note 17, p. 14. 1 4 9For a detailed examination of the Third Front Concept, see Barry Naughton, "The Third Front: Defence Industrialization in the Chinese Interior," The China Quarterly (No. 115, 1988), pp. 353-386. In Naughton's article the author defines the objectives of this national defense policy as an effort by the Maoist government to create an entire industrial system in parts of the hinterland that would be naturally remote and strategically secure. The area included all the provinces of Sichuan, Yunnan, Guizhou, Gansu, Qinghai and Ningxia, a portion of Shaanxi (south of the Qinling mountains), and the western mountainous portions of Henan, Hubei and Hunan. The Third Front was designed as a large-scale industrial network linking this entire 'rear area' through major transport and industrial facilities. 150Linge and Forbes, op. cit, in note 17, p. 12. 69 Prescription for Marxist Development The new Chinese government attempted to lift China out of poverty and backwardness through socialism. It faced the challenge of modernizing a country with an agrarian economy and a large and increasing population. During socialist China's First Five-Year Plan (1953-57), the rate of the population growth was over 2 percent per annum, an absolute annual increase of over 13 million people.1 5 1 Encumbering development further was China's huge reservoir of untrained labor and the narrow percentage of population that survived above the subsistence level in the traditional economy. 3.3 Socialist Transition 1949-1978 Before preceding with the organization and the rationale of the major policies enacted during the Maoist era of socialist transformation, the thesis establishes the parameters for that inquiry by defining development in general, and socialist development in particular. The purpose is to provide a basis by which the Chinese developmental experience can be evaluated. Generally, the consensus reached on the minimal definition of economic development is that it is a process or the combination of processes that led to capital accumulation and technical improvement, regardless of the political persuasion of the government or its agents that are in charge of making economic decisions.152 Traditionally, the measurement of success of such policies has been rising per-capita income. Yet, socialist economic development, in its purest sense, is distinguished by its methods of industrialization that theoretically benefit the working class: workers, peasants, teachers, health workers and all those whose primary economic role is participation in socially useful labor. 1 5 3 Within the socialist process there should be growing equality, a decline in the levels of absolute and relative poverty, shrinking unemployment and 151Gregor, op. cit., in note 1, p. 81. 152Lippit, op. cit., in note 44, p. 118. l53Ibid 70 underemployment, sharply improved public welfare, relatively balanced urban-rural development, and a sharp curtailment of social and economic inequality.154 This definition is only utilized here and for the following chapters to provide a framework by which to understand the similarities and differences between the status of workers under the Maoist and Dengist regimes. The First Five-Year Planning Period (1953-7) Over a five year period from 1947-1952, China had basically completed a land reform program throughout the countryside along with reconstructing its economy. According to the Party, 1953 marked the end of the new democratic phase and the inauguration of the First Five-Year Plan. 1 5 5 The First Plan, with the assistance of the Soviet Union, provided guidelines for the emerging socialist economy. In August of 1953 Mao set forth the responsibilities of the new period in this form: The party's general line or general task for the transition period is basically to accomplish the country's industrialization and the socialist transformation of agriculture, handicrafts and capitalist industry and commerce over a fairly long period of time.156 Highlighted in the general line were the two pressing tasks for the early phases of the transition: the first was Chinese economic development, focused on industrialization; the second was the long-term transition from private to socialist ownership of the means of production. Drawn directly from the five year plans of the Soviets, the CCP organized rural cooperatives and nationalized industries. Mao admitted that in the early stages of Liberation neither he nor anyone in the Party had experience in managing the economy of an entire nation. As Mao later stated, "... in the period of the first five-year plan we could do little more than copy the Soviet Union." 1 5 7 Accordingly, and predicated on extensive 154Ibid. p. 123. 1 5 5For the purposes of simplification each plan is referred to hereafter as the First Plan, Second Plan, etc. 156Mark Selden and Victor Lippit, "The Transition to Socialism in China," in Mark Selden and Victor Lippit (eds.), The Transition to Socialism in China (London: M.E. Sharpe, Inc., 1982), p. 8. 157Gregor, op. cit., in note 1, p. 40. 71 Soviet technical and financial assistance, the Chinese economy in the mid-1950s prioritized the dynamic role of large, centralized heavy industrial complexes in initiating China's industrial transformation. Other essential parts of the First Plan were State policies that advanced two orders of regional space, urban over rural, the transition of the ownership of the means of production from the private to the state sector, and land reform which was manifested through the progressively larger and more highly evolved collective forms of agriculture. These were promoted as the keys to national economic industrialization and modernization and as the foundation for the socialist development of other sectors. Among the first measures taken to accomplish these goals, the Chinese state took control of nearly 3,000 businesses, including banking institutions, utilities, land and maritime transportation agencies, as well as industrial concerns. A policy of rural reform swept through the countryside emancipating the peasant from the archaic feudal landlord relationship that gave birth to agricultural collectivization. In the fiscal sector, the Communists regulated the supply of commodities and initiated a planning system that began a gradual stabilization and an eventual reduction of price levels. Some of the immediate results were that centralized control allowed the CCP to balance the national budget and in a short two years after their acquisition in 1951, Mao and his adherents eroded hyper-inflation and ended unemployment. Accented during the first phase of plarining was the commanding position that industries gained in the state budget. In the Maoist era, the industrial sector was comprised of 18 cities and were designated focal points of China's heavy industrial drive. On average, these municipalities received over 46 percent of the government's investments, of which 87 percent went to the heavy industrial sector, such as iron, steel, Edward E. Williams, "The 'New Economics' of the People's Republic of China: The Overcentralized Command Economy Failed, Now the Management System Must be Reformed," American Journal of Economics & Sociology (Vol. 49, No. 3, 1990), p. 352. 72 and energy enterprises.159 In 1956, 68 percent of the factories had been nationalized and the remainder were classified as joint state private businesses.160 Under the First Five-Year Plan much of the government allocated investments were made in the northeast,161 such as in the provinces of Heilongjiang and Jilin, to help rehabilitate the war-devastated coastal industrial facilities. However, to rectify the regional economic imbalance and population concentration, almost two-thirds of the major industries were decentralized to inland key-point cities, such as the Taiyuan Steel Works in Shanxi, many of which were small and medium in size, as well as to some of the minorities areas where resources were available.162 In the final months of 1956, 97 percent of the rural households had joined cooperatives, including 88 percent in large collectives of the Soviet type; and over 74,000 handicraft cooperatives were set up including six million craft workers. 1 6 3 Socialist Transition of Urban China State ownership of the means of production and agrarian socialist reform impacted urban China in several ways, most particularly in the area of migration. The initial uninhibited mobility and urban industrialization following 1949 was the trajectory that triggered migratory flows of peasants from the countryside to the cities. Consequently, throughout the early 1950s, mobility was extended to all citizens despite origins. This, coupled with Mao's initial belief that future economic growth and strength rested with a sizable population, resulted in little control on urban population growth. The 1953 census reflected this attitude, as the designation of urban space was less rigid than at the end of the decade. For instance, the official classification of a place that was urban was that it was a county seat or above, had a population that exceeded 2,000 of 1 5 9Wu, op. cit., in note 137, p. 53; and Cheng and Selden, op. cit, in note 121, p. 651. 160Cheng and Selden, ibid., p. 652. 1 6 1Wu, op. cit, in note 137, p. 55. l62Ibid; and Yang, op. cit, in note 14, p. 234. 163Cheng and Selden, op. cit, in note 121, p. 652. 73 which 50 percent or more were in engaged in non-agricultural activities.164 Cities were designated as those which had a population of 20,000 and were the seats of the people's committees at county level or above — anything less was considered a town. With this definition, there was an estimated 5,568 urban places in the 1953 census, of which 166 were cities and 5,402 were towns. 1 6 5 In the same time period, other factors combined to contribute to rural-to-urban migration. The major one among them was found in Article 90 of the first formal constitution which was ratified by the National People's Congress in 1954. That provision alone served to change the composition of regions in China because it guaranteed the freedom of movement and residence. So significant was the attraction of an urban existence to rural residents that with the freedom of mobility from the countryside to cities came a steady flow of people from the western interior provinces to the eastern seaboard. The rapid population growth in China's mega urban regions and major urban areas, as shown in Figure 3.3, illustrates that there is considerable motivation among the rural population in the PRC to move into cities. The 'pull' factors or what attracts Chinese peasants to these areas that mostly lined the coast included urban employment opportunities, benefits such as housing and food grain, and the prestige of a status change. The 'push' factors driving peasants from the countryside included the flight from poorer rural regions, dissatisfaction with the new rural cooperatives, the destruction of small-scale tertiary and manufacturing enterprises, and loss of income-earning opportunities due to state intervention in private commerce. Together, these factors combined to cause China's population in cities to grow rapidly. The share of China's total population in urban areas increased from 10.6 percent in 1949 to 14.6 percent in 1956, with a net gain of 34.6 1 6 4 Wu, op. cit, in note 120, p. 675. 165Ibid. 74 Figure 3.3. China's Major Mega-Urban Regions Source: Mark Yaolin Wang, The Socioeconomic and Spatial Transformation of the Shenyang-Dalian Extended Metropolitan Region of China, 1978-1992 (Ph.D. dissertation, Department of Geography, University of British Columbia, 1996), p. 6. 75 million; rural migrants accounted for 19.8 million of the total increase.166 Subsequently, in same year the number of towns and cities had increased by a total of 157. 1 6 7 With the rising rural to urban migration, the CCP decided to restrict peasant mobility to reverse the escalating urbanization trend. Hindering the process was the ambiguity with which the Republic approached the issue. Cheng and Selden have remarked that in the early years of socialist development the Communist leadership's perspective on urban growth "embodied two contradictory, even schizophrenic, dimensions."168 On the one hand, authorities approached development from an urban-centered viewpoint that stressed the critical role of workers and the cities in the industrialization process. On the hand, they publicly and consistently promoted development of the rural sector. Consistent with its original statement on the eve of Liberation that the future role of cities was clearly to be "transformed from slothful and effete consumer cities into tough purposeful producer cities," 1 6 9 the Party continued to denounce cities as capitalist, associated with imperialism and the conquered opposition forces, the Guomindang. The Chinese leadership, in support of its official position on urbanization and migration, committed itself and its resources to the efficient use of urban labor power. It also sought to rectify regional differentiation and to restrict migratory flows, while periodically transporting urban residents out to rural villages. After 1956, a series of administrative controls were firmly in place to control population flows. Principal among them was the establishment of the household registration system.170 The state now had full and absolute control over the mobility of its population. Measures such as this system were to shape China's communal society by 166Cheng and Selden, op. cit., in note 121, p. 653. 1 6 7Wu, op. cit., in note 137, p. 56. 1 6 8Wu, op. cit., in note 31, p. 651. 169Kirkby, op. cit., in note 140, p. 14. 170Cheng and Selden, op. cit., in note 121, pp. 650-655. 76 creating a spatial hierarchy prioritizing urban places over rural ones, the city over the countryside, and urban workers over farmers. In the succeeding years migration did slow down. However, the Chinese central government's directives only caused the rate of increase of the urban population to decline, they did not manage to stem the flow entirely.171 Another outcome of state intervention in popular mobility was the elimination of the most visible manifestations of poverty in the cities. The combined effect of full employment, welfare measures for urban residents and controls that restricted the size of the urban population, served to create the image that Chinese cities were orderly and that the economy was prosperous. New regulations also helped shape China's countryside from the mid-1950s forward by creating and maintaining a 'wall' between the city and the countryside. The governmental limitations on movement limited opportunity and mobility to the detriment of villagers. In sum, the initial effort to model the prevailing orthodox Soviet growth strategy (SGS) was the only means for the CCP to industrialize within a Marxist context. With the Party anathema to commodity exchange, this perspective appeared well suited to Chinese conditions for socialist development or, at least as the Party understood those conditions at the time and with very little prior reflection. By authorizing the use of the Soviet plan without question, the Maoist government accepted the risks of the 'big push' through sustained high accumulation rates, concentrated growth based upon industry, and discri-minatory policies against agriculture that inevitably led to unforeseen and undesired results. Mao Tse-tung began to have reservations about the SGS from the mid-1950s, identifying it as a "dogmatism contrary to China's unique situation and interests."172 As Party leader he sought an indigenous industrialization alternative to the Soviet mIbid., p. 656. 172Chang, op. cit., in note 103, p. 224. 77 developmental model and attempted to craft policies and organize systems that would rapidly modernize the Chinese rural and urban industrial sectors simultaneously. 77K? Second Five-Year Plan Period (1958-62) The Chinese march toward industrialization in the latter half of the 1950s came under the spell of Mao Tse-tung's personal vision of socialist development. Following the eventual rejection of the Soviet growth strategy came the Sino-Soviet split in 1959 and the subsequent isolation from all the advanced industrial countries. This forced the Chinese into autarky and created a hermetically sealed environment exceedingly conscious of superstructural elements: ideology, systems of authority, philosophical notions of human interaction, and the preoccupation with overcoming prevailing inequities. With Mao now crafting economic policies, political principles were employed to transform economic reality, mobilize the nation's productive forces, and energize China's collective ventures by political command; ergo, the oft-cited slogan of'politics in command.'173 With that in mind, the Second Plan (1958-62) departed from the Stalinist developmental blueprint and revised the original plan prepared by the Party. In its place Mao crafted policies that abandoned the 'conservative notion' of cutting back on production. The Chinese Communist leader utilized the analogy of comparing an underdeveloped China to a woman hobbling along in bound feet, to insist instead, on upsurges, aiming high, and producing bigger and better efforts.174 Mao Tse-tung's response to economic problems was to leap higher and further on the production front with workers expected to perform prodigious feats. Party slogans such as 'overtake Britain in iron and steel and other major industrial production in fifteen or more years', were used to motivate workers recruited for intensive labor campaigns.175 173Gregor, op. cit, in note 1, p. 9. 174Gurley, op. cit., in note 136, p. 63. 175Gregor, op. cit, in note 1, p. 78. 78 Hence, a 'new high tide of production', the Great Leap Forward (GLF) or as it was also known, the 'walking on two legs' campaign, emerged from Maoism. The major component of this movement was the use of massive amounts of labor as human capital to fuel the industrialization drive. Officially, the directive insisted on all sectors of the economy achieving a balance between the five major relationships: industry and agriculture, heavy and light industry, large and small enterprises, modern and indigenous production methods, and centrally and locally operated enterprises.176 The casual sequence as interpreted in the minds of Maoists was to reduce the differences between mental and manual labor, workers and peasants, and city and country specifically. Of the two legs, the more advanced one consisted of a mix of capitalist enterprises located in the northeast and newly built and larger Soviet-funded enterprises. The native leg was small-scale factories, and workshops for indigenous rural development, that supplemented the modern sector, but were still expected to develop at the same pace as the advanced industries.177 This ambitious two-tier approach to modernization was based on the promotion of large-scale production that would eventually turn agriculture into an industry, hence ruralization. In the past, rural-based development centered on improving pre-existing agrarian institutions. By contrast, the People's Communes (a component of the GLF) could develop public farm infrastructure and bridge the gap between farming and other areas of production. In theory, the Maoist concept had the potential to evolve into a basic organizational form of society, combining among other activities, agriculture, industry, commerce, education and militia. 1 7 8 In practice, the outcome was dramatically disappointing. Moreover, where geography was concerned, the methods and policy 176Murphey, op. cit., in note 6, p. 59 177Riskin, op. cit, in note 15, pp. 117-118. 1 8Fureng, op. cit, in note 114, p. 16. 79 instruments implemented reinforced the prioritizing of space while agriculturally industrialization was initiated. Without hesitation or regard to any obstacles ~ material, organizational, or psychological ~ in approximately the same time period, the swift reorganization of the rural economy was ordered and implemented through large-scale cooperatives known as the people's communes. By September of 1958, they had extended throughout China — with the exception of the Tibet Autonomous Region ~ covering 98 per cent of rural households.179 By December of 1958, virtually all 74,000 rural collectives, over 120 million households had been reorganized into some 26,000 rural people's communes averaging roughly 5,000 households each: the immensity of the project corresponded on the average to several townships.180 In less than a year, the entire countryside passed from a mixed system of private ownership of land and the means of production with varying degrees of small-scale mutual aid and elementary forms of cooperation, to large scale collectivization. 1 8 1 Concurrently, the state introduced the strategy of self-reliance. Ideologically, it was a revolutionary statement to the Chinese population, which held universal appeal to Third World countries. It also signified a rejection of the capitalist paradigm advanced by the imperialist forces. The thrust of self-reliance was that China would industrialize from the energy of its masses by repudiating foreign models and injecting national pride into its population. The economic argument for the strategy was to maximize the productiveness of each enterprise, locality, or region from its own resources. For example, small scale-industries were the proto-type for the self-reliance cause, the objective was that each enterprise because of its size and location would have relatively low capital requirements. ™Ibid. 180Riskin, op. cit., in note 15, p. 123. 181 Mark Selden, "Cooperation and Conflict: Cooperative and Collective Formation in China's Countryside," in The Transition to Socialism in China, eds. Mark Selden and Victor Lippit (London: Croom Helm, 1982), p. 69. 80 Furthermore, in place of scarce and expensive capital, intensive labor from the vast peasant pool was substituted. Therefore, local industry was to fill local needs with the use of indigenous skills and local sources of capital. Advancing the strategy required a monumental grassroots mobilization campaign with the aim of turning China's most abundant resource, human labor, into capital that could be diversified. Consequently, millions of small shops and factories were set up by rural communes so that all-around local self-sufficiency would be able to thrive. 1 8 2 The rural sector released labor to assist in boosting iron and steel output in the agricultural and industrial sectors. Limitless use of labor in a mix of projects, such as industrial production, capital construction, and agriculture, was rationalized to accelerate the contribution of the workers who could performed a variety of tasks and therefore, could attain the highest level of self-sufficiency. Even though there was the danger of each worker becoming less than proficient at each particular undertaking, the risk was worth taking to transform the productive forces and the social relations of production. Maoism reminded Party naysayers that "[t]he productivity gains would result from greater work enthusiasm, the contribution of each task to the knowledge needed by the worker for other tasks, greater discipline, and improved relations among various groups of the population as they intermingle in several projects"183 in various locations. Thus, the total concept would lead to the original goal of reducing the three major differences and to creating a self-sufficient, intersectorally linked and balanced rural economy.184 Accelerated capital construction and the pressure to meet the central demand of the boost in output in 1958 created acute shortages in the urban work force. To remedy the scarcity in the labor pool, the CCP issued a directive allowing local administrative units to recruit whatever labor they required to continue the tempo of the industrialization drive. 182Chang op. cit, in note 103, p. 222. 183Gurley, op. cit, in note 136, p. 65. 184Chang, op. cit., in note 103, p. 225. 81 Thirty millions peasant who were recently denied access to urban positions responded to the opportunity with such zealousness that the cities soon became overwhelmed with their presence. After 1958, and up until 1960, the total number of urban workers increased by 19 million and residency in the more advanced regions escalated from 99 to 130 million. These numbers represented an increase in the proportion of the urban population from 15 to 20 percent of the national population in just three years.185 The government mobilization efforts constituted, as Tiejun and Selden have remarked, "the most rapid burst of urbanization in the first three decades of the People's Republic." 1 8 6 Achieving maximum levels of labor efficiency dominated the Second Plan period. Chinese theorists surmised that collectivization would be effectively exploited and capital accumulation would accelerate. The ideological undercurrent of communism during the Maoist period was to fashion a more democratic and egalitarian society by altering the class structure. With that accomplished, and by amalgamating and revolutionizing land ownership and its uses, the post-revolutionary government set out to raise the political consciousness and to mobilize the peasants. So, it introduced a set of alternative economic institutions that attempted to galvanize collective energy of the masses. This mix, in the mind of Maoists, would stimulate cooperative rather than individualistic behavior. Research has shown that the immediate gains attributed to the mobilization of peasants, the big industrial push, and collectivization were that personal income differentials between rich and poor diminished within each community. The specific measure that led to this outcome was, according to the Chinese Communists, the socialist transformation of the public ownership of land and the means of production. Both were the basis for China's unified rural organization of the peasant economy.187 1 8 5 Cheng and Selden, op. cit, in note 121, p. 665. mIbid. 187Selden, op. cit, in note 181, p. 74. 