Saturday, March 27, 2010

国进民退: Is China Really Re-nationalizing? (I)

Please note that this is the first in a series of several posts on this topic. Subsequent posts can be found here, here and here.

Follow-up Edit (August 2011): Please note that some of my initial speculation in this particular post about the meaning of certain Chinese terms proved to have been misguided. It is important to read the three posts that followed this one for a better understanding of these terms and the guo jin min tui phenomenon.


This is the first of at least a couple of posts on the topic of public vs private ownership of business in China. Chinese speakers may find the beginning of this post a bit tedious, but I want to lay out a few definitions for those who may be interested in the topic, but whose Chinese isn't quite up to speed.

Those who follow Chinese economic discourse may have noticed the terms 国退民进 and 国进民退 in the news recently. (I also wrote another post on this topic about a year ago.) If you speak Chinese, you already get the subtle -- yet profound -- difference between these two terms. For non-Chinese speakers, let me briefly explain these terms.

Each term contains two nouns and two verbs.

The nouns are:

国 meaning "state" (pronounced guo)

民 meaning "people" (pronounced min)

The verbs are:

进 meaning "to enter" (pronounced jin)

退 meaning "to withdraw" (pronounced tui)

So the first term "guo tui min jin" means "the state withdraws and the people enter". The second term "guo jin min tui" means the opposite: "the state enters and the people withdraw".

These two terms refer to processes. Guo tui min jin, at the risk of oversimplification, is basically the process of privatization. Guo jin min tui, again at the risk of oversimplification is the opposite: nationalization. From here forward, I will refer to these terms as "privatization" and "nationalization", respectively (quotation marks included). (Again, let me acknowledge that these are gross oversimplifications.)

One might think that these two terms emerged simultaneously in economic debate; however, those who have followed the Chinese economy for a decade or more know that this is not the case.

"Privatization" (国退民进) was first introduced over a decade ago to describe a deliberate continued policy of privatization that had begun under Prime Minister Zhu Rongji. The idea, at least on its surface, was that, as the state continued to withdraw from ownership of business, the people would gradually move in to take the state's place.

To determine to origin of "privatization" I consulted an official economic history of China which credits Professor Wang Jue (王珏) of the Central Party School for introducing the term in 2000.*

"Nationalization" (国进民退) did not really begin to emerge until very recently, but it did not emerge as a statement of policy. Rather it arose as a criticism of what appeared to be a reversal in economic reforms as the state's share of a number of important industries has begun to increase.

In order to determine whether my perception of the emergence of these terms matched reality, I consulted a couple of sources: a database of Chinese academic journals** and People's Daily, the main Communist Party daily newspaper.*** Below are two charts showing the trends in usage of these two terms.

This first chart shows that the number of academic articles using the term "privatization" (国退民进) became significant around 2000, and peaked around mid-decade before falling off significantly. The number of articles using the term "nationalization"
(国进民退) did not become significant until around 2008, nearly surpassing usage of the other term, "privatization" in 2009.

The point here is that China's academic community appears to at least acknowledge a trend in behavior, if not in policy.

A search for these terms in the People's Daily archives yielded the following chart. Not quite as exciting (and with numbers so small as to be of questionable significance) the data seem to support the academic debate. "Privatization" clearly emerged as a policy around 2000, got a few mentions around mid-decade, then barely got a mention in 2009 -- except possibly in contrast to mentions of "nationalization" which began to show up for the first time last year.

So clearly, there is some sort of a debate going on in China. But this is China, so the debate cannot be very vigorous, nor can it be held in the open, right? While the average Chinese may not be surprised to learn this, the richness of debate taking place in China, particularly in the economic arena, may surprise some outside observers.

A fascinating article about this debate was published this week in China Economic Weekly, a news weekly published by People's Daily. (Thanks to Paul Denlinger for bringing this article to my attention.) The article, entitled “国进民退” 真伪 is the cover story of this week’s issue, and, roughly translated, it means, “'Nationalization' True or False?”

Over several pages, the article presents a fascinating debate that has been taking place in China over the past year, and that managed to generate some attention during the recent annual meeting of the National Peoples Congress. Is the Hu-Wen government really in the process of re-nationalizing a lot of the enterprises that were privatized under Zhu Rongji and Jiang Zemin?

In a later post, I will summarize the debate and identify some of the players. I will also take a look at the origin of the term "
privatization" (国退民进) to determine whether the original meaning was everything we thought it was (or is).

The next post in this series can be found here.


章迪诚,著,中国国有企业改革编年史,(北京:中国工人出版社,2006) pp.556-7.

** database of full-text Chinese academic journals, through UCLA East Asian Library.