China at a Crossroads
Chongqing Bucks the Tide, Edges Leftward
While most of China embraces capitalist principles, Chongqing has decided to buck the trend, sparking major debate by highlighting its own "red" model. Here's what the western Chinese city is up to.
Chongqing Bucks the Tide, Edges LeftwardBy Ching-hsuan Huang
From CommonWealth Magazine (vol. 481 )
Climbing to the top of the Hongyadong district in Chongqing -- home to traditional Bayu culture "diaojiaolou" structures (houses supported by wooden sticks above the ground) -- one gets a clear view of the convergence of the Yangtze and Jialing rivers.
The Chongqing Grand Theatre on the riverside is even more eye-catching than the rivers themselves. Its design was inspired by a ship and, from a certain angle, seems to be sailing on the river below. The theater house, the second largest in China, cost 1.6 billion renminbi to build, but it was funded by eight major government-run Urban Development Investment Corporations (UDICs) based in Chongqing rather than drawn from tax revenues.
At the end of 2002, the city pooled its widely dispersed resources to form the eight UDICs, organized along sector and functional responsibilities such as urban construction, real estate, water works, transportation and touring, expressway development and water resources investment. This created an important investment and financing platform for the city's public infrastructure projects.
Led by the UDICs, the value of Chongqing's state-owned assets has grown over the past 10 years from 170 billion renminbi to 1.25 trillion renminbi, the fourth highest in China.
This strategy embodies the "Chongqing model" that has sparked fierce debate in China over the past year, a model that does not emphasize dominance of either the state or the people but has both forces moving forward together. The spirit of the model is that as long as the value of public assets rises, the people and private enterprise will gain dividends.
The Chongqing Experience
Bo Xilai, the Communist Party chief in Chongqing and a rising star in Chinese political circles, is making new political waves with his Chongqing model. Many people, including Cui Zhiyuan, a professor at Tsinghua University's School of Public Policy and Management in Beijing, believe that the rise of Chongqing has made it the model front for China's new left-wing practical theory.
The Chongqing model represents the theoretical masterpiece of the professor, who also serves as an assistant to the director of the Chongqing State-owned Assets Supervision & Administration Commission and is considered Bo's chief consultant.
"I call it the ‘Chongqing experience in practice,'" said Cui during an interview with CommonWealth Magazine, eschewing the term "Chongqing model."
The 48-year-old Cui, whose full head of hair has grayed, giving him the air of an authoritative scholar, received a Ph.D. in political science from the University of Chicago and has taught at MIT. Talking about the Chongqing experience, he is every bit the academic, falling back on past theoretical constructs. Cui believes that the concept of increasing national asset value as seen in Chongqing is consistent with the theory of liberal socialism espoused by Nobel Prize economist James Meade.
Because the earnings of state-run enterprises are turned over to the government, they represent an alternative source of fiscal revenue that enables authorities to lower tax rates on individuals and private businesses.
Country Style Cooking Restaurant Chain Co. Ltd. is one of the city's many private companies benefiting from the policy. Regulations on development in western China offer private enterprises setting up in any of 12 western provinces a preferential 15 percent corporate tax rate, if they are involved in specifically promoted sectors.
But only in Chongqing with its deeper pockets has the preferential tax rate been extended to all private businesses, including Country Style Cooking, which operates a western-style fast-food chain and would not qualify for the tax break elsewhere.
Realizing the Quest for Common Prosperity
If Shenzhen in the 1980s and Shanghai in the 1990s symbolically represented distinct stages of reform and liberalization, then "Chongqing in the 2000s has become China's next forerunner of development," Cui says.
The challenges now facing China have changed, Cui contends, evolving from investment and export-oriented economic development to economic growth driven by domestic consumption.
"That requires achieving a common prosperity, which is Chongqing's quest," Cui explains.
Chongqing is the biggest and most populous municipal administrative district in all of China, with 33 million people, 70 percent of whom are farmers. Government data indicates that the spending power of city dwellers is six times as high as that among villagers living within city limits. Under the umbrella of pushing for a common prosperity, Chongqing's most pressing problem is to urbanize village populations because only then can the potential of domestic consumption begin to be exploited.
Chongqing began addressing the issue when it launched household registration reform on Aug. 15, 2010. Cui stresses that farmers will soon formally become city residents, and the benefits of their new status will go far behind the residency certificates they receive. They will be entitled to the same perks offered to all city residents, such as free education, health insurance, unemployment insurance, and social security. The key to the transition is the financial muscle generated by rises in value of public assets that support the programs' funding.
To date, 2.3 million agricultural migrants who have worked in Chongqing for five years or more have been given Chongqing residency, the most of any municipality in China.