82 Impact and Contradictions of Maoism Much of the activity related to the ruralization of the countryside occurred at the peak of China's harvest season. In the late 1950s, the stress fractures to the economy related to the ill-conceived and poor timetabling of the Great Leap Forward began to reveal themselves. One estimate suggested that farm labor dropped by 41 million people over a 12 month period from 1957 to 1958. Compounding the problems of declining man power to farm the fields, was the expectation that the 1958 grain harvest was reportedly of record size. 1 8 8 Chaos reigned in China's rural regions after 1958, resulting from the perils imposed by food shortages and forced collectivization. The flight of millions of peasants in search of jobs and grain caused an exodus to China's more industrialized areas. Statistics indicate that the urban population rose from 92 million to 130 million (data are not available for 1958 and 1959), an increase of 38 million, with rural migration to the cities accounting for about 30 million people.1 8 9 Ironically, one of the principal reasons for urbanization should have been the principal reason against it. Collectivization, Fureng has suggested, under certain conditions reaps remarkable results. However, collectivization under the Mao regime had mix to poor consequences for the rural population. As such, Maoism began to lose credibility as the leadership's economic plan began to unravel. Factors that combined to create economic havoc in this period were: the false estimates of the harvest and the fact that millions of farmers instead of tilling the land were politically encouraged to occupy themselves with small unrelated industries.190 Those factor in combination with others exacerbated the problems associated with the ongoing creation of the nationwide commune system. Al l eventually contributed to the neglect of harvesting work 188Riskin, op. cit., in note 15, p. 126. 189Marina Basso Farina, "Urbanization, Deurbanization, and Class Struggle in China 1949-79,' InternationalJournal of Urban & Regional Research (Vol. 4, No. 4, 1980), p. 491. 190Wskin, op. cit., in note 15, pp. 126-127. 83 and in the Spring of 1959 the resulting food shortages made themselves felt. Only then had the Chinese government begun to grasp the realities of the economic situation.191 Mao's economic initiative ended with famine consuming large parts of the countryside from 1959-61. This debacle was the result of a massive waste of resources and labor. The misguided and excessive egalitarianism in most People's Communes lead to unmet production targets mainly in the agricultural sector (in 1959 pork, beef, mutton, eggs, sugar and fish were scarce) that resulted in negative economic results and caused many people to migrate to the cities in search of better living conditions. The extent of the failed effort at mass rural industrialization was uncovered by conducting interviews with refugees in Hong Kong who were in China at the time and from the 1982 census. The figures revealed that the GLF was the worst disaster in the twentieth century far outstripping the recent Ethiopian famines in absolute numbers. Statistics revealed that the loss of life over approximately three years related to the economic chaos of the G L F — compounded by flood and drought which destroyed two annual harvests and spoiled the land — caused between 13 million and 26 million excess deaths attributable to hunger and associated illness.1 9 2 Academics such as Fureng have frequently referred to the unequal exchange between agriculture and industry, the rapidity under which collectivization occurred, the implementation of irrational economic procedures (such as the state instituted compulsory system of the procurement of farm products at fixed prices), the rationing of food grains, the lack of material incentives for collective members to increase their labor output, and the prohibition of sideline production in non-farm activities, as contributing to communalism failing in the People's Republic. 1 9 3 Correspondingly, it could be argued that most of the 19llbid 192 Terry Cannon and Alan Jenkins, "Introduction: A Basic Guide to Developments from 1949 to 1989," in Terry Cannon and Alan Jenkins (eds.), The Geography of Contemporary China: The Impact of Deng Xiaoping's Decade (New York: Routledge, 1990), pp. 5-6. 1 3Fureng, .op. cit., in note 114, pp. 14-22. 84 economic mechanisms set in motion during the. Second Plan represented a resource transfer from the traditional to the modern sector which taxed the very survival potential of the Chinese rural economy. Among the criticisms leveled at the GLF was that it was an irrational and premature attempt to achieve full communism "overnight" without the benefit of regional mechanisms in place or strategies to support such a massive economic and systemic transformation. More damning than the actual statistics that have exposed the failures of some policies in the 1950s has been the scholarship that supports the argument that the Chinese central government's boldest departure from the Soviet model of development was even more Stalinist than the measures taken by Stalin. In the aftermath of the Leap, and in the face of escalating rural migration, Maoist had begun a full-scale implementation of the hukou system in an effort to regain control of the economy and society. With rigid controls on migration, social scientists have argued that the gulf between rural and urban areas probably widened, leading to the erection of strong walls dividing the city from the countryside.194 The government appealed to the 20 rriillion or more peasants who had migrated to the cities as a response to the powerful 'pull' of the frenetic industrialization of the GLF, and asked them to return to their villages. When less coercive persuasion failed, the back to the village campaign of mass deportation and downward transfers of peasants from urban centers back to their home village began. To further constrict urban growth and to minimize growing bureacratism, Mao Tse-tung initiated the official transmigration of tens of millions of urban youths, intellectuals, and cadres to the countryside. Still, the most extreme application of the policy was yet to be enforced during the havoc of the Cultural Revolution. In the late 1960s Mao's ideological appeal to the younger Chinese population was buttressed with the appropriate class content giving rise to one of the most repeated sayings of the whole Cultural Revolution: It is 194Johnson, op. cit., in note 124, p. 173; Cheng and Selden, op. cit., in note 121, p. 666. 85 necessary for young people to go to the countryside to be re-educated by the poor and lower-middle peasants.195 With measures such as the 'sending down' campaign, the urban population decreased from 131 million in 1960 to 116 million only three years later.1 9 6 After 1960, individuals needed state approval (which was often denied) to travel intra-regionally, particularly for urban migration. The result was the emergence of an urban hierarchy that stratified human existence in China. On the human agenda, space became the vehicle by which to divide Chinese society. Sharply differentiated structures of socio-economic benefits separated the city from the countryside. Chinese government regulations established two orders for income, housing, grain rations, education, medical and other services. The state participated in passively discriminating against the rural areas by reserving its resources in these sectors disproportionately for those classified as urban residents; hence, in almost every sphere the city was privileged over the countryside, and state sector were privileged workers over collective farmers.197 The ThirdFive-Year Plan (1963-7) and Fourth Five-Year Plan (1968-72) Periods With the inception of the Third Plan, the rural industrialization drive gained momentum with the resurrection of many countryside enterprises. Again, self-reliance resurfaced as Mao called for independent industrial systems in various localities and explicitly objected to any form of specialization. Anti-urban sentiment endured in the Maoist government as the program of sending back peasants to their home village and the downward transfers of the young continued. Other measures for restricting urban growth included downsizing cities by redefining urban, non-agricultural, and rural spaces while restricting population growth in designated cities. For instance, Harry Xiaoping Wu, suggested that the central government resorted to 195Kirkby, op. cit, in note 140, p. 38. 1 9 6Xia, op. cit, in note 108, p. 204. 1 9 7 Cheng and Selden, op. cit., in note 121, p. 667. 86 administrative reclassification to shrink cities by lessening the population limits within certain designated areas. As an example, [fjor the 1964 census the State Council specified two changes in December 1963. First, the city population criterion was generally changed to 100,000 while the size of city suburban area was reduced to such an extent that the share of agricultural population in a city's total population could not exceed 20 percent. Secondly, the town criteria were changed to 3,000 permanent population of which 70 percent must be UNAP, 2,500 permanent population of which 85 percent must be UNAP. As a net result, the 1964 census recorded 3,046 urban places of which 169 were cities (up by 3) and 2,895 were towns (down by 2,507).198 With the central government shifting the boundaries to determine what constituted a city at will, this ultimately led, in some cases, to the misrepresentation of urbanization trends. The result of Chinese policy-makers tampering with territorial boundaries and reclassifying rural and urban spaces resulted in the international questioning of the legitimacy of statistics recorded in the People's Republic. Despite changes in the census process, the manipulation of definitions that determined the size classification of cities, and population decentralization that was extended during the late 1960s, by 1964 there were officially 169 cities — a dozen more than in 1952. 1 9 9 Moreover, with the onset of the Fourth Plan came the ultra-Leftist movement, the Cultural Revolution. Notwithstanding, the political and social upheaval that reigned, the central government continued to emphasize the development of heavy industry, particularly the iron and steel industries.200 The outcome was that rigid centralized planning in agriculture with more then half (54.8 percent) of China's capital investments being devoted to the heavy industrial sector widened the gulf between rural and urban areas.201 The consequences of government intervention, essentially its anti-urban policies and ruralization strategy of development, caused national economic and social confusion. 1 9 8Wu, op. cit., in note 31, pp. 675-676. 1 9 9Wu, op. cit. see note 137, p. 58. ™>Ibid 2QlIbid. 87 William L. Parish describes the consequences of Chinese urban development prior to the reform era: ... large cities were constrained in size and small towns that might have promoted rural development also shrank. With highly subsidized urban living standards, the gap between village and city remained large. Administrative barriers between city and village grew, preventing peasants from moving to cities to enjoy the fruits of urban life. With an emphasis on capital-intensive, heavy industry, which needs few laborers relative to total investment, and on employing all women, the number of urban jobs failed to keep pace with population growth. The result was increasing unemployment for the youth, the sending of seventeen million unemployed youth to the countryside, and much anguish among these youth and their parents. At the height of the Cultural Revolution the industrialization process ceased to function normally as did the bureaucratic structures of authority, with all facets of administrative and central government (with the exception of the People's Liberation Army) falling under attack. With 'politics in command', from 1966 to 1969 the flow of rural migration continued into the cities as the controls for population movement were neglected because of the political instability and administrative paralysis. Yet, the cities could not provide asylum for individuals searching to hide from the chaos because this was an urban centered movement "aimed specially at cutting down urban elites and Party cadres, who were accused of forgetting their duty to 'serve the people', neglecting rural development and promoting instead 'revisionist' and bourgeois (i.e. urban) values."203 Consequently, people fled the cities and returned to the countryside. However, reports indicated that these people were not peasants, but the urban unemployed, students, and intellectuals who had settled in rural China during the 1950's. With the collapse of civil society there was a severe economic downturn: [i]n 1967 industrial output value fell by 13.8 percent. In 1968 it fell by a further 5 percent. Also in 1968 agricultural production declined by 2.5 percent. Although the production figures for the years 1969 and 1970 showed some increase, they were inflated. During the period of the Fourth Five-Year Plan, disruption caused by the Gang of Four was even worse. Many enterprises stopped production and planning conferences could not be held. The annual rate of growth of the gross value of industrial and agricultural output dropped to 7.8 percent with industry declining to 9.1 percent and agriculture to 4 percent. The rate of growth of national income was 5.6 percent. Parish, op. cit., in note 102, p. 4. 203Murphey, .op. cit., in note 6, p. 35. 204Williams, op. cit., in note 158, p. 354. 88 With the death of Mao Tse-tung in 1976 which resulted in the arrest and demise of the Gang of Four, the restoration of national economic planning, and the renewed rise to power of Deng Xiaoping there came an end to the national upheaval. With Deng Xiapoing as paramount leader, China entered an epoch of economic transformation with a hybrid economy, the socialist market economy, which has led to economic recovery and has stimulated nearly two decades of economic growth. 3.4 Summary This chapter has discussed the key features of the Maoist period of industrialization that occurred over a thirty year period, from 1949 to 1976. When the Marxist government ascended to power as an independent and anti-imperialist regime, the Chinese Communist Party under the leadership of Mao Tse-Tung found that China's regional imbalances were the sum of two co-existing and polarized economic positions. The first was the concentration of a few industrial urban establishments in close proximity to and on the coast, which inherited their economic advantages by benefiting from the treaty port era. The second factor was the converse of the first. It was the greater number of inland provinces that were disadvantaged and marginalized by the previous era of development and remained virtually devoid of infra-structure and economic development. Maoists found these geographical conditions of differentiation an unacceptable flaw in China's pattern of urban and industrial growth. Indeed, the major revolutionary goals as identified by Chairman Mao, were the elimination of the twin (and closely interrelated) distinctions between mental and manual labor and between city and countryside. Within this context, the CCP attempted to turn cities from consumer cities into productive cities. From 1949 forward, the Chinese leadership sought to correct these imbalances both for economic reasons and for national security reasons. The core element throughout the four-planning periods was to bring industrial activities closer to sources of raw materials (most of which were situated in the interior of the country) and to promote the reduction of inequalities in 89 living standards between urban coastal residents and peasants who lived in the backward provinces. Concrete measures to meet these goals assumed the form of administrative direc-tives. The central government enforced the three following measures the most. The first was the household registration system that effectively restricted the inland-coastal flow of peasants. The second was the constraints placed on the growth of China's largest cities. The third goal was to disperse urbanization and industrialization more widely. In order to bring to fruition the three previously mentioned goals, the post-1949 Chinese Communist regime spent over three decades re-directing considerable resources, in people and capital, from the rich coastal regions to be re-invested in the interior of the country. Despite political shifts in policy and practice, the central government's intent toward city growth remained consistent throughout much of the Maoist period. It generally sought to restrict the growth of large cities to refocus new development away from the coastal 'consumer' oriented cities to newer developing cities in the interior. New industrial developments were also refocused toward the peripheries of large cities in an effort to redirect growth to fringe areas and reduce big city congestion. One significant outcome of Mao's redistributive polices, was that decentralizing the population erected a 'wall' between the city and country that established two social orders: one that dictated that urban space and employment were considered more privileged than the second order, which was rural space and peasants. In the post-Cultural Revolution period, the Chinese leadership observed that the legacy of Maoism created inequalities. The first was that state investment policies favored the heavy industrial sector, and they were partly responsible for an impoverished agriculture sector. Second, in spite of the policies aimed at a more 'even' distribution of industries, the coastal industrial centers continued to dominate. Though a gradual but small erosion of this domination could be detected, it was clear that the regional differences between coastal, intermediate, and inland regions were still marked. 90 Since 1978, the adoption of the 'Four Modernization's'205, emerged as a response to a host of structural weaknesses - chronic waste and faulty incentives to labor and management that were attributed to some aspects Chinese tradition. These problems, of course, led to recurrent inefficiencies and perpetual stagnation, and were exacerbated by a decade long mass mobilization movement; the effects of which neutralized and actually served as a counterrevolutionary process that arrested development. With the renewed rise of Deng Xiaoping, the CCP has tried to reverse the declining economic growth, the discontent in the countryside and in the cities, and to nationally repudiate the Cultural Revolution. Furthermore, the impetus for economic reform emerged from the desire of the leadership to protect the Chinese Communist government against democratic opposition. Mao's demise created an opportunity that enabled Deng Xiaoping to emerge as paramount leader of the Chinese state and chief architect of the current reform process. The ideological distinction between the Maoist and Dengist reform efforts have been that socialist transition has ultimately led to gradual capitalist economic development in the People's Republic of China. The Dengist model has called for the establishment of economic and technical development zones, the reinforcement of the development potential of core cities, and permitted the coastal and inland disparities to continue while emphasizing cross-provincial economic integration. The efficacy of the Dengist reforms (to be examined in Chapter 4) has been to deliver goods and to offer a more functional economy that has lead to increased Uving standards for the masses. ''""'For more on the 'Four Modernizations' see Immanuel C.Y. Hsu, China Without Mao (Oxford: Oxford University Press, 1990), p. 168. Hsu explains that Deng was the architect of the Four Modernizations. The definition of the reform effort included industry, agriculture, national defense, and science and technology. The key aim was to modernize every sector of the country with a concerted effort and with harmony and coordination of policy. The Open-Door strategy which was also included in the reform policy was in fact the approach implemented to achieve modernization. The aim of the Open-Door policy was to revive the economy. For this policy to function properly it required that the Chinese leadership abandon Mao's long-standing legacy of autarky and that isolationist economic approach be replaced with a set of policies designed to attract foreign capital and technology. 91 Moreover, economic liberalization has advanced the role that cities play in the post-1978 reform era. Large and medium sized urban systems which are mostly located along China's eastern seaboard are viewed officially as primary economic actors in the development process. This is a significant shift from the pre-1978 bureaucratic command model of governance that regulated and constrained the growth of coastal industrial centers. Thus, the following chapter moves beyond this broad-scale conclusion to examine certain consequences that reforms have had for emerging industrialized centers such as the Shenzhen SEZ. 92 CHAPTER 4. THE 1978 ECONOMIC REFORMS AND CHINA'S SPECIAL ECONOMIC ZONE 4.1 Introduction As already noted, the Chinese government's plan of accelerated economic development following 1978 has been based on spatial redeployment with renewed emphasis on the coastal region and open cities. The Dengist regime's emphasis on comparative advantage in regional development in the post-1978 era has expanded the development discussion beyond the Maoist dichotomy of urban versus rural. Therefore, to understand the reform movement in post-Maoist China and its influence on the role that cities play in the process, we must consider the impact on three sectors of the national economy. First, the chapter evaluates rural reform and its effect on the agrarian labor sector, mostly referred to throughout this thesis as surplus farm labor. Second, it reviews the opening up of the national economy to foreign investment and exports; and third, the deregulation of urban based state-owned enterprises. It is the contention of this chapter that the reform of these areas of the Chinese economy have converged to impact on China's urban systems, including the Shenzhen, Special Economic Zone (SSEZ). In order to assess the social and economic realities of migrant workers in the Shenzhen SEZ (as seen in Chapter 5), we must first examine the phenomenon of rural-urban migration and identify the social conditions that have been driving population movement in China since 1978. This analysis is followed by an examination of the CCP's attitude to worker's rights. Furthermore, it reveals how that attitude of the Chinese leadership has influenced its assessment in the process of deregulating urban-based enterprises. With that concern in mind, the chapter investigates the PRC's current developmental strategy by chronologically (from 1978-1993) examining programs set in place to reform Chinese agrarian institutions and the state-owned enterprise system. It also establishes the purpose of Special Economic Zones. The aim is to establish the new roles 93 played by rural areas and cities in this recent period, and to measure the level of impact each reform has had on China's regional development and migration policies. 4.2 1978 Economic Reforms New Rural Economy and Household Responsibility System Reform According to numerous scholars including Putterman, Croll, and Wu and Wenpu, the irrevocable changes to the Chinese countryside since 1979 have been as profound as the great transformation that occurred to Chinese agriculture in 1956, with the formation of cooperatives and communes.206 Therefore, central to the liberalization of rural institutions was the Dengist leadership's desire to initiate the individual incentive factor among Chinese farmers. In other words, the primary goal was to provide an increase in living standards, wherever possible, to as much of this segment of the Chinese society that numbered approximately 900 million peasants in 1993. 2 0 7 To achieve this end, the Chinese government encouraged entrepreneurialship, and this gave rise to the restoration of the principle of "to each according to his work," (a reversal of "to each according to his need").208 Such a change allowed for the diversification and increase in agricultural production through the implementation, in several forms, of the production responsibility system.209 The state's intent with the production responsibility system was to devise agrarian policies that linked the process of farming and related activities to payment or income. Generally, the responsibility system remains a contractual agreement between or among 206Louis Putterman, Continuity and Change in China's Rural Development (New York: Oxford University Press, 1993), p. 9; Elizabeth J. Croll, "The New Peasant Economy in China," in Stephan Feuchtwang, Athar Hussain, and Thierry Pairault (eds.), Transforming China's Economy in the Eighties, Volume I: The Rural Sector, Welfare and Employment (London: Zed Books, 1988), p. 77; Zhan Wu and Liu Wenpu, "Agriculture," in Yu Guangyuan (ed.), China's Socialist Modernization (Beijing: Foreign Languages Press, 1984), p. 209. 207Goldstein, op. cit., in note 4, p. 68. 208Azizur Rahman Khan and Eddy Lee, Agrarian Policies and Institutions in China After Mao (Bangkok: International Labour Organization, 1983), pp. 7-12. 2 0 9For further reading on the responsibility production system and its many distinct forms see Khan and Lee, op. cit., in note 208, pp. 19-38. 94 parties, groups or households entered into with an individual or team with the most capital, equipment, or livestock. Detailed in the agreements are the specifications for production and quotas such as target output. While distribution was a secondary issue, it was considered equally as important. Analogous to other reform measures initiated in 1978, this system was implemented with little or no single model or guideline for reference. Nonetheless, the marketing procedure implemented in Agriculture evolved to full household farming by the end of 1983. 2 1 0 Other reforms that impacted on the structure of Chinese rural life in the period of readjustment (1977-80) included modifications to the state procurement and pricing system. This adjustment, together with loosening many restrictions, led to commercializing rural markets while granting permission to peasants to market-for-profit surplus output in nearby urban areas. In the area of domestic sideline occupation (defined as producing handicraft or almost any produce of a private plot — vegetables and livestock — appeared in town or city markets) prices were determined by the interaction between supply and demand. Naturally, de-institutionalizing collectivization and introducing market initiatives resulted at the onset in an economic surge in personal income for farmers. The evidence showed that peasants became enthusiastic for work when their financial gains became directly linked to their skill and effort. Croll noted overall that between 1979 and 1983 peasants incomes more than doubled from 133.6 yuan to 270.11 yuan. In 1984, the average per capita income was 355 yuan. 2 1 1 To Beijing's credit by 1993 the number of poor people had decreased from a reported 250 million in 1978 to 80 million; moreover, the Chinese bureaucrats claimed that the number of counties designated as poverty-stricken fell from 699 in 1986 to 592 in the early 1990s.212 210Putterman, op. cit., in note 206, p. 34. 2 1 1Croll, op. cit., in note 206, p. 88. 212Facts and Figures, Beijing Review, March 5, 1995, p. 20. 95 While state achievements in rural land reform are significant, the record of successes is blemished with the persistent disparities in urban and rural incomes and regional differentiation. For instance, in 1992, the income gap between urban and rural dwellers widened as personal income in cities averaged $US313 and annual income in the countryside was $US134. 2 1 3 With the new responsibility system, the number of agricultural units were greatly reduced. Such a reduction allowed farms to expand to larger, more modernized units. Additionally, with the initial incorporation of the responsibility system, peasants felt uncertain as to how long the government would lease property, this prevented farmers from investing in the contracted land or maintaining or increasing soil fertility.2 1 4 Terry Sicular ranks among the scholars who have disputed the miracles associated with de-communization. He criticized the notion that modernizing the rural economy has wholly been successful. Rather, he noted that the reform process has been "fitful. " 2 1 5 Listed among Sicular's concerns are the inaccuracies in Chinese publications critiquing the de-centralization of their farm planning system. According to the author: ...few contain concrete facts about the number, levels or regional distribution of plan targets. Explanation of production planning reforms is further made difficult by the fact that planning can take place at many levels of government, from the centre-down to the village. These different levels do not always act in harmony: central planning is not necessarily implemented at lower levels, and lower levels at times initiate their own, independent plans.216 In addition to the suspicions raised about how extensive were the practices of de-centralization in agricultural planning, decision-making, and pricing, were questions raised about the precise manner and timing of how peasants had actually gained from the "new peasant economy". From one quarter queries emerged in connection with social welfare 213Mitsuru Kitano, "The New China: Dynamism and Vulnerability," Pacific Review (Vol. 7, No. 2, 1994), p. 155. 214Ibid.,p. 39. 215Terry Sicular, "Agricultural Planning and Pricing in the Post-Mao Period," The China Quarterly (No 116, 1988), p. 676. 216Ibid. 96 benefits the cornerstone of the socialist system. Thus, Davis concluded that state-led industrialization and bureaucratic reallocation of resources served to exacerbate the increasing differentials between urban and rural existence, rendering China a nation with two separate societies217, while reinforcing the condition of dualism and inequality. Critics of the reform process claimed that re-calculating the reward structure in the workplace, each with its own separate "ladder" of remuneration, led to income disparities that were pre-existing in the Maoist era. Progression of the marketization model in the Chinese rural sector has forced some provincial and local governments to reduce investments to villages, townships, and collectives. According to Putterman, "the abandonment of collective farming meant the disappearance of collectively provided services, including health clinics." 2 1 8 As of the 1950's these welfare and wealth benefits have been traditionally factored into the earnings of Chinese individuals. Therefore, separating, then subtracting these benefits, in effect translated into an individual who essentially earned less in the reform era than in the period prior to 1978. Khan and others, suggests that before stating whether incomes have risen or decreased in the rural sector one must identify the degree to which incomes (for example farm or non-farm) have increased in a number of occupations. Similarly, a problem exists over how to establish mechanisms within the reform system to measure specifically what incomes have remained relatively the same, as oppose to those incomes that have decreased with the transitions occurring within the Chinese rural economy. The additional problem that arises in calculating rural incomes is how to factor into the differential equation differing regional development levels. Accordingly, Khan collaborated with other scholars and conducted a survey in 1988 of over 10,000 households in 28 provinces. The 217Deborah Davis, "Chinese Social Welfare: Policies and Outcomes," The China Quarterly (No 119 1989), p. 577. 218Putterman, op. cit., in note 206, p. 39. 97 empirical evidence revealed several observations about rural earnings and raised even more questions about previous calculations of rural and urban incomes in Chinese and non-Chinese scholarship and publications.219 A synopsis of the survey indicates that in condensed and basic terms, that rich Chinese peasants derive most of their income from various sources, such as wage employment, non-wage income from enterprises, and property income. Moreover, higher-income earning farmers also received parts of their wages from sales of farm and non-farm produce and in the form of rental value housing. However, it should be noted that for these farmers, more income is derived from overall family production and their status is bolstered by the lower rate of tax that they pay. In contrast, poor farmers were profiled as living in households that received most of their income from family production of farm and non-farm output, the greater proportion of which remained in the household for consumption. Apart from differences in income and the rental value of owned housing, as Khan et. al. concluded that poor farmers earned less than the average person and paid a higher rate of net taxes.2 2 0 On the matter of the rural poor, Mao Tse-tung's original goal was to transfer urban wealth to the rural regions. Yet, there are many studies which show that this approach has been elusive for the Dengist regime. In the post-1978 era, issues related to poverty in the Chinese countryside persist; more specifically, the rising inequality in personal incomes and opportunities and personal development has sparked outbreaks of civil disobedience in the rural sector.221 In the post-collective era, there have been acts of protest by some groups of rural residents against certain reforms. This is an indication that the transition from communal living that at one time guaranteed employment, entitlement to collective output, and welfare benefits, is missed. The paradigm that has emerged to 219Azizur Rahman Khan, Keith Griffin, Carl Riskin, and Zhao Renwei, "Sources of Income Inequality in Post-Reform China," The China Economic Review (Vol. 4, No. 1, 1993), p. 24. 220Ibid 221"Revolt of the Peasants," The Economist, 19 June 1993, p. 33. 98 replace the socialist approach has been a series of measures enacted in the framework of a mixed-economy with very little overall vision. The systemic changes occurring to China's economic institutions have come at a cost that has given rise to discontent in the countryside and has resulted in surplus labor and massive out-migration to the more advanced provinces such as Guangdong.222 Other observations concerning the emerging tide of surplus labor relate to the utilization of peasants in the fields. Previously, the inefficient use of peasant labor absorbed a predominantly large segment of this population. However, the decline of labor use on farms has been attributed to the Dengist reform efforts. Listed among them are: the new division of labor, the diversification of the rural economy, incentive features attached to target output, and the new calculations in remuneration.223 The result of all of these features in conjunction with others have improved agricultural efficiency on farms. The contradiction that has arisen following the reform of the countryside has been the creation of a large pool of surplus laborers. As such, international press reports documenting the domestic crisis have confirmed that disgruntled peasants were migrating in large numbers to China's coastal cities. Thus, the Nikkei Weekly reported that a document circulated by unofficial sources revealed that in 1993 the Chinese countryside was involved in 6,230 disturbances and that the serious cases involved burning and looting of government buildings, banks, and township cooperatives.224 Reportedly, peasants were angered by non-payment for services delivered, taxes, and Party corruption. Some observers attributed peasant unrest to taxes by relating stories of peasants being beaten or jailed i f unable to pay levies imposed.2 2 5 Corroborating other reports of tax revolts was the Economist, which cited a specific case in Sichuan province where 222Kitano, op. cit., in note 213, p. 155. 2 2 3Croll, op. cit., in note 206, p. 95. 2 2 4Greg Austin, "China is Facing a Public-Order Crisis of Alarming Proportions," Nikkei Weekly, 13 February 1995. 2 2 5 Goldstein, op. cit., in note 4, p. 68. 99 peasants were officially required to pay $5 to $10 fee to help build a highway.2 2 6 Other complaints from rural dwellers were that rural incomes have failed to keep pace with inflation, and the consequence of provincial budget deficits has meant that Communist officials have had to forgo paying in cash and have had to resort to reimbursing farmers for their grain with promissory notes. Throughout the century, as McGee has reiterated, the driving force in the levels and degree of migration remains economic discontent. In the China case, for the most part, the validity of this argument seems to support the supposition. For example, rural to urban migration figures indicated that in 1994, 35 million people 2 2 7 migrated from poor rural areas such as Nuluerhu and Maowusu mountainous areas in Central China and North Shaanxi and Sanxi in Western China to cities. The Los Angeles Times calculated that in Beijing, in-migration from other parts of China was an estimated 1.6 million and that for China as a whole the number of peasants moving to more prosperous communities exceeded 80 million, more than the population of Germany.2 2 8 Specifically, Wang remarked that inland-to-coastal migration escalated between 1978 to 1987. 2 2 9 The geographer noted that since the establishment of the Special Economic Zones and other employment centers on the coast, China's migration patterns have reflected a general and voluntary population transfer to the economically vibrant coastal region. As Figure 4.1 indicates this inland-to-coast migration was characterized by a concentration of migrants in several economically advanced provinces such as Guangdong in south China; Jiangsu, Zhejiang, and Shanghai in the Yangtze Delta; Beijing, Tianjin, and Shandong in north China; and Liaoning in northeast China. 2 3 0 22677*e Economist, op. cit. in note 221, p. 33; andKitano, op. cit., in note 213, p. 155. 2 2 7Mark O'Neill, "Migrants Close China's City-Country Gap," The Japan Times, 16 March 1995. ^Los Angeles Times, "China Trying to Count the Migrants." Reprint in The Daily Yomiuri, 20 November 1994, p. D7. 229Wang, op. cit., in note 27, p. 51. ™Ibid, p. 52. 100 Figure 4.1. Migration Patterns, 1982-1987 Source: Mark Yaolin Wang, "China's Core Economic Regions and Their Hinterlands," Wzstern Geography (Volume 4, 1994). p. 52. 101 The predominant motivations behind migration are that development and modernization has impacted the occupational and residential distribution of the population and that of the labor force almost simultaneously. Still, the constant here is that migration is a universal component and should logically be calculated in the development plans of most nations. Therefore, in this respect, China is not different but consistent with other patterns of economic trends in the modernization process. Where China does differ with other nations in terms of migration is that it has actively practiced resettling urban residents in the countryside and restricted migration that has resulted in a significantly slower rate of urbanization and contributed to some forms of rural development.231 Furthermore, it could be argued that when Chinese policy-makers lifted some of the household registration system's restrictions on peasant mobility, their overall plan included the development of more cities. With 22 percent of the world's population and only 7 percent of the globe's arable land, an alternative plan to the persistent problems of rural China was sought. One solution, cited in a recent report suggested that a Chinese policy goal for the mid-21st century has been to reduce the population in the countryside and increase the proportions living in cities. 2 3 2 This infers, that relaxing the classification for an area to achieve city status was a policy initiative that worked in tandem with the reduction in agricultural population. Such an assertion is supported by studies showing that since 1978 there has been a gradual increase in the number of new cities. By 1986, China recorded over two hundred new cities, which constituted almost half of its total cities. 2 3 3 Other scholarship suggested that the term "blind currents"234, is a misnomer, but instead, suggested that chain migration was more appropriate. Hsieh deduced from his 2 3 ^am Wing Chan, Cities with Invisible Walls (New York: Oxford University Press, 1994), p. 11. 232"Birth of the Instant City," The Economist, 10 September 1994, p. 68. 2 3 3Yeh and Xueqiang, op. cit, in note 104, pp. 50-51. 234Winston Hsieh, "Migrant Peasant Workers in China: The PRC's Rural Crisis in an Historical Perspective, in George T. Yu (ed.), China in Transition (New York: University Press of America, 1993), p. 91. For several reasons the author, Hsieh, prefers to use the term chain migration rather than blind 102 research that the reasons for rural laborers leaving their villages varied and were not always tied directly or simply to economics. In a survey he conducted, the predominant answers given for movement were more traditional. People in transition reported that they left their communities because of high expectations from family members and residents of the village, the personal dream of earning a fortune, or a more ambitious goal of obtaining a status change, from "peasantry to urban residents."235 While all of the above personal motivations appear to have driven the recent wave of migration in China, it could also be argued that the government of the People's Republic viewed labor in the countryside as a potential resource. Therefore, the central government's liberalization of administrative controls on mobility was an act to supply specifically the industrialization momentum occurring in the southeastern provinces, especially in SEZs. Nonetheless, migrant laborers have caused a myriad of problems to provincial and local governments in terms of infrastructure, space, and employment. Yet, outside of the status-driven urban employee, the only source of cheap and docile labor are migrants. Furthermore, within the migratory population there have been entrepreneurs who have started businesses, people who became housemaids, tailors, managers of privately-owned restaurants or clubs, started street markets, which were in many respects started to supply the needs of the urban consumer.236 Whether unintended or intentional, the effects of de-communization were that it created a floating population. The assumption here, is that it is unimaginable that the Chinese leadership failed to recognize the danger of a floating population given the currents. Hsieh claims that blind current in China describes a peasant stream that can be characterized as one that has very little if any social contact in the cities. Instead, the author argues that for the most part peasants migrating to cities are following in the footsteps of others and that individuals usually had an idea about job opportunities. Also, the term characterizes peasant as refugees who abandoned their homestead because of natural disasters rather than individuals seeking to fulfill personal dreams and desires. 235Ibid. 2 3 6Yeh and Xueqiang, op. cit., in note 104, p. 46. 103 traumatic outcome of the Cultural Revolution. More remarkable, is that it appeared that the central government was purposely releasing farmers from the land. Research concerning the reform of China's economic systems has revealed that it was three separate official acts that exacerbated inland-coastal migration and created more surplus labor. The first official act was the dissolution of the people's communes by the end of 1982 which created visible surplus labor. 2 3 7 The second one, was the liberalization in 1984 of the household registration system that permitted peasants to move their registry to towns with a population of 100,000 or less which ultimately contributed to the labor problem. 2 3 8 Finally, in 1986 the Chinese State Council enacted four provisional laws concerning employment in the state sector, among them was the elimination of the state allocation of jobs as well as life-time employment practices.239 Each of these policy-decisions ultimately led to the formation of a market for labor that did not previously exist in China before 1978. Therefore, one assumption is that Chinese state managers were cognizant of the risk and relinquished to the gamble for the sake of continued modernization. World Bank officials tabled a report issued in 1992 that supported this hypothesis. Contents of the report related to agricultural reform suggested that the intent of the Chinese government in reforming agrarian institutions was threefold. The first suggestion was to create a level of surplus labor that would be available for investment, to have a ready pool of enthusiastic unemployed workers accessible for the emerging sources of employment. The second suggestion was to create vast opportunities for entrepreneurial activities to emerge where rapid and high profits could be earned; and the third suggestion was to allow local governments to foster such new types of labor intensive industries.240 237Keiko Wakabayashi, "Migration from Rural to Urban Areas in China," Developing Economies (Vol. 2, No. 4, 1990), p. 503. 238/Z>/rf. *9ibid 240World Bank, China: Reform and the Role of the Plan in the 1990's (Washington, D.C: The World Bank, 1992), p. 44. 104 In conclusion, rural reforms such as liberalizing the household responsibility system and agricultural modernization programs have given rise to a far reduced demand for labor in rural areas. In the Chinese countryside, officials estimate that there are 130 million surplus workers. However, World Bank figures indicate there are about 20 million more than actually reported, for a total of 150 million people without regular work because of rising farm productivity. This in turn has worsened income distribution within rural settlements, which has led to a wave of migration bound for Special Economic Zones and elsewhere along China's eastern seaboard. Chinese officials estimate that thirty million peasants have flocked in blind flight to cities such as Shanghai, Tianjin, Beijing, Guangzhou, and Shenzhen, in search of work. One estimate tracking migration patterns in China has suggested that 10 percent of the country's population has moved from the countryside to the city. 2 4 1 Reform of the State-Owned Enterprises (SOEs) System Divestment of the Marxist model of development has been implemented in China, especially in the case of the urban industrial sector, to relieve Beijing's sense of crisis over economic stagnation. Only in retrospect has it been evident that reform of the state-enterprise system would prove to be among the most daunting in the liberalization process. Since 1979, the Chinese state has had the colossal task of imposing market-like discipline on state-controlled concerns that were previously government directed. The social and official responses that emerged in the advancement of enterprise autonomy are explored throughout this section. Chinese state-owned industries in the pre-reform era were primarily characterized as ascending from the orthodox version of socialist political economy that traditionally required a pervasive state to regulate industry by means of centralized directive plans, enforced by a network of political and administrative agencies. In the pre-1978 period, 2410rville Schell, "Twilight of the Titan: China — The End of an Era," The Nation (1995 July 17)[Online]. Available: LEXIS Library: NEXIS File: ASIAPC. 105 state enterprises functioned as an institutionalized publicly-owned body established by the central government for the administration of the Chinese urban industrial economy. Under the rubric of these nationalized businesses various governmental activities converged and connected, such as the management of state-industries, labor recruitment, and the bureaucratic allocation of housing, education, and health benefits as related to employment, commodity circulation, and price policy. 2 4 2 Kizaki's research has shown that the establishment of Chinese operations can be roughly divided into three sets: SOEs established in the pre-Revolutionary period or during the First Plarrning Period (1952-1956), centrally directed industries that emerged during the Great Leap Forward period, and those established between 1965 and 1975. 2 4 3 Several sources, including Hodder, Yahuda, and Yichun and Costa cited that their inquiries into the number of state-operated businesses in the urban industrial sector had been hampered by inaccurate data.2 4 4 Though, according to Klenner and Wiesegart, in 1985 there were approximately 300 to 400-thousand state-owned enterprises in mainland China 2 4 5 In this regard, the author has decided to rely on Hodder's figure which suggested that even though the number of state-controlled enterprises remained ambiguous, there were in 1989 over 100-thousand state-owned enterprises in urban areas that accounted for 77 percent of the industrial output.246 242Gordon White, "Evolving Relations between State and Markets in the Reform of China's Urban -Industrial Economy," in Stephan Feuchtwang, Athar Hussain, and Thierry Pairault (eds.), Transforming China's Economy in the Eighties (Boulder, Colorado: Westview Press, 1988), pp. 14-17. 243Midori Kizaki, "Changing State-Enterprise Management in China During its Economic Reform Period," Developing Economies (Vol. 28, No. 4, 1990), p. 453. 244Rupert Hodder, "State, Collective and Private Industry in China's Evolving Economy," in Denis Dwyer (ed.), China: The Next Decade (Essex, England: Longman Scientific & Technical, 1994), p. 119. 245Wolfgang Klenner and Kurt Wiesegart, The Chinese Economy: Structure and Reform in the Domestic Economy and in Foreign Trade (Oxford, UK: Transaction Books, 1985), p. 25. In this source the aforementioned numbers in the text of the thesis included at the time of publication state-operated firms, collectively-owned industry, commonly located in rural areas, and sometimes joint-venture firms. While their differences have generated considerable debate and questions among scholars, and their numbers remain ambiguous, the author felt obligated to include empirical fact as to the number of Chinese owned-firms in the PRC. 246Hodder, op. cit., in note 244, p. 119. 106 Given the preponderance of state directed urban enterprises, the vertical linkages between the regime and state corporations combined to result in firms becoming stewards of the regime; therefore, it is not surprising that the industrial sector became the cornerstone of the Chinese economy and has remained the chief source of government revenues.247 Government procured funds were derived from a variety of SOEs that ranged from airlines to steel, chemical, and energy producers as well as bicycle makers and some of them have been responsible for roughly half of China's industrial output of more than $US80 billion. 2 4 8 Therefore, the diminishing returns of these various firms, combined to impact heavily on a government seeking reform from a perspective of aggregate growth set in national economic development terms. Noteworthy in the post-reform era has been that SOEs continue to impose substantial economic losses to the state and the banking system. Government investment in state-owned firms was 50 billion yuan ($US 6 billion) in 1978. 2 4 9 Still in 1992, statistics revealed that comparatively, SOEs remained a far greater burden to the banking sector than the inefficiencies found in the central bodies of the government. Opposition to these findings were presented in the Chinese press when in 1995 the China Daily reported that the State Statistics Bureau claimed that, the "[s]tate's factory output grew by 10.9 percent over last year and that they achieved an incremental output value of 92.5 billion yuan ($US11 billion). 2 5 0 Conflicting evidence as to the economic recovery of SOEs surfaced in the same publication in the same year, which published that the combined debt to banks of all the Chinese state-operated businesses in 1994 reached 1 trillion yuan ($US 120 2 4 7Zhai Linyu, "Current Situation and Problems of China's State Enterprises," JETRO China Newsletter No. 98, (May-June 1992), p. 9. 248"China Stirs Its Sleeping Giants," The Economist, 17 August 1994, p. 53. 2 4 9 Fu Jian, "State Must Tackle Firms' Debt," China Daily, 6 April 1995. 250 W U Yunhe, "State-Run Firms See Marked Growth," China Daily, 10 April 1995. 107 billion). 2 5 1 Information in a World Bank report supported the latter assertion, concluding that,"... SOEs have made a progressively declining net contribution to the budget."252 To correct the inefficiencies associated with the central administrative management of state concerns in 1978, the Chinese reformers introduced a set of market-oriented reforms to ease declining productivity and financial losses in SOEs. Reformists resolved that they should focus their efforts on economic irrationalities of how enterprises operated and sought measures to place constraints on the ubiquitous nature of state involvement. With that in mind, Chinese economists specifically targeted the over concentration of state management power. White stated in 1984 that: [although successive waves of administrative decentralization had weakened the branch principle and diffused power to localities, from the point of view of the enterprises, the identity of their superiors might have changed but the basic fact of administrative subordination had not. Regardless of whether the superior unit was a central or a local bureau, the same hierarchical logic of directive planning operated. Put another way, vertical economic linkages predominated over horizontal....253 However, within this central directive framework other critical defects arose in the function of state-controlled enterprises such as: the planning ethos of production for plan not market, meaning that the predominant result was that enterprises sought increased output target irrespective of whether products were needed or not, the outcome of which was negative economic growth and supply bottlenecks and overstocking of products. With regard to the productive forces within the socialist employment structure the decree of full-employment without the consideration of necessity resulted in institutionalized latent forms of surplus labor, disguised under the compulsory allocation of job assignments. To ameliorate the dominance of the state in Chinese enterprises, and the statist logic it imposed on the economy and on the economy of factories that clearly hindered economic performance, reformers implemented measures to correct the planning systems within which state-controlled enterprises operated. They attempted to alter fundamentally 251Jian, op. cit, in note 249. 