The city also launched a program last year to build 40 million square meters of public rental housing within three years to meet the housing requirements of these new Chongqing residents.
In April, Wu Bangguo, chairman of the Standing Committee of the National People's Congress visited Chongqing. Joining him was Taiwanese tycoon Terry Gou, the chairman of Hon Hai Precision Industry Co. Ltd., the world's biggest contract electronics manufacturer. Gou told Wu that one of the main reasons he chose Chongqing as the site for a new plant was because of the public rental housing policy, which eliminates the need for factory dormitories and means companies no longer have to take care of employees' social needs.
The Three Principles of the People on ‘red' soil
Sun Yat-sen may be the father of the Republic of China, but the course charted in his "Plans for National Reconstruction" could easily be the blueprint for major infrastructure projects in the People's Republic of China in recent years. Chongqing, for its part, has used one of Sun's Three Principles of the People – the Principle of the People's Livelihood – to justify its own governing direction.
Cui ties Chongqing's "Country Land Exchange," the first to be created by any city in China, to a concept articulated by Sun.
"Chongqing's Country Land Exchange emphatically embodies Sun Yat-sen's ‘distributed dividends,'" Cui says, referring to Sun's idea that when land prices rise, the benefits should accrue to the public.
The goal of the program is to expand urban areas open to development while maintaining a stable amount of farmland by linking rural and urban land markets.
The market approximates emissions trading systems, where industrialized countries buy carbon emission credits from less developed countries for the right to pollute.
Its main currency is a land credit – called "dipiao" or "land ticket."
Transacting these credits might involve, for example, farmers who have been legally registered as residents by the city and decide to convert the land they used for housing back into farmland. The contractual right to the land would remain in the farmers' hands, but a "credit" for the area of the newly created farmland would then be put up for auction on the exchange and sold to developers looking to develop land in another part of the city of an equal size.
With possession of the "land credit," the developer would be allowed to obtain land usage permits, and the rise in land prices generated by the auction would go to the city or village government.
At the same time, by taking land in rural villages originally used for infrastructure and rezoning it into farmland, the government ensures that fast-growing urbanized construction will not encroach on the 120 million hectares of land China feels is the absolute minimum it needs for agriculture.
But as the Chongqing model has drawn more attention, waves of criticism and negative publicity have intensified.
"Among those opposed to the idea, the Chongqing model really wants to negate the reforms and liberalization of the past 30 years. The goal is to return to the planned economy seen in China prior to the Cultural Revolution," according to a book called Bo Xilai's Destructive Course published by Hong Kong-based Mirror Books.
The most controversial elements of the Chongqing model and its march toward more leftist values have been the "Sing Red Songs" and "Crack Down on Organized Crime" campaigns. The organized crime crackdown, which has pleased Chongqing residents, reached its peak when the former head of Chongqing's Justice Department, Wen Qiang, was arrested and eventually executed.
But the "Red Songs" campaign, which requires public and private organizations to sing songs praising the achievements of the Communist Party, was not as well received.
"Bo Xilai's crackdown on organized crime was really good, but singing red songs is a little too left-wing," has been a common refrain. In fact, many people from Chongqing and all around China who discuss the "red songs" campaign aimed at rebuilding traditional Communist Party value systems take exception to it.
Turn on the TV and one finds Chongqing Satellite TV broadcasting staffers at a Chongqing hospital singing red songs. Nurses wearing pink uniforms and nurses hats and doctors clad in white coats are seen lined up in rows on a stairwell enthusiastically signing revolutionary songs from the Mao Zedong era. But on the set below, TV station workers appear to be anything but happy.
At the beginning of this year, Chongqing Satellite TV station became the country's first provincial level "red channel," forgoing all commercial advertising and broadcasting programming associated with traditional Communist Party culture produced in house rather than popular drama series during prime time viewing hours.
The station's ratings quickly plummeted after the programming change, falling from third best among provincial level satellite stations to 34th. The station's advertising department let go 20 percent of its staff and the wages of all employees of the Chongqing Broadcasting Group, the parent company of Chongqing Satellite TV, were cut.
An article in the South China Morning Post interpreted the move as "Bo's latest attempt to promote red culture" in a campaign "widely seen as part of an intensified push for a seat on the Politburo Standing Committee at next year's party congress."
Bo's apparent drive for increased power begs a question about the staying power of Chongqing's evolving model. Will the Chongqing experience become the forerunner of a changing "China model" or will it disappear after Bo leaves the city?
The answer won't be known until next year at the earliest.
Translated from the Chinese by Luke Sabatier