252WorldBank, op. cit, in note 240, p.23. 253White, op. cit, in note 242, p. 44. 108 and re-make state firms in the image of the market-conforming behavior of state enterprises operating in competitive environments elsewhere in East As ia . 2 5 4 Official discussion of the privatization of SOEs began intrinsically at the watershed Third Plenum of the CCP Central Committee in December of 1978. Prior to that, discussions started in July of 1978, with the development of the CCP Central Committee's Draft Decision Concerning Some Problems in Speeding up the Development of Industry, known as the thirty-point decision.2 5 5 Thereafter an academic, Hu Qiaomu, proposed adjustments to the state machine with a series of recommendations that included a method which recommended correction in the relationship between three forces — the state, enterprises, and workers. The Chinese government's concern together with Hu's other proposals, paved the way for a surge of critical reformist literature in the latter part of 1978. In response, pilot programs for expanding enterprise autonomy were begun in Sichuan province in October of 1978. In the move away from the traditional model to a more empirically functional archetype, a more rigorous form of decentralization materialized as enterprises were able to exercise greater autonomy. Several concurrent solutions arose that facilitated Chinese state managers to attempt to meet their proposed objectives. Among the initial ones were: first, was the centerpiece of reform in the urban enterprise-system, between 1979 and 1984. It consisted of an expansion of autonomy mainly based on the introduction of the system of responsibility of factory directors. This particular reform of state-owned interests allowed the distinction between state administrative organs and industrial enterprise management to emerge.256 Secondly, Chinese reformers made changes to the employment structure that required the dismantling of life-time tenure in the workplace, diversifying the allocation of wages, and implementing a reward-penalty system. Lastly, 254Ross Garnaut, "China's Reforms in International Context," in Ross Garnaut and Liu Guoguang (eds.), Economic Reform and Internationalisation (NSW, Australia: Allen & Unwin, 1992), p. 19. 255White, op. cit., in note 242, p. 46. 2 5 6Zhai, op. cit., in note 247, p. 8. 109 the Chinese leadership's official act of reforming intra-firm relationship by introducing provisions that authorized enterprises to produce according to market needs and to supply and receive payment for services rendered in a commercial fashion.257 For central administrators complete reform has been hindered by the proviso of the Chinese central government that distinctions raised would remain within the context of the existing and sacred state-dominated structure of ownership.258 The contract management responsibility system which was gradually incorporated was the initial step in dismantling the bureaucracy. Cadres of the responsible ministries who had originally held direct control over state-enterprises under the old system, were now required to entrust their operation to managers through contracts. By the end of 1988 the system of giving responsibility to the factory director was being applied in 95 percent of the state industrial and commercial enterprises.259 Under this system the principles of competition began to function, if only partially, in Chinese enterprises. In 1988, 35.5 per cent of state-owned enterprises contracted for quotas through competitive bidding. In cases where the contracted quotas are not fulfilled, the system calls for the risk to be borne by the top manager, by management as a whole, or by the employees as a collective. This risk-taking system is currently applied to 25 per cent of the Chinese state-owned enterprises.260 On the one hand, the result of deregulating sectors of the urban industrial economy resulted in the instituting of the pursuit-for-profit motive, which meant that enterprises now had discretionary powers over production, marketing, and investment. With the move toward greater commercialization, several market imperatives emerged. Hodder writes: 257Francois Gipouloux, "Industrial Restructuring and Autonomy of Enterprises in China: Is Reform Possible?," in Stephan Feuchtwang, Afhar Hussain, Thierry Pairault (eds.), Transforming China's Economy in the Eighties (Boulder, Colorado: Westview Press, 1988), pp. 110-111 258Riskin, op. cit., in note 2, p. 316. 259Ky6ichi Ishihara, China's Conversion to a Market Economy (Tokyo: Institute of Developing Economies, 1993), p. 100. 2 6 0 Ibid. 110 [r]ather than handing nearly all profits over to the state, state-run enterprises were to pay a series of taxes at rates stipulated before production began. In practice, an enterprise could now retain anything up to 40 percent or more of its profits. Although a stipulated proportion had to be used for establishing reserve funds, depreciation funds, funds for the development of production, for trial manufacture of new products, for repairs, and to meet the enterprise's commitment to the welfare of its employees, the enterprise now had control over the manage-ment of these funds. The remainder of its profits could be used as the enterprise so wished.261 In this phase of the reform movement a subsequent enterprise reform took shape, altering the intra-enterprise relationship. The newly incorporated mode of interaction between industrial entities required that: horizontal linkages were to replace the vertical command which coordinated administrative units; horizontal linkages would thereby enable the unrestricted flow of raw materials, funds, equipment, labor and goods. Each industrial enterprise would be connected to the rest through these linkages, allowing each settlement and region to be integrated into the national whole.262 Once these liberalized policies began to take root on the macro level, micro reforms were next. In the re-structuring of the inter-enterprise system came mergers, a natural course of economic policy that dictates economic efficiency. The state allowed a cross-country merger of more than three-thousand urban enterprises. Partnerships and tie-ups were encouraged and by the end of 1988, 1,362 enterprise complexes were thus established in eighteen provinces and municipalities.263 Of them, more than 100 were large complexes. Most contentious in reform of the intra-enterprise relationship was the employment structure. This particular change universally impacted the urban and rural work force. It required the dismantling of what had been known as the 'iron-rice-bowl'.264 Enacted in the 261Hodder, op. cit., in note 244, pp. 117-118. 262Ibid. 263Ishihara, op. cit., in note 259, p. 100. 264Denis Dwyer," China: The Consequences of Liberalization," in Chris Dixon and David Drakakis-Smith (eds.), Economic and Social Development in Pacific Asia (New York: Routledge, 1993), p.153. Denis Dwyer defines the 'iron rice bowl' essentially as an enterprised based social safety net. The system in addition to providing wages, bonuses, and life-time tenure in the workplace to state workers, employees who were also entitled to nonwage benefits such as housing, pension, healthcare, and universal education for dependents. In David Granick's "Multiple Labour Markets in the Industrial State Enterprise Sector," The China Quarterly (No. 126, 1986), pp. 272-273, the author goes beyond the definition of the iron rice bowl to describe the abuses that occurred within the system. Such abuses were defined by Granick as the Ill Autumn of 1988 was the reform of the employee system. New hirers were no longer extended life-time occupations, but were hired on a competitive and contractual basis. "The number of contract workers in 1988 reached 9,920,000 persons, or 10 percent of all state-owned employees."265 Nationally, this single reform has potentially created a new urban industrial paradigm that structurally has altered the exchange and value determinations in the labor markets in mainland China. Enterprise administrators now had jurisdiction over wages and bonuses given to their workers. Contracts dissolved the previous bond to the workplace that the workers had and replaced it with a more competitive perspective. For example, in place of a fixed wage from the state administrative organ the enterprise or factory manager received a total wage fund. This allowed greater control over workers and other facets of the managerial aspect of industrial business. Specifically, the introduction of the responsibility system for factory directors in Shanghai gave directors the authority to dismiss and appoint certain grades of cadres and enabled the management of a factory to become more and more disassociated from the Party Cornmittee.266 Other problems, however, surfaced from the very effectiveness of certain elements of reforms in the industrial sector, such as uneven results. Put another way, reform of the enterprise system has had a devastating effect on one geographical area of China over others. Varying accounts suggest that employees of state-owned enterprises in the surrounding areas of Manchuria (since most state industries are located in the north-east) are reluctant to participate in the dismantling of the institution and for good reason. The Economist reported that in the province of Heilongjang's the state sector accounted for at least 75 percent of the industrial output as of 1995, down from 80 percent in 1985. 2 6 7 As open practice of hiring and providing job protection for regular state employees as well as the inheritance of jobs of elderly retirees to their children or relatives. 265Ishihara, op. cit., in note 259, p. 100. 266Ibid; and Gipouloux, op. cit., in note 257, p. 110-114. 267"Where the Old China Lives On," The Economist, 14 January 1995, p. 33. 112 such, the figures have revealed that in that section of the country reform of state-enterprises has lagged considerably. In regard to reforming the work force with attrition and incentives that apparently has not been the case, and in fact, there has been evidence to the contrary. Instead of declining employment, one estimate reflected that on balance the number of workers that the state sector actually employed has increased. The statistic released showed an 8 percent growth in 1994. 2 6 8 These figures play prominently in the case of Heilongjiang because enterprises there and in surrounding areas are the primary producers that provide half of the country's oil, a third of its timber, and a fifth of its coal. Further glaring contradictions have arisen as evidenced by the flagrant disregard for reforms that originated from the same authors of the reform process, the higher echelons of the Chinese central government. For example, despite the introduction in 1988 of the law for the bankruptcy of state-owned enterprises there have been suggestions that contradictory action on the part of the government has rendered it irrelevant. Suspicions as to the fallacy of the law surfaced when in the Spring of 1994 in Manchuria, it was noted that reformers dispensed 10 billion yuan ($US1.2 billion) in funds to the provincial government to prevent the bankruptcy of state industries.269 Yet, what is becoming increasingly more critical has been the crisis of state enterprise debt and the fashion in which it has been perpetuated. One estimate of debt owed by 70,000 urban enterprises to banks in 1994 was approximately one trillion yuan ($US120 billion): that represented about 40 percent of the nations total bank credits.2 7 0 In March of 1995, which Chinese officials designated the 'year of enterprise reform', Minister in charge of the state economic and trade commission, Wang Zhongyu, admitted that state 26*Ibid. 269Ibid. 270Jian, op. cit., in note 249. 113 organizations reported losses of 40.9 billion yuan, up 20 percent over the previous year.271 Reflected in the data presented have been indications that Chinese debt management for state-controlled industries has remained essentially at the rudimentary stage. Remedial efforts taken to correct present inefficiencies have produced deeper problems as repayment is often solved through borrowing new loans. The appropriateness of the colloquial term 'the debt merry-go-round' qualifies here, as further debt is incurred when many government industries transform themselves through mergers, become shareholders, or go bankrupt. By these industries attempting to circumvent the repayment of loans and denying monies owed to other enterprises this situation has led to accumulating debt. Financial analysts in the People's Republic of China have referred to this activity as triangular debt; and in their estimation it has served to hinder the re-organization process of state-owned enterprises.272 Despite the noted imperfections in the domestic economic reforms, especially the transformation of the non-productive enterprises and that of the rural institutions, there have been advancements made in Chinese economic construction. Still, Deng Xiapoing's most significant policy shift and contribution in the modernization process has been the open-door policy and its companion, the establishment of Special Economic Zones. The meaningfialness of each component in the reform movement will be discussed in the following section. 4.3 Open-Door Policy and Special Economic Zones The decade of the 1980s represented an uncommon new openness for the Chinese nation. With Deng Xiaoping's initiation of the "Open-door" policy273 in 1978 after the death of 2nXinhua News Agency, "NPC Deputies Call for Enhanced Effort in Enterprise Reform," (1996 March 8) [Online]. Available: LEXIS Library: NEXIS File: Xinhua; and Xinhua News Agency, "Progress Made in Reform of State-Owned Enterprises," (1996 March 14 )[Online]. Available: LEXIS Library: NEXIS File: Xinhua. 272Jian, op. cit, in note 249; and The Economist, op. cit, in note 267, p. 33. 273Sometimes the open in the title of the "open-door" policy appears with quotation marks to signal to the reader that the policy is a conditional type of openness that is directed centrally by the Chinese government and one that is not meant in the traditional Western meaning of the word. 114 Mao Tse-tung. The move by reform minded officials to open China's economy to foreign trade and investment represented a rejection of the autarkic development strategy of absolute self-reliance that pre-dated economic transformation. What replaced the isolationist position has been the formation of linkages to global markets for the first time since 1949. With the relaxation of direct administrative intervention in exchange for indirect price-based instruments for managing its trade policy, China decided officially in 1979 to launch the reform of its trade regime. Thus, enacted was the continuous promotion of external trade that has been the focus of the Dengist government to modernize the economy. The modernization program of the trade regime reaped successes while evolving through times of contradiction. In the years following 1979, China has transformed itself into a new export competitor in and outside of Asia Pacific. 2 7 4 Here as shown in Table 4.1, that achievement has been remarkable with exports having increased more than ninefold in certain cases and imports more than sevenfold in others, over the same time period. 2 7 5 Working in tandem with the reform of external trade regimes in China was the development of the SEZs. For the purposes of this study this section concentrates on the most important areas of policy interaction between the Special Economic Zones and the domestic economy. Furthermore, it shows how each relates to foreign trade and foreign direct investment and establishes that the SEZs were instituted to promote both. 2 7 6 Therefore, the thrust of this section is to evaluate the role of Special Economic Zones in 274Jong H. Park, "From Self-Reliance to Economic Interdependence," Journal of Developing Societies (Vol. 9, 1993), p. 181. This article indicated that between 1970 and 1987 China's exports to neighboring countries in the Asia-Pacific region rose 20 times and that the country's imports nearly tripled that number, with a 50 percent rise. 275World Bank, China; Foreign Trade Reform (World Bank: Washington, D.C, 1994), p. xv. 276Michael Osborne, China's Special Economic Zones (Paris: Development Centre of the OECD, 1986), p. 28. 115 conjunction with the evolution of the foreign trade structures in China and reveal their relevance to the development of cities in surrounding areas. Through the examination of SEZs and chronicling their development, the emerging realization has been that Special Economic Zones provided Beijing with the confidence and impetus to open more of China to the outside world. Hence, in 1984, the Party opened 14 coastal cities along China's Pacific coastline (from Liaoning Province in the north to Guangxi Province in the south) to foreign direct investment and technology.277 Subsequently, the government in 1985 further exposed to capitalistic economic influences three huge deltas in the Pacific coastal areas: Changjian Delta, Zhuziang Delta, and Southern Fujian Delta. Therefore, SEZs are vehicles by which to chronicle how the central authorities have attempted to gradually implement varying policies of decentralization and modernization within specific geographical areas over the past years 2 7 8 Chinese policies for the open-economy were based on several assumptions. Primary among them was that the central government could take advantage of the spreading international finance trend that exploded in the 1970s.279 The underlying perception was that this source of revenue would allow Beijing to utilize foreign capital more than its Asian neighbors which developed earlier, as for example Japan. Secondary, was that China recognized the Diaspora of Chinese living outside of the Mainland, and more specifically Hong Kong, as a source of major growth and revenue.280 277David W. Edgington, "China's Open Door Policy: The Tianjin Case," Pacific Viewpoint (Vol. 27, No. 2, 1986), p. 101. 278George T. Crane, The Political Economy of China's Special Economic Zones (Armonk, New York: M.E. Sharpe, Inc., 1990), pp. 1-49; David K.Y. Chu, "The Politico-Economic Background to the Development of the Special Economic Zones," in Kwan-Yiu Wong and David K.Y. Chu (eds.), Modernization in China (New York: Oxford university Press, 1985), pp. 25-39; and David S.G. Goodman, "Political Perspectives," in David S. G. Goodman (ed.), China's Regional Development (London: Routledge, 1989), pp. 20-37. 2 7 9 Shirk, op. cit., in note 18, p. 34. 2S0Ibid. 116 Table 4.1 China's Trade in East Asia and the Pacific (U.S. $ Billion) Japan AsianNICsa ASEAN United States World Exports to: 1970 0.2 0.5 0.1 - 1.7 1979 2.8 3.6 0.5 0.6 13.7 1985 6.1 9.2 0.7 2.3 27.3 1987 6.4 15.1 1.0 3.0 39.5 1989 8.2 23.6 1.4 4.2 51.8 Imports from: 1970 0.6 c c - 1.7 1979 3.7 0.6 0.3 1.7 14.2 1985 12.6 8.2 0.5 3.9 38.3 1987 8.3 12.0 0.8 3.5 39.8 1989 8.5 20.0 1.6 5.8 52.8 Notes: a Four East Asians NICs — Korea, Taiwan, Hong Kong, and Singapore, b Four ASEAN countries -- Malaysia, Thailand, Indonesia, and the Philippines, c Less than $50 million. Source: Jong H. Park, "From Self-Reliance to Economic Interdependence," Journal of Developing Societies (Vol. 9, 1993), p. 187. Even more tangible was that China sought to exploit its great export potential on account of the country's large labor force and rich natural resources, while relieving the escalating tensions associated with surplus labor. The unintentional outcome of labor reform was urban unemployment, disguised unemployment, and rural surplus labor that accompanied the diversification in the rural sector. In 1995, Chinese Labor Minister L i Boyong totaled urban redundancy at 4.5 million or 2.9 percent.281 Surplus rural labor was estimated at 120 million.2 8 2 There is little consensus on the numbers related to surplus labor, but a median estimate is 100 million. Thus, the number of people from rural areas 283 that are expected to seek employment in the next decade amounts to 200 million. Finally, another possible attraction to investing in China, according to Chinese planners, was the reduction in the presence of the Leninist state. Crane argued specifically 2 8 1 M a Chenguang, "Goal for Jobless Rate: Under 3%," China Daily, 8 March 1995. 282"Measures to Deal with Surplus Labor Force," Beijing Review 23 April 1995, p. 4. K.C. Yeh, "Macroeconomic Issues in China in the 1990's," The China Quarterly (No. 131, 1992), p. 522. 117 that the development of Special Economic Zones attracted foreign capital because of 'bureaucratic simplification'. The outstanding feature of less government intervention in the economic process implied a lower administrative capacity: A necessary condition for some foreign investors.284 For an optimal investment environment and to utilize these perceived and actual advantages in its modernization efforts, the government allowed foreign investment to start modestly after the passage of a joint venture law in 1979 and the establishment of SEZs on China's southeast coast in 1980. 2 8 5 Allowing international exchange of capital and industrial expertise resulted in state authorities approving nearly 50,000 foreign-funded projects in 1994. For the People's Republic the weight of this foreign investment represented US$81.41 billion dollars and an estimated 100,000 foreign-funded enterprises that currently operates the China and employs 14 million people.2 8 6 One source reported that in the import and export values of foreign-funded firms reached US$87.65 billion, an increase of thirty percent over 1993. 2 8 7 Compared to the semi-seclusion of the Maoist period, the open-economy strategy has reaped great successes in terms of export growth. State statistics have shown that in the previous decade China's exports outperformed those of most other countries, including such newly industrialized economies (NTEs) such as Malaysia. World Bank analysts surmised that Thailand (13.2 percent), the Republic of Korea (12.8 percent), Taiwan, China (12.1 percent), and Portugal (11.7 percent) were the only countries that registered an average annualized export growth rate higher than China in 1993. 2 8 8 The PRC is internationally ranked as the 11th largest exporting nation in the world. What contributed to this strong performance in trade is "institutionalized decentralization; foreign investment 284Crane, op. cit, in note 278, p. 18. 285Nicholas Lardy, China in the World Economy (Washington, D. C: Institute for International Economics, 1994), p. 63. 286"Increase of Foreign Capital in China," Beijing Review, 12 March 1995, p. 29. ™lbid. 288World Bank, op. cit., in note 275, p. xvi. 118 (especially from Hong Kong), depreciation of the real effective exchange rate, and incorporated duty-free access to imported inputs for export assembly."289 SEZ's are attributed with contributing much of the accomplishments earned in the reform of the country's trade regimes. As laboratories of experimentation for capitalist methods and management, the SEZ's were to be controlled situations, while at the same time acting as a means of transferring capital goods and equipment. These contained areas of capitalist activities were a means in reforming the Chinese economy and alleviating the uneven development that had plagued China for centuries. It was planned that within the SEZs, any technological advancement, educational tool, market achievement, could be transplanted, if necessary, to the Chinese work force inland to national enterprises and industries.290 The dramatic break with China's Maoist past began with the establishment of the four SEZs in the two coastal provinces of Guangdong and Fujian in 1979-80. Three of these SEZs are in the southeastern coastal area of Guangdong: Shenzhen, Zhuhai, and Shantou. The fourth is located in Xiamen in the southeastern part of Fujian across from the Taiwan Province of China as seen in Figure 4.2. 2 9 1 The overall goal of the Communist leadership with creation of the Special Economic Zones was to exploit fully its stated aim of quadrupling the value of China's production by the year 2000. The means to achieve this end, was to exploit its competitive advantage: abundant and cheap labor, low-cost factory sites, free import/export duties, and preferential tariffs status as a developing country.2 9 2 2S9Ibid. 290David R. Phillips and Anthony G.O. Yeh, "Special Economic Zones," in David S.G. Goodman (ed.), China's Regional Development (London: Routledge, 1989), pp. 117-119; and Alvin Y. So., "Shenzhen Special Economic Zone: China's Struggle for Independent Development, "Canadian Journal of Development Studies (Vol. 9, No. 2, 1988), pp. 315-316. 2 9 1 J.C.M. Chan, N.Y. Li and D. Sculli, "Labour Relations and the Foreign Investor in the Shenzhen Special Economic Zone of China, Journal of General Management (Vol. 14, No. 4,1989),p. 53. 2 9 2So, op. cit., in note 290, p. 313. Figure 4.2. Location of the Fourteen Open Cities and the Four Special Economic Zone Source: G.J.R. and D. K. Forbes, "The Space Economy of China," China's Spatial Economy (Hong Kong: Oxford University Press, 1990), p. 17. 120 National debate about the SEZs centered around the problem of 'capitalist contamination' of the socialist economy. The fear that originally dominated the earlier discussions about the zones were centered around the issue of 'spiritual pollution' that would occur the closer the contact between Chinese and Western institutions became. Moreover, Communist authorities were wondering how to limit the infiltration of foreign capital that would ultimately led to capitalist relations of production and capitalist class formation.293 Thus, from these discussions emerged the theoretical justification for the SEZs. Establishing zones of foreign commercial activity in rural southern border towns in the Mainland away from urban regional economic centers or cities was one way to limit contact. The location of the SEZs are important because they are sited away from the major Chinese urban agglomerations. Furthermore, the state wanted to explore the economic opportunities available to China if it allowed foreign investment to concentrate • , • 294 in zones with extra concessions. Just as the treaty port cities before them, the SEZs can be understood as representations of foreign systems in China. Therefore, they are regarded in some ways as being undesirable to be located near existing centers of population.295 Still evident is the CCP's aversion to urbanization as exampled by the policy of separating SEZs from major populated areas. Although, in the case of the Shenzhen SEZ, the major rationale for its location was to build on the connection with Hong Kong and the fact that the majority of the business community is Chinese, with language and customs of South China, which helped in that regard.2 9 6 2 9 3 C.F . Lai, "Special Economic Zones: The Chinese Road to Socialism?" Environment and Planning D: (Vol. 3, No. 1, 1985), p. 64. 94Robert Kleinberg, China's "Opening" to the Outside World: The Experiment with Foreign Capitalism, (Oxford: Westview Press, 1990), p. 6. Wong and Chu, op. cit., in note 19, p. 7. 2 9 6 J.C.M. Chan, et. al., op. cit., in note 291, p. 53. 121 In the larger framework of China's development strategy, Shenzhen and other SEZs have benefited from urban policy biases to emerge as conduits to foreign markets for trade and investment that would theoretically spread profits and modernization to the hinterland. Yet, it is debatable i f the distribution of wealth as dictated by current reform measures will have a net result of nationwide economic development. Indeed, if in fact these measures were successful in their mission they would be serving the goals of the Dengist regime as well as fulfilling Mao's redistributive policies of rural development: to provide the peasantry with access to the benefits and modern technology while they 297 remained in the countryside. As Edgington has remarked, reforms have impacted on the Chinese system of industrialization by causing new patterns of regional inequality.298 4.4 Economic Reform Contradict ions and Spatial Outcomes Among the economic contradictions that have arisen from within China's reform movement has been the context in which to place contemporary Chinese employment. Part of the confusion emerges from the three co-existing main forms of relations of production that ultimately form labor markets in the wake of decentralization. They resemble in large part the following examples of the current division of labor in China and are best described as: socialist; petty commodity-producing or petty capitalists; and capitalist.299 As shown earlier, China's evolving economic environment has placed rural sector employment in an expanding gray area of categories that has little connection to the overall reform process, other than the creation of a large surplus labor pool. With the devolution of the collective framework that guided the life of peasants for more than 30 Frolic, op. cit., in note 135, p. 392. 298David W. Edgington, "China's Open Door Policy: The Tianjin Case," Pacific Viewpoint (Vol. 27, No. 2, 1986), p. 113. 299Josephine Smart and Alan Smart, "Personal Relations and Divergent Economies: A Case of Hong Kong Investment in South China," International Journal of Urban and Regional Research (Vol. 15, No. 2, 1991), p. 218. Socialist production is described as firms that are 'owned by the whole people'. In other words, they are businesses that are generally defined as state-section firms. On that continuum, the petty-commodity or petty-capitalists production market created are characterized by individual ownership and appropriation by the direct producers and are associated with production for the market. Finally, capitalist production is directed by entrepreneurial means and is guided purely by the profit-motive. 122 years and the infusion of the varying occupational opportunities, by 1982 the government had lost control over economic activities and movement of individual peasants. In general, there has been public discontent related to wages and rural incomes that has provoked a backlash. Rural labor (113.72 million people) which at the time of this writing accounted for two-thirds of the Chinese registered labor force (165 million or 41.2 percent) has been sufficiently problematic because a diversifying agricultural sector has been unable to absorb less than half of the people in the rural labor pool. 3 0 0 In fact, with decreasing employment opportunities in the countryside for peasants and rising inflation, their numbers are the major demographic that make up the largest proportion of the huge floating population. One of the causes of rural unemployment has been the decline in the level of agricultural investment. The Chinese state has compounded the problems plaguing peasants by decreasing state procurements to rural areas by 44 percent. This decrease happened in the years between the Fifth Five-Year Plan (1976-80) and the first four years of the Seventh Plan (1986-89). Moreover, the average annual construction investment by the state in agriculture fell by 11.62 percent, as compared with increases of 233.66 and 301 180.8 percent for light and heavy industries. One Western press source has noted that the central government's investment in the countryside fell even more sharply to just one percent in 1993 and only slightly increased in 1995. The above factors have combined to push farmers to migrate to cities in more economically advanced areas. To conclude, criticisms and recommendations made in regard to state-operated businesses have indicated that the process has been uneven and inconsistent. Specific proposals and corrections have been reiterated elsewhere, but the author notes that in the research there are indications that some of the Chinese government's initiatives in regard 300Kirkby, op. cit., in note 127, p. 143. ^Robert Ash, "The Peasant and the State," The China Quarterly (No. 127, 1991), pp. 498-499. The Economist, op. cit., in note 3, p. 19. 123 to income inequality and failed reform procedures have led to very little or incremental changes in provincial economic inequality. Nonetheless, there have been prominent successes since the process started in 1978. Still, critics regard the following suggestions as the most crucial in China's next leap in the economic re-construction process. First, the proposal is that there needs to be increased reforms to the pricing structure so that it can reflect economic value; second, the reformers should attempt to objectively assess the performance of state-interests, this requires the complete removal of all government subsidies; third, China should develop a commercial banking system independent of the monetary authorities and it should be charged with making commercial decisions independently of government influence; and last, the Chinese financial managers need to reconcile with the notion of bankruptcy as a consequence of poor commercial performance. Spatial Outcome of Reforms The central government's stated objectives for economic planning in the People's Republic of China for the last two generations have included three core features: systemic and regional vitalization of the Chinese economy in every respect; sustained increases in efficiency and innovation; and strengthening the self-sufficiency of the inland provinces. To achieve these ends, the Dengist regime implemented a regional polarized growth strategy that would in the government's estimation reduce provincial economic discontinuities and eventually promote equity. Additionally, the policies were to allow China to adequately compete effectively against its Asian neighbors and within the world economic system. Not surprisingly, Chinese economic reforms have given rise to contradictions and have supplied opponents of the socialist-market economy with the claim that the new imposed economic system has exacerbated the regional gaps already present. To counter that claim members of the post-Maoist regime argue that despite continued regional differentiation in the PRC, for the most part all regions in China have experienced some 124 growth in the post-1978 era. The data series presented below in some respects contradicts this claim because it illustrates that at best regional growth has been paltry in most areas and even fell slightly in China's central region. What can be extrapolated from the research is first, that significant regional disparities continue to exist in China; and second that members of the current Chinese leadership are in accordance with their earlier stated goal: to "speed up the development of the coastal region." 3 0 3 The modernization strategy has resulted ultimately in supporting the leadership's political economic intent of uneven regional development while encour-aging the central and western regions to concentrate on their regional comparative advantages. Thus, the underlying presumption is that the present Dengist economic and political position has allowed the coastal provinces to accelerate their development at the expense of the rest of China. These propositions are reflected in the statistics listed in Table 4.2 which shows that despite the various differences and inconsistencies, it is evident that the coastal region has maintained the highest GVIO over a six-year period. Additionally, the numbers reveal that in certain years over others, for the eastern provinces, there has been a slight increase in growth over the central and western regions. More importantly what the data set indicates is that the gap between the three regions have remained substantial. Unequivocally, the numbers clearly show that reform measures implemented over the 1981 to 1987 time period have been associated with continuing the historic regional differential that emerged out of the treaty port era. Finally, it is evident that the Chinese central government's new approach to solving regional underdevelopment recognizes and accepts that any trickle-down benefits that inland provinces may gain from the coastal regions will not be automatic and may take decades to be achieved. Hirschman has supported this thesis by relating that growth is 303Yango/7. cit., in note 14, p. 231. 125 incremental and constantly congeals in one area, but has the tendency "to round itself out for a long time within some subgroups, regions, or countries, while backwardness retains its hold elsewhere."304 Apparently, the Chinese central government is cognizant of these implications and has encouraged inter-provincial co-operation through investment, the trading of personnel, and the transfer of technology from the coast to the interior. However, the government's efforts to persuade the coastal regions to share more with their neighboring provinces and with less economically advanced regions has had little success to date, and instead has caused feuding among provincial authorities rather than producing a plan for economic integration. Table 4.2 China's Share of Gross Value of Industrial Output (GVIO) by Region Region 1981 1982 1983 1984 1985 1986 1987 Coastal Central Western 60.49 27.25 12.26 59.97 27.61 12.62 59.49 27.62 12.89 59.78 27.31 12.91 59.39 27.58 13.03 60.41 27.34 12.25 61.21 26.55 12.24 Total 100.0 100.0 100.0 100.0 Source: Dali Yang, "Patterns of China's Regional Development," The China Quarterly (No. 122, 1990), p. 251. While the efforts of China's state managers should be applauded in these matters, the reality has been that for at least the last decade income differentials between the rural, suburban, and centrally industrialized areas have become more obvious. A perusal of Figure 4.3 visually illustrates that even though the combined land area of the four core coastal economic regions is small (6.5 percent of China's total land mass) and inhabits only 21.4 percent of the nation's total population, it accounts for 45.8 percent of the PRC's total industrial output and attracts 68.7 percent of the nation's total F D I . 3 0 5 Moreover, the decrease in the state allocation of funds to China's backward areas where many minorities and nationalities reside suggests that Chinese policy-makers have failed since 1986 to plan 304Albert O. Hirschman, The Strategy of Economic Development (New Haven: Yale University Press, 1958), p. 184. 305Wang, op. cit., in note 27, p. 47. 126 Figure 4.3. The Four Core Coastal Economic Regions jl^Shenyang-Oalian Beijing-Tianjin / Lanzhou" - / . J v;,t \Zhengzhou - ^ i ^ ^ V . -. c~ Xian --, a ^}He*ei Shanghai-Chengdu* ,y W u h a n ? ^ ^ ? . N a n J i n9-Ji^&t H a n 9 z h o u * Provincial Capital - — Provincial Boundary 0 500 km Guangzhou-Shenzhen y Kaikao 127 how it will implement the transmission of technology and allocate investments to those areas in the future.306 A l l of which substantiates the author's claim that regional disparities, based on the above situation, must be widening. How could it not? Worst, one recent report indicated that the fiscal conservatism of the Chinese leadership when considering the poorer regions is evident in the lack of principles and key points overall in the last several Five-Year Plans. 3 0 7 Consequently, what can be drawn from this assertion is that when specifically discussing national economic and social development policies that impact on the economies of the central and western regions, the discussion quickly ends with few remedies to aid these regions. Furthermore, researchers have revealed that for the most part the concerns of the interior regions are rarely represented, and when they are mentioned it is only briefly and in vague terms.3 0 8 Sadly, there is little evidence in the Ninth Five-Year Plan (1996-2000) that has suggested that the Party has timetabled or formatted ways in which to address the economic problems of the lesser advanced regions.309 Furthermore, there has been increasing evidence that the higher-income regions have hampered the growth of China's lesser developed areas. This has led to inter-provincial disputes whereby the poorer inland provinces have set up trade barriers to protect their own industries.310 With the rise of these types of conflicts, the concern among Dengist reformers interested in regional equity is that China's developmental growth patterns could revert entirely to the pre-Maoist stage. The implication of returning 3 0 6Wu, op. cit., in note 137, p. 93. 307Stephen Vines, "China Cautious as it Considers Life After Deng," The Independent (1995 October 16) [Online]. Available: LEXIS Library: NEXIS File: News; and Xinhua News Agency, "Jiang Zemin on Development of Central, Western China," (1996 March 9)[Online]. Available: LEXIS Library: NEXIS File: Xinhua 30SXinhua News Agency, ibid. 3 0 9For instance if one looks at the following listed sources, what is absent from the reports is any mention of the countryside in significant detail. Xinhua News Agency, "Draft Development Plan for 1996 Feasible," (1996 March 14) [Online]. Available: LEXIS Library: NEXIS File: Xinhua; wAXinhua News Agency, "China's Development Goals in the Next 15 Years," (1996 March 5) [Online]. Available: LEXIS Library: NEXIS File: Xinhua. 310"China's Feuding Regions," The Economist, 20 April 1996, p. 27. 128 to that period of regional development is that the coastal areas could continue to significantly outpace the rural provinces if economic integration is not pursued. While stating conclusively that the gap between regions is widening may not be entirely or statistically established here, there is little doubt that the Chinese plan to exploit the advantages of the coast at the expense of the central and western regions is occurring. In regard to cities, the policies that have significantly influenced the flow of migrants from rural to urban areas are revealed in Figure 4.4. The noteworthy step emphasized in the system reforms has been the building of a relationship between larger regional planning and administrative regions that are in close proximity to certain cities. 3 1 1 The method used by Chinese planners was connecting cities to counties by placing the counties in neighboring regions under municipal administration.312 In essence, the development of these counties would be geared to the needs of the city they surround. Other indications of the prominent role of cities in the development process is revealed in Figure 4.5. In the latter half of the 1980s new cities accounted for almost half of all cities in the People's Republic. Figure 4.6 is more detailed in that it shows there has been a net increase in urban growth overall with the contribution of new cities, and that after 1978 on China's eastern seaboard there has been an increase in the number of cities generally. Finally, China's regional planners have boosted the development of large cities by expanding the economic planning powers of the coastal regions and that of most cities under China's open-door economic policy. These measures, which included the develop-ment of the SEZs, the fourteen coastal cities, and the designated 'open areas' for foreign investors, have all led in part to the establishment of thousands of'development zones' that have emerged out of'open economic zones.' 3 1 3 311Chan, op. cit., in note 231, pp. 104-105. 312Ibid. 3nIbid., p. 106. 129 Figure 4.4. Rural-Urban Lmkagesand Urbanization and Cities Rural reforms Responsibility system Specialized households Diversified agriculture Sub-leasing of farms Rural enterprises Occupational restructuring Regional Impacts Coastline dominance Urbanization impacts " Metropolitan centres k Provincial centres Secondary industrial centres Major towns * Market towns r Towns Economic and administrative reforms Economi nc regions Core cities Open coastal cities Population policies Changes in ration system a ^ s ^ ^ ^ ^ S ^ X n t q ^ f Reforms and Rural to Urban Migration," opanai economy (Hong Kong: Oxford University Press, 1990), p. 132. 130 Source: Anthony Gar-On Yeh and Xu Xueqiang, "Changes in City Size and Regional Distribution, 1953-1986," Chinese Urban Reform: What Model Now? (Armonk, New York: M.E. Sharpe, Inc., 1990), p. 51. Figure 4.6. Number of Cities by Size, Region and Date 131 1953 1963 iuJLU S U L E L S M L E L S U L E L S U L E L S U L E L S U L E L 1973 IOOT 90 BO 70 60 50 40 30 20 10 0 1978 ijuJju.L.-J S M L E L S U L E L S U L E L 100 00 00 70 60 50 40 30| 20 10 S U L E L S M L E L S U L E L 1986 L E L • New cities B Old cities S - Smal l cities M — Medium cities L — Large cities EL - Ex t ra - l a rge cities Source: Anthony Gar-On Yeh and Xu Xueqiang, "Changes in City Size and Regional Distribution, 1953-1986," Chinese Urban Reform: What Model Now? (Armonk, New York: M.E. Sharpe, Inc., 1990), p. 61 132 4.5 Summary The material in this chapter has detailed the Chinese policy shift in the late 1970s with the ascent of the Deng Xiaoping Government. The thrust of the research was to illustrate the sequencing and timetabling of economic reform measures introduced after 1978. The chapter viewed the introduction of policy changes to the responsibility system in the rural sector and the reform of the household registration system as the most prominent reforms with the most far reaching impact on China's space economy. It is the contention of this study that each of the reform policies have individually contributed to the growing surplus rural labor problem that has become of major concern to Chinese authorities. Also, crucial to China's economic transition has been the use of the open-economy strategy and the establishment of the Special Economic Zones. For almost two decades, Chinese economic reforms have been operating within the context of shifting from inland development to fostering polarized economic development in the coastal regions. The choice between methodologies in Chinese industrialization has been partly based on the conscious desire of the government to achieve faster national economic growth over improved regional equity. As policies are neither aspatial nor are they neutral, it is clear that the Dengist regime appears to believe that many of the reforms implemented on marco-economic or sectoral grounds eventually will have desired spatial consequences. The paradox in the growth pole strategy as administered in China's coastal region is that the success in developing SEZs, open-cities, and open regions along the Chinese eastern seaboard has led to widened disparities in income and as planned by the central government has reinforced the development lead held by the coastal region. Additionally, with the ever increasing autonomy of and their growing influence in the surrounding regions, urban development is now beginning to fall outside the parameters of the planned sector. The introduction of market forces and the opening up of China's once autarkic economy to outside capitalistic influences have fostered the rapid expansion of the coastal economy. 133 Still, the Chinese leadership continues to support uneven regional development. The policy position of the central government on this issue, is that in its estimation favoring certain regions over others is necessary as long as such growth poles provide a real source of dynamism to the national economy and generates the appropriate spread of wealth. Whether such open polices and support for the regional comparative advantage development strategy will induce the wealthier provinces and developing urban centers to integrate more of their richer economies with the lower-income provinces and cities, still remains an open question. The management of the growth of cities in these high-income regions, and the population growth that often accompanies regional economic advancement should be of additional concern to China. Another pressing challenge that Chinese state managers face is whether they can formulate social and state policies based on social realities. For instance, there is still little clear indication on how the leadership intends to control the movement of transmigrational proportions from the inland to the coast. Furthermore, continued reforms to migration policies are more likely to increase the size of city populations not curb it in most investment priority areas, such as Shenzhen. In Chapter 5, these issues are explored and the impact of high rates of in-migration to one particular urban center, the Shenzhen SEZ, is examined. By charting Shenzhen's population growth and examining the problems its migrant population face, the study tests the efficacy of Chinese reform and the soundness of the Dengist regional inequality formula. 134 CHAPTER 5. SHENZHEN 5.1 Introduction The objective of this chapter is to illustrate certain consequences in the transition of a pre-capitalist Chinese agricultural township into that of a modern industrial city. Thus, the accelerated development of Shenzhen is instructive in the various urbanization processes and is pertinent to the fashioning of policy measures. Beyond those lessons that can be drawn and implemented usefully, the meaningfulness of this fast changing market-oriented environment is that it is one of the Special Economic Zones created as part of China's Four Modernizations policy. Therefore, as a case study, Shenzhen can serve as an example to other budding Chinese cities. Shenzhen's successes and failures are relevant to this research because the SEZ has been established as an integral component of China's new approach to development. As such, the focus here is on investigating the socio-economic and territorial significance of such an urban transition and examining the impact of these processes on Chinese migrants moving into Shenzhen. As part of the necessary context for discussing the transformation of the SSEZ, this chapter also explores issues of migration, employment, and land-use, as well as the implications of state and international investments in the area. 5.2 Pre-1978 Shenzhen Twenty years prior to its SEZ designation, visitors to the coastal region recognized Shenzhen only as the first railway station from Hong Kong to China because of the Kowloon to Canton railway that passed through it, as illustrated in Figure 5.1. 3 1 4 Before 1978, Shenzhen City was an unknown southern frontier market town and fishing village. 314Leslie Sklair, "Regional Consequences of Open-Door Development Strategies: Export Zones in Mexico and China," in David Simon (ed.), Third World Regional Development (London, Paul Chapman Publishing, Ltd., 1990), p. 116. 135 Figure 5.1. The Location of Shenzhen Special Economic Zone 0 10 km Source: CF. Lai, "Special Economic Zones: the Chinese Road to Socialism?", Environment and Planning D: Society and Space (Vol. 3, No. 1,1985), p. 67. 136 At that time, 60 percent of the Zone's inhabitants were classified as rural and the main mean of income was predominantly through agricultural industries. The estimated pop-ulation of Shenzhen municipality together with Nantou Market in the pre-reform era was between 23-27,000.315 At that time, the population of the Special Economic Zone, which encompassed a greater area than the municipality was between an estimated 68-to-71,000.316 The level of underdevelopment in the community prior to 1980 was the fact that in the late 1970s water buffaloes roamed the muddy streets, there were a dozen small factories and several department stores, with the tallest structure standing at a modest five stories.317 The geographical characteristics that in the mid-1980s to early 1990s advanced industrial growth in the SSEZ inhibited growth in the area before 1978. Thus, worried Communist officials who constantly felt vulnerable to military attack from all border angles restricted access to the location and severed economic ties with Hong Kong . 3 1 8 This isolationist policy had a negative impact on the general area in terms of industrialization and paralyzed development. One source that has corroborated the above supposition reported that in 1979 Shenzhen's gross industrial output was a mere 60 million yuan (US$11 million dollars).3 1 9 Employment in the period prior to 1978 was largely in agricultural related activities, 31'David K.Y. Chu, "Population Growth and Related Issues," in Kwan-Yiu Wong and David K.Y. Chu (eds.), Modernization in China: The Case of the Shenzhen Special Economic Zone (New York: Oxford University Press, 1985), p. 131; and So, op. cit., in note 290, p. 313. 316Jieming Zhu, "Changing Land Policy and its Impact on Local Growth: The Experience of the Shenzhen Special Economic Zone, China, in the 1980's," Urban Studies (Vol. 31, No. 10, 1994), p. 1611; Chu, op. cit., in note 314, p. 131. 3 1 7So, op. cit., in note 290, p. 313; and Keung, op. cit., in note 25, p.58. 318Kwan-Yiu Wong, Ren-Qun Cai, and Han-Xin Chen, "Shenzhen: Special Experience in Development and Innovation," in Yue-Man Yeung and Xu-Wei Hu, (eds.), China's Coastal Cities (Honolulu: University of Hawaii Press, 1992), p. 264. 3 1 9Edy L. Wong, "Recent Development in China's Special Economic Zones: Problems and Prognosis," Developing Economies (Vol. 25, No. 1,1987), p. 73. For more on industrial growth see Kwan-Yiu Wong, "Trends and Strategies of Industrial Development," in Kwan-Yiu Wong and David K.Y. Chu (eds.), Modernization in China: The Case of the Shenzhen Special Economic Zone (New York: Oxford University Press, 1985), pp. 57-78. 137 followed by the commercial and service sectors; manufacturing was a distant third with nearly six-thousand employed.320 With the decision by the Chinese Communist Party in December of 1978 to open China's borders to the outside world as a means of achieving domestic economic growth, Shenzhen was one the first heuristic tools to test the Party's development strategy. Initially, as a preparatory step to establish the area as a SEZ, Bao' an county was upgraded to municipal status (and was renamed Shenzhen municipality) and put under the direct rule of the Guangdong provincial government in 1979. 3 2 1 As Yee has detailed, with the shift in territorial re-classification and in administrative control the structural transformation of Shenzhen's chiefly subsistence economy was dramatically changed from the agricultural to the tertiary sector.322 In August of 1979, the Standing Committee of the National People's Congress officially approved the 'Regulations on Special Economic Zones in Guangdong Province' 3 2 3 and demarcation of certain areas in Shenzhen was made to establish the SEZ. Thus, Shenzhen municipality (or city) as we know it at the time of this writing covers a total area of 2,020 sq. km and is composed of two sections. The first section is the Shenzhen SEZ with an area of 327.5 sq. km. The second section of the Zone is the non-SEZ portion which has been renamed Bao'an county.3 2 4 Shenzhen's transformation is crucial to our understanding of the events that have contributed to shaping the Zone into one of China's prized catalyst of national economic development. Therefore, the study must first establish that the coastal city has achieved progressive growth under the rubric of the post-1978 reform measures. Second, the research must prove that the area's population growth and urbanization trend are 320Wong, op. cit, in note 318, p. 277. 321Ibid, p. 265. 322Yee, op. cit, in note 20, p. 138. 323Wong, op. cit., in note 318, p. 265. 3 2 4 Huasheng, op. cit., in note 22, p. 26 138 attributed to mass in-migration into the area with the expansion in industrial and commercial land uses playing a significant role in the ratio of growth. As this chapter attempts to provide evidence for the assertions made, it is appropriate to discuss the motivations of peasants relocating to Shenzhen and to examine the effects of internal population movement on the Zone's infrastructure, and employment and wage structures. 5.3 Post-1978 Shenzhen The change in the city's status transformed the lives and livelihoods of the inhabitants who reside or who have migrated to the area. The Chinese Communist government created a unique situation for developmental opportunities in Shenzhen with preferential policies. Some of these policies included tax exemptions, that encouraged foreign and domestic investments. On top of this, state allocated funds were issued for improvements in Shenzhen's infrastructure, and relaxation in restrictions facilitated the importation of skilled and semiskilled workers from rural parts of Guangdong Province, or from adjacent provinces such as Hunan and Guangxi. Since Shenzhen's transformation, from 1979 its gross industrial output ballooned thirty-fold and increased to 1,800 million yuan in 1984, and continued to expand at a rate of 92 percent during the first half of 1985. 3 2 5 Total industrial output and exports from the area was an estimated US$3 billion in 1988 3 2 6 and as of 1986 the manufacturing center's gross domestic product (GDP) has grown at an annual average rate of nearly 50 percent.327 Several academic observations attribute the rise of the Shenzhen model in China to its growing economic integration between the Zone and Hong Kong. 3 2 8 With the return of Hong Kong to mainland China in 1997 and even though the Communist regime and the British government continue to haggle over what the political persuasion of this territory 325Wong, op. cit, in note 319, p. 73. 326Sklair, op. cit, in note 57, p. 202. 327Keung, op. cit, in note 25, p. 58. 328Jeffrey Henderson, "Urbanization in the Hong Kong-South China Region: An Introduction to Dynamics and Dilemmas, International Journal of Urban and Regional Research (Vol. 15, No. 2, 1991), p. 175; So, op. cit, in note 290, p. 315; and Sklair, op. cit, in note 313, p. 211. 139 might be, Hong Kong capital still accounts for the lions share of foreign investments in Shenzhen. The financial partnership built between the Territory and the coastal city has been a distinguishing feature in the overall economic advancement of Guangdong province and that of Shenzhen. The latter has been managed by the Shenzhen Municipal Government which is directly supervised by the provincial authorities. As Guangdong's largest and most visible border city, the economic connection between Shenzhen and Hong Kong has become important mostly because of proximity and cultural similarities. The SEZ is located on the southern part of Guangdong province at the mouth of the Pearl River delta directly north of the border between Hong Kong and China. The Zone is one sixth the size of the Shenzhen Municipality and one third the size of Hong Kong . 3 2 9 The large amount of land adjacent to Hong Kong together with wage rates constitutes the city's major locational advantages. For Hong Kong, Shenzhen has served to provide energetic industrialists from the colony with an opportunity to shift a substantial share of their labor-intensive operations across the border. Neighboring Shenzhen has provided factors that are increasingly becoming scarce in the former: low-cost labor and land at a fraction of the market value in the Territory. Statistically, of the total overall foreign direct investment (FDI) in China, about a third of the realized amount has entered Guangdong, more than the combined total received by metropolises such as Shanghai and Beijing. 3 3 0 Most of Guangdong's investment comes from Hong Kong and half of its industrial workers are employed by Hong Kong companies. The benefit of this connection between the two cities is that continued migration of the colony's manufacturing base to Shenzhen has enlarged Hong Kong's productive potential. Nearly four-fifths of the territory's manufacturers have 329Gar-On Anthony Yeh, "Development of the Special Economic Zone in Shenzhen, The People's Republic of China, Ekistics (Vol. 52, No. 311, 1985), p. 154. 330Laurence J.C. Ma and Chusheng Lin, "Development of Towns in China: A Case Study of Guangdong Province," Population and Development Review (Vol. 19, No. 3, 1993), p. 590. 140 transferred production to China in general; in the Pearl River Delta region of Guangdong, reportedly there are about 25,000 factories that are engaged in outward processing for Hong Kong firms. 3 3 1 These foreign invested firms and others similar to it have helped increase Guangdong's exports to US$13.6 billion in 1991. 3 3 2 Furthermore, there are three to four million laborers333 who are employed directly or sub-contracted to companies from north of the border directly or indirectly. As for investment, in the Mainland's Special Economic Zones, especially in Shenzhen, Hong Kong firms account for about 90 percent of all investments.334 The implications for Shenzhen has been that Hong Kong's position in the world market provides the Zone with diverse training, technology, expertise in modern production, and techniques. Furthermore, the Territory: ... is a huge consumer market with extensive commercial ties. It is served by excellent port facilities and is the third largest container port in the world. Although few of the Chinese in Hong Kong actually come from Shenzhen, in dialect and culture, they do not differ greatly from the inhabitants of Shenzhen. The Shenzhen SEZ is, therefore, in a good position to attract investments from Hcmg Kong itself and from foreign financial groups through their agents in Hong Kong. Similarly, reciprocal arrangements in transportation have been helpful when exporting. For instance, geographical proximity to the colony has allowed the Zone's firms to use the Territory's harbor and port installations to facilitate the import of raw materials and equipment as well as the export of products.336 In sum, the research clearly has shown that the two cities have been acting in concert to further their individual economic growth potentials and that they have achieved 3 3 ^.P. Ho and Y.Y. Kueh, "Whither Hong Kong in an Open-Door, Reforming Chinese Economy?," Pacific Review (Vol. 6, No. 4, 1993), p. 344. 332Madelyn C. Ross and Kenneth T. Rosen, "China's Real Estate Revolution," The China Business Review (Vol. 19, No. 6, 1992), p. 45. 3 3 3 Ho and Kueh, op. cit., in note, 331, p. 344. 334Henderson, op. cit., in note 328, p. 175. 335 Yen-Tak Ng and David K.Y. Chu, "The Geographical Endowment of China's Special Economic Zones," in Kwan-Yiu Wong and David K.Y. Chu (eds.), Modernization in China: The Case of the Shenzhen Special Economic Zone (Oxford: Oxford University Press, 1985), p. 43. 336Wong, op. cit, in note 318, p. 266. 141 a number of successes by integrating the two economies. It is evident that Shenzhen and Hong Kong have benefited separately and collectively from the financial arrangements in progress. Therefore, it is not surprising that China's major pattern of internal population movement is urbanward migration and specifically in the direction of the former treaty port cities, such as Shenzhen. Nor is it irrational for Chinese peasants to believe that by migrating to the Zone, they will increase their employment opportunities as well as their wages. As noted in chapters 2, 3, and 4 of this thesis, in the People's Republic of China substantial regional differences characterize the quality of life between rural and urban places. The following section identifies the varying types of employment and occupational status available to migrants in Shenzhen. 5.4 Employment in the SSEZ As a result of the amount of investments from Hong Kong, foreign-funded firms, and indigenous industries, Guangdong authorities have divided the Zone into 18 planning districts. They consist of a variation of multipurpose (mixtures of industrial, residential, commercial, and tourist), and areas exclusively for industrial, tourist, and scientific use. 3 3 7 With the additional capital source apart from state investments, provincial managers were able to expand the industrial sector to include light industries, trade, and commerce. Over the last decade, production has come primarily from labor-intensive industries such as textiles and clothing, toy manufacturing, and electronics. The international, national, and provincial attraction of Shenzhen has given the local government an advantage in negotiating contracts with capital- and technology-intensive industries. Recently, the manufacture of computer parts have begun to move into the area as well. Thus, job creation in the Zone was mostly a consequence of the number of emerging joint ventures and foreign funded firms and provided the optimism and the pull for peasants to migrant to Guangdong.3 3 8 337Sklair, op. cit, in note 57, p. 203. ™Ibid, p.202. 142 In 1991, foreign-funded enterprises accounted for one-third of the total of firms in Shenzhen City. 3 3 9 In 1993 about half of China's industrial output and perhaps 75 percent of its total output was accounted for by private or joint-venture firms (ownership by the government and private individuals). Moreover, the official figure of people working in privately-owned businesses was underestimated at 30 million. 3 4 0 Thus, the rate of change that occurred to Shenzhen's industrial structure impacted on the productive sector with equal force and speed . Industrialization and the rise of the non-state sector has provided new employment opportunities to the rural, local non-temporary, non-local temporary, contract, and migrant employees. As noted earlier, shortly after the establishment of the SEZ in 1980, Shenzhen experienced exponential growth to it productive sector. To fill the shortage for laborers, the Shenzhen authorities in the early 1980s moderated restrictions on travel to the SEZ and authorized permanent registration for non-residents with minor restrictions attached. Research indicates that apart from construction workers, most settlers who migrated to the area received permission to relocate. Employment research conducted in the SEZ in the 1980s has shown, that political cadres, administrators, managers and technicians, and skilled workers have acquired permanent and resident status in Shenzhen, with better- than- average salaries and housing, and social insurance.341 The data reflected that there was little doubt that Shenzhen was one of China's leading cities in terms of employment growth during in the last seventeen years. As such, migration between 1984 and 1988 doubled in number, the population of the Zone increased to about 600,000 permanent residents in addition to the 500,000 temporary residents. On 5 August 1989 the Shenzhen Daily reported that there were more than one 339"The Economy," BBC Summary of World Broadcasts (1993 September 21)[OnUne]. Available: LEXIS Library: NEXIS File: ASIAPC (BBC-SWB). 340Economist, "Why China's People are Getting Out of Control," The Economist, June 12 1993, p.41. 341Sklair, op. cit., in note 57, p. 201. 143 million temporary workers in the Zone, 80 percent of whom were women. 3 4 2 Other than gender, the profile of the dominant proportion of the work force in the Zone's industrial sector has been young immigrants and the predominant share of that segment of the working population were temporary employees. As reforms to the occupational structure became more progressive, a new contract labor system was implemented on an experimental basis in the early 1980s in test areas such as Shenzhen. As of July 1982, all new workers in domestic enterprises were hired on a contract basis only. The outcome has been that despite the highly acclaimed contract labor system, the majority of the workers in Shenzhen were employed only on temporary contracts. As Yee observed the rapid growth of employment in Shenzhen was largely due to the expansion of the temporary work force. 3 4 3 Temporary workers included those who were hired as an individual or through a collective to work on some specific projects which could range from a few days to over a year. As indicated in Table 5.1 temporary workers consisted of more than three-fifths of all workers in the SEZ. Temporary, contract, and permanent employment status emerged from the reform of the Chinese employment structure as previously discussed in Chapter 4. Workers employed under the three types of employment status have said that they prefer the permanent or employment contract system the most. 3 4 4 Permanent jobs offered higher job security and good housing benefits. For other potential employees, the contract employment system was preferred over permanent employment because it was viewed as one way of enhancing training and skill by being able to change jobs with ease. The least favorable of the three was the temporary worker who earned less wages than the other two categories of employment and had fewer benefits than what was granted to employees who held permanent or contract status in the Zone. These benefits came in the form of 342Ibid, p. 207. 3 4 3Yee, op. cit., in note 20, p. 156. 34401ivia K.M. Ip, "Changing Employment Systems in China: Some Evidence From the Shenzhen Special Economic Zones," Work, Employment & Society (Vol. 9, No. 2, June 1995), p. 274. 144 higher wages, promotion prospects, pension schemes, housing benefits, social insurance packages, and vacation leave. According to Ip, who conducted a survey in the area of various firms in various ownership patterns (collectively-owned, Sino-foreign joint venture, and state-owned), "the bulk of the working population in the Zone's industrial sector were young immigrants."345 Table 5.1 Employment Structures in Shenzhen and Shenzhen Municipality, 1979-1986 (Selected Years) Percentage of Total Labor Force Shenzhen SEZ Shenzhen Municipality 1979 1986 1979 1986 A. Types of Employment Local workers n.a. 60.0 n.a. 46.7 Permanent n.a. 24.1 n.a. n.a. Contract n.a. 7.5 n.a. n.a. Temporary n.a. 22.5 n.a. n.a. B.Sectoral Structure 1.Primary 39.0 8.2 86.9 15.8 -2.Secondary 22.0 49.7 n.a. 51.2 2.1 Industry n.a. 34.9 n.a. 37.3 2.2 Construction n.a. 14.7 n.a. 13.9 2.3 Survey n.a. 0.1 n.a. 0.1 3.Tertiary 39.0 42.0 n.a. 33.0 3.1 Transportation n.a. 4.0 n.a. 2.8 3.2 Commerce n.a. 17.0 n.a. 11.5 3.3 Urban & Tourist n.a. 8.0 n.a. 5.9 3.4 Health & Social n.a. 1.4 n.a. 0.8 3.5 Cultural n.a. 1.6 n.a. 1.3 3.6 Research n.a. 0.3 n.a. 0.2 3.7 Financial n.a. 0.9 n.a. 0.5 3.8 Administration n.a. 5.1 n.a. 3.8 Source: Adopted from Francis Yee, Economic and Urban Changes in the Shenzhen Special Economic Zone, 1979-1986 (Ph.D. dissertation, Department of Geography, University of British Columbia, 1992), p. 144. With the advent of labor reform the function of the centrally-administered allocation system was amended. Hence, the Shenzhen Labor Bureau was gradually relieved of its primary authority in the mandatory allocation of work in the SEZ. Various 345Ibid, p. 280. 145 government designs were developed. Among them were the Labor Services Company, the Social Insurance Company, the Labor Disputes Office, and the Inspection Brigade; all three units were established between 1980 and 1990. Under the terms of the regulatory role that these agencies were assigned, primary among them was to exert control over the constant influx of migrants attracted by the employment opportunities. Greater flexibility in hiring was the rationale given by the Chinese government for amending the employment structure. Central and provincial officials noted that by empowering foreign investors to recruit their own workers and select qualified candidates would enhance job creation within the Zone. Subsequently, employment opportunities would improve, job training would become more commonplace, producing a more competitive environment that ensured quality. 3 4 6 Under the Dengist regime's new regulatory practices a hierarchy of employment was initiated. Migrants seeking employment were obliged to acquiesce to the fundamental policy of the Labor Bureau. Directives became institutionalized to ensure that locals in the area would always have primary access to employment. The guideline issued to regulate employment prioritized available work in the following categories. First, officials were required to rank registered householders of the SEZ first over those that were from outside of the Special Economic Zone. Second, micro ranking occurred as registered householders of the Shenzhen municipality were first over people outside of the municipality. Lastly, employment administrators were instructed to give priority to residents of Guangdong Province over people from outside of the province. In the early 1990s, Ip claimed that two-thirds of the SSEZ's urban working population numbered 550,000 million in the industrial sectors. Permanent, contract, and temporary employees constituted 32.5, 14.0 and 53.5 percent of the working population respectively and the total rural working population was roughly one million. 3 4 7 These 346Andors, op. cit, in note 87, pp. 26-30; and Ip, op. cit, in note 344, pp. 273-276. 3 4 7Ip, Ibid., p. 274. 146 earlier figures indicate that even several years ago migration was becoming a troubling outcome of economic development in the SEZ. Chinese critics of SEZ polices blame temporary residence in urban areas with creating conditions associated with temporary urbanization.348 Since then, the number of temporary workers has increased three-fold. In 1994, reportedly the number of such types of employees was an estimated 1.9 million out of a total population of 2.6 million. 3 4 9 Clearly, the figures reflect the increasing tide of migrants moving into Shenzhen. However, the data on population growth and movement is limited because it is based on estimations and not on official enumerations of the urban population, and this undoubtedly has led to substantial under-numeration of the temporary population in Shenzhen. In short, the numbers telling what percentage of the SEZ population is employed or unemployed is disguised. Yee remarked that although all workers are re-quired to register with the Labor Services Bureau, large numbers of workers who did not or those who failed to get employment authorization were left out of the official 348Temporaiy urbanization is a spatial condition that apparently arises out of the condition known as temporary residence status. This status is issued to peasants seeking to work in urban areas and in some ways offers protection to non-native personnel wishing to migrate to areas such as Special Economic Zones. The de facto residential status provides migrants with some form of legal cover under the household registration regulations. Once the potential migrant meets the necessary requirements an administrator issues a temporary residence permit that has restrictions. Chinese authorities view this official temporary status as one method of organizing otherwise undocumented workers in urban centers. Thus, the chain reaction of temporary residential status has been to trigger temporary urbanization. Sklair describes this spatial condition as the displacement of the costs of overall industrialization such as housing and municipal services, from the state onto employers and/or local authorities. Since these de facto residents of cities similar to Shenzhen may be numerous and different in their socio-economic and demographic characteristics from permanent residents, their omission from urban registers and statistics distorts the data on the size and composition of urban places. With temporary urbanization the expenses associated with improving or building infrastructure are lowered by denying factory workers permanent residence in cities. Therefore, non-permanent and inadequate housing is constructed and urban services, such as education and sanitation are overburdened and not expanded. For more see Goldstein and Goldstein, op. cit. in note 69, pp. 43-88; Chan, op. cit, in note 231, pp. 121-122; and Sklair, op. cit. in note 57, p. 202. 349"Population," BBC Summary of World Broadcast, Saturday (1994 August 6)[Online]. Available: LEXIS Library: NEXIS File: ASIAPC (BBC-SWB); David Halley and Sam Jameson, "Province of Wealth and Power," Los Angeles Times (1991 November 11) [Online]. Available: LEXIS Library: NEXIS File: News. 147 registry.350 Once again, the doubt over the validity of statistics emerging from mainland China has resurfaced. What can be extrapolated from Yee's observation is that there are more undocumented migrants then officially recorded. As a catalyst of development, the Shenzhen SEZ has fulfilled its mandate. Since it was established, the Special Economic Zone has been able to attract joint-venture projects and foreign-funded firms which in turn have created jobs. For the most part, the Zone has been a training ground for workers employed in area businesses and people who generally work in Shenzhen earn higher personal incomes. Also, the SEZ's economy through new demands for consumer goods and services has infused vitality into the economies of Guangdong and surrounding areas in the Pearl River Delta. For example, nearly sixteen years ago, the province ranked sixth in GNP, accounting for 4.9 percent of the nation's total. At the start of this decade Guangdong ranked first in GNP, accounting for 8.5 percent of China's total. 3 5 1 Equally as impressive in terms of growth has been the wages earned by migrants and others in the Zone. In the first half of this decade the annual urban income for China as a whole was US$313 and US$415 and the annual rural income was between US$134 and US$275, 3 5 2 In advanced regions and in coastal cities similar to Shenzhen, the reported per capita income was US$1,034, 3 5 3 Concurrently, in Guangdong employment has been shifting from the agricultural sector to the industrial/commercial sector where salaries tend to be higher. In 1983 just 17 percent of the province's work force was employed in commerce and 3 5 0Yee, op. cit., in note 20, p. 152. 351Chu-Yuan Cheng, "China's Economic Policies After the CCP 14th Party Congress, Journal of Developing Societies (Vol. 10, No. 1, 1994), p. 9. 352Kitano, op. cit., in note 213, p. 155. 353Jesus Aznarez, "China's Stumbling Blocks to Economic Growth," World Press Review (Vol. 40, No. 7, 1993), p. 40. 148 industry. By 1991 the figure had grown to more than 28 percent.354 Since that time, the per capita income in Shenzhen has jumped to over twenty percent.355 This reported rise in earnings advances the argument that SEZs are catalysts of growth and provide China's surplus rural labor with an opportunity to earn higher incomes. Evidence also exists that employment in the SEZ has allowed for the channeling of funds earned by migrant workers to be transferred to the inland from the coast. Whether in the formal or informal employment sectors, income earned in the Zone has been a new source of economic growth to the interior. 5.5 Urbanization and Human Settlements: Land Use and Housing: Urbanization The chapter now turns its attention to the social realities that confront peasants living in the Shenzhen SEZ. In order to have a comprehensive understanding of the devolution of socialist society in many parts of China (especially in growing and in large cities), we must understand the political primacy of economic growth at any expense. Apart from gener-ating incomes for migrants Shenzhen has its downside. As noted earlier, prior to the estab-lishment of the SEZ, Shenzhen was a small rural town with a population of twenty-thousand, an annual industrial output of less than US$10,000 from twenty-six factories356, and an urbanization level of 7 percent.357 This gives perspective to the socio-economic factors that have led to the rapid transformation of the urban system. Administrative changes to the definition of Shenzhen, from a rural designation to an urban one, automatically increased its population from under 25,000 people to nearly three-fold of its original population. Further liberalization in criteria for the urban 354Denny Barnes, "Cantonese Consumer Stampede," The China Business Review (Vol. 19, No 6 1992) p.28. 3 5 5Lee A. Brudvig, "The Fifth Dragon," The China Business Review (Vol. 20, No. 4, 1993), p. 14. 356Wong, op. cit, in note 318, p. 265. 3 5 7Yee, op. cit, in note 20, p. 236. 149 designation resulted in the Shenzhen municipality expanding from one township to seventeen in 1986 with a commensurate change in population. To facilitate commercial and industrial land-use expansions, limits were placed on public space and places designated as cities was extended. In 1986, the State Council approved cities which had a non-agricultural provincial average of 8 percent. As a result of this high growth rate, the level of urbanization in Shenzhen Municipality reached a much higher level than the provincial average of 19 percent.358 With a higher rate of growth in migration, population, and employment, urbanization in Guangdong has been occurring at such a rapid pace that by 1991 nearly 93 percent its population lived in townships and cities. 3 5 9 Guangdong's overall urban growth impacted on Shenzhen to such a high degree that the SEZ surpassed the level of urbanization in the Guangzhou Municipality within a year of its administrative changes. As a result of the aforementioned relaxation of criteria for expanding the classification for urban places in Guangdong province, the growth of Shenzhen's urban population, mostly resulted from its changing economic and employment structures. The casual sequence was: first, modifications to provincial administrative restrictions that allowed for migrants to enter the SEZ with residential temporary status which enabled some of them to be officially registered and to seek employment. Second, the release of Guangdong's large surplus labor force from traditional agricultural production has meant that the population growth has increased causing urbanization to escalate. The process that Shenzhen has been undergoing since its inception, simply confirms the logic of industrialization and urbanization theories: structural economic transformation presupposes that "change from a largely subsistence, agricultural economy to one based on non-agricultural production inevitably involves shifts both in the locus of 35&Ibid, p. 241. 3 5 9 Barnes, pp. cit., in note 354, p. 29. 150 economic activities and the distribution of population."360 Hence, structural economic and population shifts of this dimension have implications for housing and land-use decisions which are explored in the subsequent section. Land Use and Housing With socialist imperatives as a guiding force land and property remained public goods in China until the latter half of the 1980s. Before 1988, the administrative mechanisms in place for allocating land and property prohibited Chinese cities from selling or leasing land to individuals, foreign ventures, or domestic companies.361 Nonmarket administrative allocation of land meant that property in urban areas were allocated through land administration bureaus which reviewed applications for land use. Thus, from 1954 to 1984 urban land was used virtually free of charge: new users simply paid the cost of relocating sitting tenants.362 Such decentralized land management resulted in glaring economic inefficiencies, low incentives to economize on urban space, under utilization of land in urban areas, and inequity between land users as well as the distortion of property prices which is common in centralized systems. With market-oriented reforms taking precedence over the established planned economy, land and property became an economic asset in the SSEZ. Proof of the shift in the debate about land transactions emerged concretely on January 3, 1988, when the Guangdong Provincial People's Congress, legislated the economic brokering of land and property for profit. The Provisional Ordinances on Land Management of Shenzhen Special Economic Zone declared that state-owned land in the SSEZ should be recognized as a special commodity whose right of use could be leased.363 360 Goldstein and Goldstein, op. cit., in note 101, p. 17. 361David E. Dowall, "Establishing Urban Land Markets in the People's Republic of China," Journal of the American Planning Association (Vol. 59, No. 2, 1993), p. 183. 3 6 2Zhu, op. cit, in note 316, p. 1612. ™Ibid. 151 Thus, with the influx of foreign-funded firms, the relaxation in the administrative designation of urban space, and for the sake of economic growth, land commercialization occurred at a rapid pace. Since the provincial government lacked the funds to develop land in the SEZ, Shenzhen administrators permitted foreign investors to build infrastructure with little to no central appropriation of funds. With the central and provincial governments playing a marginal role in land-use, they were able to pass the financial burden of land development from the municipality to non-locals. Ultimately, foreigners paid for land leveling and other necessary on-site facilities before the land could be used. With foreign investments credited with the improvements to infrastructure, transportation, and housing, property prices have been raising. In 1992, prime real estate in the city increased three-fold from 1988, to about US$200/sq. ft. 3 6 4 The stated amount for property in Shenzhen is approximately three hundred dollars less than the exorbitant price levels found in the Hong Kong market. To accommodate the increased population growth, another priority for foreign investors and for the Chinese government has been affordable or low-cost housing. The Chinese authorities investment of US$53 billion in the housing sector over an eleven year period (from 1979 to 1990), testifies to Beijing commitment to improved living conditions in China . 3 6 5 As a result urban housing conditions have been greatly improved in Shenzhen and elsewhere. Yet, the great improvements in the living conditions of a few million people have come at the expense of the overwhelming majority. It seems that in the short term the concerns about housing in Shenzhen have been allayed. However, advocates for China's poor that reside in economically advanced regions are worried that local governments with commercialized housing markets will accommodate high-income earners. In other words, 364Ross and Rosen, op. cit., in note 332, p. 45. 365Shunfeng Song, "Policy Issues Involving Housing Commercialization in the People's Republic of China," Socio-Economic Planning Sciences (Vol. 26, No. 3, 1992), p. 215. 152 the beneficiaries of the existing duality in land prices and management will have a tendency to be landlords, foreign developers, and investors. For example, researchers have found that the high demand for low-income housing and low supply has resulted in tenants who are generally paying more and more due to the tight supply in rental premises. Another change that can expect to cause homelessness in China is an experiment that is underway to allow housing agencies to buy housing stock 366 from state enterprises, with the intention of gradually increasing rents over time. In Shenzhen, particularly in the Zone, statistics reveal that tenants bare the rising expenditure of premise occupation because it is a by-product of property undersupply. Reportedly in the SSEZ, from 1984 to 1990, low supply and high demand caused rental prices to double annually in multi-storey housing.3 6 7 Also, housing rents increased 5.4 percent every year and office space was three times as expensive as housing on an annual basis.3 6 8 At that rate of increase, by the second millennia massive housing shortages and homelessness should occur as is the case in most capital cities in the world today. What is evident from the material presented is that agents of capitalism in the Shenzhen SEZ have the means to override land as a public good' ideology. As such, criteria often used in non-commercialized areas by central administrative bureaus when allocating housing or conducting land transactions are usually dismissed as inappro-priate.3 6 9 Finding appropriate and affordable housing is one of the many realities confronting peasants migrating to Shenzhen. From here, the chapter looks at the profiles of migrants and the types of lives they are living in the Zone. Migrants When the Chinese central government established the SEZs it designated them urban systems that were to be experimental places where reforms in the allocation of labor and Balls, op. cit., in note 3, p. x. 3 6 7Zhu, op. cit., in note 316, p. 1619. ™Ibid. 369Song, op. cit., in note 365, p. 213. 153 wage systems could be carried out. The evolution of current urban and employment patterns that emerged from the adoption of new employment practices and the relaxation in migration policies created several problems with respect to the influx of immigrants into Shenzhen. Vitalizing the Shenzhen economy through capitalist means has generated a series of inequalities among different groups of workers, in the workplace, in housing, and between rural and urban development in the area. Half-open migration with restrictions that commenced in 1984 has contributed greatly to the disparities and has had serious consequences for both civil status and economic well-being.3 7 0 The Household Registration Regulations which divided the population into two segments ~ rural and urban, has been institutionalized and signifies different opportunities in life. 3 7 1 Over the last decade, the demand for labor in the Shenzhen Special Economic Zone and the problem of surplus labor in the rural regions have forced the government to take a more lenient attitude towards migrant laborers wishing to out-migrate from the countryside. Additionally, Chinese officials realized that rural-to-urban migration has become the dominant stream of internal migration, as shown in Table 5.2. Xia's research revealed that an estimated 50 million people migrated from rural to urban areas from 1949 to 1986 at a faster pace and on a grander scale than ever before in China's history.3 7 2 Moreover, the research indicated that the greater percentage of the peasants migrating often moved to large cities. Therefore, the official response was to grant permission to migrants who could basically support themselves without any government or provincial assistance. So, Beijing allowed peasants who could invest or had the necessary funds to begin businesses, those who could provide grain and living places for themselves, and those peasants who 3 7 0 Hsieh, op. cit., in note 234, p. 96; and Xia, op. cit, in note 108, p. 195. 3 7 1Ip, op. cit, in note 344, p. 282 3 7 2 Xia, op. cit, in note 102, p. 204. 154 possessed the necessary skill and capacity for management, to leave their rural areas. Contrary to official policy, migrants have been moving in large numbers to more pros-perous areas in search of urban amenities and social services; very often, these migrants believe that they have access to these amenities which has ultimately stimulated more migration.3 7 3 Table 5.2 Percentage Distribution of Migrants by Type of Origin and Size of Destination in 1986 Destination Types of origin Extra-large cities Large cities Medium-sized cities Small cities Towns City 37 37 35 33 15 Town 16 23 24 25 26 Rural 45 39 39 41 57 Other 3 2 2 2 2 Total 100 100 100 100 100 Source: Ma Xia, "Changes in the Pattern of Migration in Urban China," Migration and Urbanization in China (Armonk,N.Y.: M.E. Sharpe, 1994), p. 203. In addition, to instituting a more lenient attitude towards migrants, many cities such as Shenzhen purposely have recruited peasants in order to develop their urban economies. Nevertheless, migrant workers have been denied many benefits enjoyed by registered householders in the Zone. 3 7 4 For instance, regardless of the number of years they have been in a city and despite their contribution to the commercial network the tendency has been to treat them poorly. More serious to their personal and economic development has been that the institutional barriers to changes to one's residential status has remained intact. Therefore, the upward mobility of peasants are limited or completely obstructed resulting from the structural divisions in the employment and welfare systems.375 373Chatterjee, op. cit., in note 45, p. 135. 374Hsieh, op. cit, in note 226, pp. 96-97 3 7 5Ip, op. cit, in note 344, p. 282. 155 Ip's research on Shenzhen found that under the existing regulations, migrant workers holding rural household registration cards have been barred from becoming contract workers: only migrants who are urban registered householders have been qualified to change their employment status.376 In addition to the restrictions that result because of their status, small quotas, and other stringent requirements (that include a fee of R M B 10,000), the personal development of peasant workers has been greatly reduced and these barriers has contributed to making their chances of becoming contract or per-manent workers highly remote.377 While temporary employment has its benefits and provides employment opportunity, the multiple impact of this employment status on a person's social condition has implications for urbanization, housing, and food needs. Government administrations allocate funds for projects based on population projections. As mentioned earlier, there is some doubt as to the reUability of the enumerations of urban population in Shenzhen. Those doubts arise from the fact that residents in cities, such as Shenzhen, who are not permanent residents are often not counted as part of the city's population in any enumer-ation based on household registers.378 Therefore, if the data conveys inaccurate information, as many scholars and officials suspect, then given the nature of what has been occurring in the SEZ in terms of employment, population growth, and limited infrastructure, complications are inevitable. The complications arising from temporary employment or resident status include less housing or places for people to live, decreased allocation of funds to the municipality, and inaccurate investment calculations. For example, Shenzhen has a population,of nearly two million, yet Shenzhen proper has an infrastructure that can accommodate perhaps a little more than a population of400,000. 3 7 9 376Ibid, p. 284. 311Ibid., p. 283. 378Goldstein and Goldstein, op. cit, in note 69, p. 48. 3 7 9 "Population," op. cit, in note 349; and Halley and Jameson, op. cit, in note 349. 156 The ambiguity in China's current migration policies is confusing for all parties concerned and inaccurately reflects the true social and economic conditions that exists in Shenzhen. Migrants and their families who are following a traditional path of self-development leave their rural homes believing that they will have an opportunity to improve their lives. Instead, for at a large number of migrants when they arrive in the Zone they are accused of cornmitting crimes, straining the educational system, and social services. For urban areas surrounding Shenzhen, temporary residents have become equally as burdensome as those within the Zone. Among the 80,000-odd transients in Henggan Town, Shenzhen City a considerable number have children and find it difficult to send them to school because they have no permanent residence status.380 The imbalance between social and economic development has continued as two-thirds of Shenzhen's population have no legal certificate and no permanent employment.381 Furthermore, the future population projections based on natural increase and migration suggest that the standard of living will decline in Shenzhen. The cumulative effects of lack of infrastructure in surrounding townships and massive in-migration into the Shenzhen Metropolitan Region, have been attributed with negatively impacting all residents in the SEZ. For instance, the repercussions of marketizing land that was theoretically 'free' have been that prime real estate in Shenzhen has escalated in value. 3 8 2 Other factors associated with fueling the capital value appreciation of property, has been a growing population, rising incomes, and investments. The negative outcomes related to this increase has been that the performance of property investment is based on the profitability in housing rental increases. Labor Exploitation in the SSEZ 380"Population," ibid 3 8 1 "Population; Urban Problems," Renmin Ribao (1995 April 20) [Online]. Available: LEXIS Library-NEXIS File: News. 382Ross and Rosen, op. cit, in note 332, p. 45. 157 If a thorough application of the meaning of social economic development were used to evaluate the lives of temporary residents in the Shenzhen Special Economic Zone, several anomalies and contradictions in social and state policies and practices would surface. Furthermore, these policies and practices would be judged to have directly or indirectly obstructed personal development for the most dependent proportion of the population — contrary to the tenets of socialism. Among the most glaring inconsistencies are the follow-ing: the overlapping of communism and capitalism in land ownership, the confusion in state regulations that are restrictive at one time and lenient at others, insufficient regard for the contributions of migrant workers, the overemphasis of market value and wages, and a hierarchical employment and residential status structure. Regardless of the working conditions for non-native workers, the influx of migrants into Shenzhen continues unabated. However, in some cases the lives of peasants hoping to improve their employment opportunities have been put at risk. Thus, since 1990 there has been evidence of worker exploitation in the SSEZ. As the following section reveals in some cases the abuse of workers has been so severe as to be identified as human rights violations. Labor relations in the SSEZ are, by all accounts, less than entirely harmonious and have been the source of growing tensions between workers and employers. The negative impact on the work force has been the Chinese government's reform of wage structures and labor markets. Some of the disagreement arises from complaints that employers are violating safety regulations, imposing cramped working quarters on employees, failing to pay wages for work rendered, and physical abuse, such as beatings. According to a 1994 All-China Federation of Trade Workers survey, basic labor-protection measures in safety and sanitation were lacking. The report's investigators claimed they discovered evidence of mental and physical abuse of employees, and in the more extreme cases there were 158 incidence where employees that worked in foreign-invested firms were forbidden to drink water or use the toilet. 3 8 3 In 1991, the British Broadcasting Company (BBC) reported that foreign invested firms were involved in 843 labor disputes, which was 68.6 percent of the total number of labor-related troubles in Shenzhen Ci ty . 3 8 4 Furthermore, incomplete statistics suggested that a year later, Shenzhen City Labor Bureau and trade organizations in the area received more than 4,000 complaints about enterprises delaying or not paying nearly 30,000 staff and workers. 3 8 5 Among other charges issued against firms in the SSEZ, was the discovery of child labor, violations of contracts, overcrowding on factory floors, and compulsory overtime without compensation.386 In one case, the Guangdong Provincial Federation of Trade Union claimed that in a foreign-funded firm workers were required to work overtime for 29 consecutive days carrying out more than 3 hours of overtime work every evening.3 8 7 Industrial accidents ranked as high in terms of issues that were of official concern. For instance, fires in factories are frequently reported in the press. In early August of 1993 there was a blast that ignited eight warehouses in which 70 people were killed. 3 8 8 As early as January of 1996, there was little improvement as a fatal factory fire occurred on 1 January and was followed by a second blaze in a dormitory for workers. Official press reports have suggested that Zone officials are not handling the issue of industrial accidents seriously enough.389 383"China International Report on the Mistreatment of Workers in Foreign Invested Enterprises," Reuter Textline, BBC Monitoring Service (1994 April 8)[Online]. Available: LEXIS Library: NEXIS File: News. 384"The Economy," op. cit., in note 339. 386Sklair, op. cit., in note 57, p. 206. 3 8 7 , 1 Population," op. cit, in note 349. 3 8 8Carl Goldstein "Safety Indicator," Far Eastern Economic Review (Vol. 156, No. 33, 1993), p. 54. 389Stella Lee, "Foreign Investors 'Ignoring Safety," South China Morning Post (1996 January 3)[Online]. Available: LEXIS Library: NEXIS File: News. 159 Exculpatory explanations offered by Guangdong's provincial authorities for the disasters and deaths have been that: first, many foreign-funded enterprises in the Zone have been given authority to draw up their own personnel recruitment policies and plans. Consistent with capitalism and the commodification of individuals, the reforms extended to foreign enterprises were then given to state- and collectively-owned firms. In Shenzhen, state-owned interests have been empowered to draw up their own labor plans according to their needs. Second, U.S. and European businesses with subsidiaries in the coastal city have absolved themselves of any blame for the loss of lives as well. Executives of multinational corporations and joint-venture factory owners claim that they subcontract much of their production to smaller companies which often have bad safety and welfare enforcement habits.390 From the statements and explanations offered, it is clear that there is a lack of accountability. Therefore, it is not surprising that there have been lapses in regulations for a higher return in profit. On the one side, there is general agreement that workers work long arduous hours and that all classes of employees, especially contract and temporary, experience poor working and living conditions. However, there is profound disagreement as to whether this represents exploitation. Managers argue that most overtime is voluntary, while advo-cates for employees claim that overtime in certain situations is mandatory and that em-ployees who work longer hours, on many occasions, have been improperly compen-sated.391 On the other side, young Chinese workers are provided with an opportunity to leave home and work and live in a city for wages that are far higher than what could be earned at home. Supporters of SEZs claim that most workers with temporary status are coming from a less privileged background and, therefore, the food and accommodations in 390John Kohut, "Trade Threat Removed, Human Rights Situation Worsens," International Herald Tribune (1995 April 24)[Online]. Available: LEXIS Library: NEXIS File: IHT. 391Sklair, op. cit, in note 57, p. 207. 160 the Zone are estimated to be more favorable than the ones found in their home villages. Still, others claim that the division of labor created in the SEZ is one based on discrimination. One group clearly benefits over two other groups of workers because of hukou status. So profound are the differences in wages and employment opportunities for native Guangdong residents as oppose to migrants, that current government policies only serve to institutionalize the differences instead of correcting them. The issues presented in this last section are just a few of the concerns that the PRC government must resolve in its continuing transition from socialism to capitalism. While, for the most part reformers have had overall positive outcomes there still exists contradictions. Furthermore, the government must issue a decisive policy statement that guarantees the human rights of all workers, without exception. It must instill mechanisms to redress safety and sanitation violations as well as put in place some regulations that will hold companies, especially foreign-invested firms, more accountable for the well-being of their employees. Sadly, research used in the preparation of this thesis did not at any time indicate that the Chinese government was crafting new policies that would directly improve the lives of migrants and that of nationals or minorities re-locating to Shenzhen. Nor was there any indication that such instruments were deemed necessary by Chinese officials. 5.6 Summary This chapter analyzed the industrial and spatial development of pre-capitalist Shenzhen. The five previous sections examined the economic transition of the coastal city over a decade starting with its official designation as an SEZ in 1980. The discussion of the Zone was within the context of national Chinese economic reforms with specific emphasis on state policies that encouraged polarized growth in the coastal regions. Other reforms with equal impact on growing cities such as Shenzhen were the liberalization in migration polices and the reform of China's wage structures and labor markets. 161 Lessons drawn from reviewing the urbanization experience of Shenzhen are that in the present phase of development in the People's Republic of China, specific cities are regarded as key in the country's overall growth strategy and that small, medium, and large urban systems have a growing role in the Chinese development process. As such, the Beijing government views urban industrial development in Shenzhen and other cities as advancing socialist principles rather than stressing the antagonisms between Marxism and capitalism. In regard to Shenzhen, it was to play a dual role in China's modernization process. It was to become an exponent of capitalism while containing the negative values associ-ated with the pursuit of profit and to act as a catalyst of growth for lagging regions. In the first instance the SEZ has failed to wholly limit most of the negatives associated with capitalism, such as the exploitation of workers, the three-tier system of employment that permits some workers to advance at the expense of others, and a system of discriminatory policies that are used essentially against peasant workers. In the second instance there is very little empirical evidence that suggests that Shenzhen has stimulated economic growth in communities beyond the city's immediate surrounding areas. In that regard, there are certain geographers who have questioned the rationality of Shenzhen ever being able to spark growth much outside of the city's borders. For instance, research by Wang and Bai has indicated that there is little evidence that trickle-down economics is a process that does actually occur. Rather, according to these scholars what does happen is a process they refer to as the Matthew effect.392 For the academics, the impact of the Matthew effect on China's space economy has been negative and has led in their estimation to further regional disparities. Wang and Bai, op. cit., in note 118, p. 1. The authors define the Matthew effect as a cybernetics term used to describe positive feedback. In simpler terms, it is the spiraling effect of the direct ratio of 'more leads to more' which holds between cause and effect. 162 The social scientists claim that China's spatial economic statistics have shown that from the period following 1978, poor regions have been experiencing a slower pace of development as compared with the advanced coastal regions which have been forging ahead. In their book the authors present a convincing case that suggests there is a sense of irony in the process. For example, they insist that the regions that are not openly benefiting from reform practices are not necessarily resource poor. To the contrary, these regions are rich in resources. But, state policies discriminating in favor of the coastal regions have had a tendency to induce the siphoning off of resources from the inland in an effort to fuel economic growth on the coast. In response to these criticisms, Chinese administrators have decided in 1996 to ensure that development is gradually more comprehensive and to reduce the concentration of state investments in coastal areas. Consequently, preferential policies for SEZs, such as tax exemptions, will be phased out and the Special Economic Zones will be required to exploit their own comparative advantages without government assistance. Chapter 6 expounds more on the economic outcomes of China's most visible aspect of modernization, the economic transformation of the Shenzhen SEZ, and its larger relevance and implication for the role of cities in general. In the final sections of this thesis, the relationship between the processes of Chinese economic development and that of urbanization are explored. The following sections discuss the implications of the study's research findings for the crafting of policies in the People's Republic of China and for theory. Furthermore, Chapter 6 examines the greater significance of China's new approach to development for other lesser developed countries seeking to devise a national growth strategy sensitive to their indigenous economic circumstances and how the role of cities of all class sizes can participate in this process. 163 CHAPTER 6. CONCLUSIONS 6.1 Introduction For more than four decades China has endeavored to fashion a developmental strategy wholly, and in the post-Maoist era partially, independent of Western influences and responsive to the Republic's unique economic conditions and needs. The former chapters have illustrated, through analytical and descriptive empiricism, Beijing's preoccupation with regional differentiation, urbanization trends, rural industrialization, population growth, and the role of cities in the development process. In summarizing the systemic issues concerning China's transition from socialism to a mixed privatization model, the treatment here will be general. There is little need to further debate the merits or contradictions found in the Maoist developmental scheme, the Dengist reforms, or to reiterate the competing theories of development and urbanization in relation to Chinese modernization. Their relevance to China and the richness and complexity of each have been adequately expounded upon in other scholarship. Instead, in this concluding chapter, the author offers a brief summary of the core propositions presented in this study followed by the impact of those concerns on the formulation of Chinese policy and the implications of China's post-1978 growth strategy for theory and further research. In closing, the last section (suggestions for further research) offers a new set of lenses with which to approach the modernization discourse and the spatial organization of (people in) Third World nations. 6.2 Summary of Research Findings The results of this study may be summarized by the following 8 major points. First, the Maoist model of economic development was a generic solution to rural poverty in China. The post-1949 government crafted national policy solutions from a system of flawed assumptions that were detrimental to China's national economic interests. In regard to regional disparities, the first assumption was that the inland provinces were all 164 equally underprivileged economically in similar ways and areas. What the Maoist analysis failed to take into consideration was the inequality differential among the lesser advanced provinces, municipalities, and autonomous regions as compared to the coastal region. Such an analysis would have enabled the Chinese leadership at the time to improve on Mao's model of economic growth and would have better served the central government's policy of regional self-sufficiency. The results of the Maoist socialist growth strategy was to unduly focus on redirecting wealth away from the coast to the inland, thus containing the growth of major urban systems (cities) as well as strictly regulating inland-to-coastal migration. Second, in late 1978 the Communist Party officially endorsed the Dengist developmental model entering the Chinese command economy into a new epoch of economic planning known as the reform era. While the adoption of the 'Four Modernizations' policy has produced major and impressive sustained national growth, it is essentially the inverse of Maoist economic philosophy. The Deng Xiaoping government has implemented an open-door/economy strategy that has re-directed the development focus from the inland back to the coast. This approach has in some respects brought economic growth strategies in the PRC full circle — back to the treaty port era. Dengists support regional disparities, but also encourage regional economic integration and co-operation as a means to alleviate the regional economic differentiation between inland and coastal regions. Third, in regard to cities, there is a new direction and attitude that is guiding state policies. The realization within the higher ranks of the Chinese central government is that the previous Maoist state-sponsored aversion to cities is inappropriate for the reform period. The new approach embraces the idea that growing townships and cities of all class sizes have a crucial role to play in China's development effort. In the reform era urban centers are regarded as attracting the resources for continued modern capital development 165 and political leadership, as well as providing the educational training necessary for modernization. Fourth, the attraction of urban areas that offer economies of scale combined with the liberalization of the household registration system has intensified rural-to-urban migration flows. The increase of such population movement in China currently serves the interests of non-state actors and foreign-funded enterprises by supplying them with abundant cheap labor. However, there is concern that any measure implemented by the state to stem the flow of peasants migrating to the country's larger cities once the labor need is met will fail. Fifth, what has compounded the migration problem are issues related to the distri-bution of wealth, specifically those reforms that have impacted on the pre-existing income in-equalities between rural and urban wages. While incomes in general have risen, the average income in the countryside is likely to be three times lower than that of the average urban wage earner. Additionally, rural residents have few housing or welfare benefits in comparison to the ones received by urban employees. In post-1978 China there have been a number of economic indicators suggesting that while several million people saw their incomes rise significantly in urban and rural areas, an even greater number of people suffered economic losses. Sixth, regionally and in regard to cities, Deng's industrialization plan included spatial redeployment with renewed emphasis in the coastal region as catalysts for accelerated development. This led to the creation of China's Special Economic Zones. Thus, state and foreign-directed investments and resources have been concentrated in these areas to enhance their economic advantages and technological leadership. The core concept of the post-Maoist economic strategy has been that comparative advantage is emphasized and encouraged and that any economic achievements reached in these cities will ultimately spread to other counties and provinces. 166 Seventh, with that model in mind, Shenzhen has risen as possibly the exemplar and the most visible aspect of the socialist market economy. As an exponent of capitalism the SSEZ has achieved many of the leadership's economic goals. The Special Economic Zone is instructive for other cities seeking to gain foreign investment and attract foreign-funded firms. However, even though Shenzhen has become a sizable city the study doubts that it has been able to effectively trigger economic growth in the peripheral areas within its own provincial borders, much less in neighboring provinces. Eighth, discriminatory employment policies used predominantly against many mi-grants living in the Shenzhen SEZ have contributed to widening the rift between social and economic well-being for peasants. More precisely, as much of the unprecedented inland-to-coastal migration has been directed to medium and large cities and specifically to Shenzhen, migrants overwhelm public transportation and are blamed for rising crime rates. They are forced to squeeze into already crowded housing markets that drive up rents and create ghettoes. Furthermore, the research in the area of peasant workers failed to suggest or provide solutions for such emerging problems. 6.3 Implications for Policy The issues discussed above have direct policy implications and suggests the following recommendations. First, the Deng Xiaoping government should reexamine Maoist economic philosophy in detail in order to understand the inconsistencies that led to the country's economic failures. While many elements of the post-Liberation government's economic plan are irrelevant to the present situation, there are still a number ideas from the Maoist era that continue to circulate and inform post-1978 Chinese economic transformation. As such, the present Chinese central government should prepare to move beyond all economic aspects of Maoism and to advance its present socialist-market growth strategy to the next stage. 167 Second, Chinese economists need to demonstrate that they understand the differences between the varying types of inequality that exist in the People's Republic. While it is unreasonable to expect any government to address all forms of regional inequity, there needs to be a comprehensive plan that does identify the most critical economic problems and then it should seek to resolve them.393 For example, "regional imbalances" is a blanket term that generically identifies the general problem associated with poverty in the inland provinces. The term fails to define and therefore to address the types of differentiation that exist in the varying provinces throughout western China. Each region has a different need that possibly overlaps or coincides with the necessities of other regions. Therefore, an official assessment of the different provinces is necessary in order reach more concrete solutions. Only then, can the government properly attempt to inter-grate industrial growth in the east with resource rich regions in the hinterland. Such a realistic assessment would better enable the government to handle rising social and political disparities and discontent. Third, the acceptance of the Dengist government that Chinese cities have a role to play in the country's development is progressive and wise, but insufficient given that migration trends indicate that China will suffer an explosion of population growth in urban centers, especially in the well established extra-large cities. To better manage this issue Chinese officials should move beyond the acceptance of cities in theory and formulate concrete measures that address the complications associated with the increasing economic growth of urban areas. They can begin to meet this goal by defining urban areas in terms that realistically speak to trends found in the People's Republic of China. For Chinese planners history should guide the process. It is these types of decisions that could enable officials to properly treat issues related to urbanization which would ultimately impact on emerging and established larger cities. Further, the central government should start to 393According to Terry Cannon and Alan Jenkins, op. cit., in note 192, p. 26, the Seventh Five-Year Plan did not do such an assessment. 168 build partnerships with and between cities of all class sizes. Such a formal policy would allow cities and townships to become relevant to the communities they serve. With this concerted effort cities could positively impact on the hinterland and create the possibility of stimulating economic development in remote regions. It is the belief of this thesis that if these suggestions were implemented other solutions to problems such as migration and infrastructure development would naturally emerge. Fourth, the research indicates that the Chinese central government underestimated the migration drive when it initially liberalized the household responsibility system. The negligence of studying how such a massive population movement would impact on China's developmental process, given that the country contains one-fifth of the humans inhabitants on Planet Earth was a serious miscalculation on the part of Chinese officials. Thus, the interests of the Chinese government in internal migration have arisen mainly from the impact of that movement on the nation's spatial dimension and from short-term concerns related to its significance for administration and planning. As such, solutions to internal population movement are rare. However, when incorporated with other measures, they have been shown to achieve some level of effectiveness. Therefore, the author suggests that the Chinese Communist Party rethink and revise its current migration policies. The previously mentioned recommendations are thought to provide part of the solutions needed and the following suggestions can perhaps lead Chinese officials in the right direction. Fifth, in terms of income inequality between rural and urban wage earners the government should seek to redefine its relationship with agricultural industries beyond the reform procedures originally initiated in the post-1978 era. New economic initiatives are needed to persuade peasants and their families to stay in their villages and to create the means for them to improve their living conditions. The study suggests that the central government begin this process by increasing the state allocation of funds for infrastructure needs, such as paved roads, so that transportation needs can be met adequately and so that 169 agricultural goods can be taken to neighboring cities and/or markets on a daily or weekly basis. These suggestions could dramatically improve the quality of life for rural residents and perhaps increase wages and encourage more people to remain in their communities. Sixth, the government needs to research the idea of creating corridors of economic exchange that run through disadvantaged areas or regions. Such an idea would be based on a cross-regional system of cities that advances the idea of location by creating so-called highways of economic exchange. In essence, the thesis is again suggesting the building of a partnership or network of cities in the western region that connects in some fashion to cities in more economically advanced provinces. For instance, since the Beijing government has already assigned each region a specialization or comparative advantage it could devise a plan that indicated where agricultural needs in the inland provinces intersected with the needs or interests of provinces elsewhere in China. Such coordination in economic policy would certainly lead to the bridging of economic gaps and induce cooperation at the provincial level. Seventh, as economic development in the People's Republic has remained dynamic, continual monitoring of post-Dengist China will be necessary. The immediate example that comes to mind is the Shenzhen SEZ, which was largely an urban project of the 1980s. Furthermore, as China enters the next century more research will be needed to understand the impact of mega-projects currently under construction, such as Shanghai's Pudong district. Additionally, to further understand the role of cities, one suggestion is to explore the living conditions of minorities and nationalities in China and to research what contributions these locals can offer the Chinese urban industrial development discussion. There is little doubt that the cultural heritage of non-Han people and their urbanization experiences can supply researchers with a different lens with which to examine current and developing urban systems. Eighth, a policy suggestion that helps Chinese state and provincial officials overcome much of their profound short sightedness and provides them with a modern 170 analysis for improving their employment structure is to abolish the current system that issues an advantageous employment status to natives of a certain region over others migrating into the area. The current system condones social inequality and potentially hampers the personal development of a large segment of the least privileged individuals in Chinese society. Therefore, Beijing is obligated to institute a universal system of hiring procedures that at least in theory enables all Chinese citizens to compete on an equal basis for the jobs available in the coastal areas and elsewhere. The creation of anti-discrimination employment policies where peasants, minorities, and nationalities are concerned will solve some of the problems associated with poverty. 6.4 Implications for Theory In the literature it appears that the Chinese hybrid model of development represents a dilemma for the urbanization discourse. In some respects there is little analysis as to China's changing landscape which for the moment, reflects the unlikeliest patterns of urbanization. In varying areas, such as the lesser developed regions, the reflection is one of the traditional system which mirrors anti-urbanization policies of the Maoist command economy. In the other half of the country, the coastal region areas reflects the structural economic changes made to the post-1978 economy through market forces. Neither the first nor the second example have much in common with other situations. The dilemma that the China case poses for urbanization theorists is the same one that it poses for the dependistas: how to model and define properly China's economic transformation. Chinese urbanization and economic national development issues are different for the following reasons. China's transition from a socialist to a market economy has not altered the condition of urban primacy that exists in the country's coastal region, nor has it managed to remedy the underdeveloped state of the western provinces. Furthermore, as mentioned in the previous section, the terminology employed to inform theories of urbanization is vague and fails to determine accurately the specific problems that cause regional inequalities. 171 Second, in the Dengist era the structural economic connection that creates the state of dependency between China's primate cities and more industrialized nations appears weaker in nature than the overwhelmingly powerful relationships that have influenced the function and viability of certain Third World economies, such as Brazil. What has prevented the traditional core-periphery relationship developing has been the Chinese government's intervention in the market end of market socialism. There is no doubt that some form of dependency between the more economically advanced countries and this lesser economically advanced country could happen in the long term. However, China's political elites are managing capitalism so closely that this author thinks that they are redefining the terms of economic engagement and minimizing any chance of dependency. On theories in general, to demand that one general theory provide explanations for the complexities or accurately depict the texture that exists throughout the world is sadly to misunderstand theory. Theories in the normative sense are instruments, devices used to guide research concerns. A necessary component in theoretical knowledge is the fluidity of ideas. Concepts that have an expanded applicability can serve to stimulate the creative thought processes by which we measure and make sense of the realities presented. With that in mind, this study proposes that geographers and social theorists of uneven development reassess the current debate. One proposed method is to reform the current instruments used in the discipline that investigate regional differentiation. Combining several social elements, such as cultural intellect, ethnicity, and history of a particular people or region is a far more constructive and informative way of examining pre-industrialized, industrializing, and post-industrial societies. For instance, it would be useful for theorists to incorporate into their research a set of approaches sensitive to the dynamics of traditional society. Only then could one more accurately chart the development of nations that fall outside of the Western paradigm. The example that comes 172 to mind and one that Western social scientists have been unable to properly categorize is post-1978 'modernizing China'. Thus, the challenge for academics is to envision other forms of development rather than the socialist-communist or capitalist dichotomy. Simply categorizing moderniz-zation in one or the other positions has served only to limit the discourse within these narrow boundaries. What is recommended here is that researchers explore the various socio-economic and political definitions and cultural frames of references that have in-fluenced development. Certainly, such theoretical expansion would create diversity which could lead to better understanding of the developmental processes in countries outside of the Western framework. With that change incorporated into theory, only then, would the definition of development fit the situation rather than the standard. In that regard, the study has ascribed to aspects of Durning's definition of development.394 For the theoretician, true social and economic development transcends the achievements of merely attaining material wealth. Profound development empowers societies and the individuals within all social units to build the capacity to recognize and meet without intervention their own needs. For Durning, "it involves a shift of concerns from the economic to the concerns of the basic necessities of nutritious food, clean water, adequate clothing and shelter, and access to basic health care."3 9 5 In absolute terms, development is a transition from poverty to dependency to independence. In other words, subsidizing the needy becomes contrary to educating the poor to provide for themselves. Therefore, there can be no discussion about the needs of the impoverished unless they are involved in the decision-making process. With that definition in mind, the study supports geographers and social scientists expanding their theoretical bounds. The rationale being that more questions need to be 394Proshanta K. Nandi and Ashim K. Basu, "A Peace Dividend," Journal of Developing Societies (Vol. 9, January-April, 1993), p. 40. 395Ibid.,p. 40. 173 asked and more research needs to be done to investigate the political motivations of state policies that ultimately impact on decisions concerning geographical issues. More importantly, geographers need to place the society they are examining in human context. Such contextualized inquiry should seek to be thorough and sensitive to non-Western examples of socio-economic issues. Theories informed by these societal elements will perhaps go a long way toward building alternative models of economic development. As new criteria are set and varying research themes are articulated, it can lead to creating a groundbreaking approach that is integrative and equally as informative to the traditional approaches that have been at times successfully employed to understand the richness and complexity of our world. 6.5 Suggestions for Further Research For its part, China serves as an example of how an independent decision-making body can provide for its own needs through the crafting of domestic policies that are conductive to its particular social and cultural needs. The People's Republic of China has created a new standard by which to measure the privatization model. This author is conscious of the fact that the mix of Chinese history, culture, and revolutionary experiences are uncommon and therefore the possibilities and constraints China faces in reconstructing its socio-economic system are to a degree unique. However, the Chinese case has contributed much to the theoretical debate of social and economic development and to the academic study of political economy and human geography. Thus, the applicability of the socialist-market economy in varying degrees may be relevant to other Third World economies. Developing countries can draw lessons, borrow insights, and capitalize on miscalculations made by the Chinese leadership during the earlier stages of its economic transformation. The cornerstone of the post-1978 Dengist industrialization model reflects the concerns of the Maoist modernization plan which is, and has been, development in the People's Republic with Chinese characteristics. The major shift in the interpretations and explanations provided to differentiate China's post-174 revolutionary period from that of the Dengist era is that the latter approach to economic development has been reinterpreted to fit the current national and international environment. In economic terms, the author understands that the Chinese invention of the socialist-market economy will be approached with caution by other Third World nations. Nonetheless, China has provided the catalyst that has stimulated the development discussion concerning alternatives in economic reconstruction. The Chinese example now informs this issue and has helped create new models that are used to decipher the complexities related to economic growth. Moreover, due to its high level of economic growth, China is now perhaps the contemporary Third World paradigm of industriali-zation. Traditionally peripheral states can confidently look to the PRC for advice and recommendations concerning economic processes. Future research using China as a model can hopefully aid in the redefinition of uneven geographical and social development, and thus aid theorists in fashioning remedies for regional differentiation. 175 BIBLIOGRAPHY Armstrong, W., and McGee, T. G. 1985. Theaters of Accumulation. 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