International Conference on China

1
International Conference on Chinas Social Policy
Reform Challenges and Direction, Jointly
organised by East Asian Institute, National
University of Singapore Research Department of
Social Development, Development Research Centre
of the State Council, China  

•  
• Title The Evolving East Asian Welfare Regimes
  The Case of China
•  
• Wong, Chack Kie PhD
• Professor, Social Work Department,
• Associate Director, Hong Kong Institute of
  Asia-Pacific Studies,
• The Chinese University of Hong Kong

2
Introduction

• The paper uses a tripartite framework to study
  the change of the welfare regime in China.
• It suggests that the prevalent Western welfare
  theories are inadequate in explaining the
  development of Chinas welfare regime because it
  has different institutional logic.
• It also incorporates the developmental state
  theory and the experiences of welfare
  developmentalism in some East Asian welfare
  regimes in the analysis of the institutional
  dynamic in Chinas welfare development.

3
Western welfare state theories and concepts

• The welfare state is located at the interface of
  two sets of rights, or rules of the game
  (Gintis and Bowles, 1982, pp. 341-345)
• citizen rights underlying the democratic
  institutions of society, and property rights
  underlying the capitalist market system.
• They are in constant and persistent
  contradictions
• According to the neo-Marxist theorists, the
  contradictions underlying the welfare state are
  functional to the very existence of capitalism
  because they legitimize the accumulation function
  of capital (OConnors, 1973 Gough, 1979 Offe,
  1984).

4

• The welfare systems in East Asian societies where
  the underlying institutional arrangements are
  different from Western welfare states
• The democratic institution and the capitalist
  economy were or are absent
• Some of them may have different rules of the
  game or their institutional logic may take time
  to mature,
• such as the market economy in reform China and
  political democracy in Maoist and reform China,
• or rudimentary democracy in many East Asian
  societies.
• In other words, from the standard set by Western
  welfare capitalism, East Asian welfare systems
  can be described as evolving or immature (Kim,
  2001 Tang, 2000).

5
The concept of regime

• The concept of regime in a welfare regime denotes
  the complex socio-political, legal and
  organizational features that are systematically
  interwoven in the relationship between the state
  and the economy as well as between the state and
  society (Esping-Andersen, 1990, p. 2 Walker and
  Wong, 2005, p. 6) and class coalitions of power
  resources account for the regime types in the
  form of social settlements among capital, labour
  and state actors (Esping-Andersen, 1990).
• In this light, the concept of the welfare regime
  looks more powerful and explains the outcome of
  social settlements, i.e., welfare arrangements as
  major components between regime types.
•  

6
The concept of globalisation

• According to Mishra (19993-4)
• Globalisation refers to a process through which
  national economies are becoming more open and
  thus more subject to supranational economic
  influences and less amenable to national control
• Internationalisation the principal economic
  units remain national although international
  aspects of the economy, e.g., trade, foreign
  direct investment and multinational enterprises
  assume increasing importance.

7

• It is assumed that globalisation exerts a
  downward pressure on social protection and
  weakens national governments choice due to
  fiscal constraints increase in taxation will
  reduce competitiveness in attracting foreign
  investment
• It is also suggested that globalisation has come
  to conflict with democratic politics -
  constraints of national government to use
  expansionary policies to enhance welfare

8
A brief review of welfare theories and concepts
in the study of East Asian welfare systems

• Inform us
• First, East Asian welfare systems have and/or
  prefer a greater use of society in the
  distribution of welfare and social costs.
•  
• Second, they may have different institutional
  logics underlying their economic and political
  systems.
•  
• Third, class coalitions of power resources,
  primarily a society-led theory, explain the
  welfare regime types in the form of social
  settlements among capital, labour and state may
  not be able to explain welfare development in
  East Asian welfare regimes.

9

• In fact, neither capitalism nor democracy is
  necessary for constituting a welfare state or
  explaining its development (Walker and Wong,
  1996, 2004).
• Former Soviet bloc countries and Maoist China had
  many essential welfare services and provisions on
  par with those in Western welfare capitalism.
• In other words, welfare development is driven not
  only by the institutional logics of capitalism
  and democracy
• The driving force of welfare development in
  non-capitalist and non-democratic societies is
  often motivated by the need for political
  legitimacy of the authoritarian rule over society
  (Walker and Wong, 2005, p. 5).

10
The tripartite framework

• Walker and Wong (2009) use a tripartite framework
  to analyze the relationship between economic
  policy and social policy in a comparative
  analysis of social policy as a public burden in
  the West and China
• The three dimensions are
• 1. Institutional, e.g., the neo-Marxist
  macro-institutional logic underlying welfare
  capitalism capitalist welfare state the set of
  citizen rights as rule of the game underlying the
  democratic institution of society
• 2. Ideological, e.g., values and traditional
  beliefs about welfare
• 3. Developmental, e.g. national wealth and fiscal
  resources for welfare development (i.e.,
  modernisation theory for welfare development)

11
Developmental state and East Asian welfare regimes

• Developmental state theory
• In order to catch up with advanced nations,
  developing countries need to use their state
  capacity to direct the economy and the society to
  accomplish national economic development
  (Leftwich, 1995, p. 401).
• According to Johnson (1982), a developmental
  state is a coalition consisting of government
  ministers and state bureaucrats that prioritizes
  economic growth over all else.
• In essence, it is a combination of political
  power and economic expertise that give the
  developmental state much transformative power
  (Weiss, 2000).

12

• Ironically, the success of the developmental
  state may pave the way for its own demise,
• As these countries achieve their economic growth,
  a clientelistic state evolves into a citizen-led
  state over time and the developmental elite has
  to make room for new autonomous institutions as
  well as popular interests (Barro, 1997 Lijphart,
  1999).
• Pang (2000) talks about the end of the East Asian
  developmental states due to two major factors
• democracy self-confident civil society
  confronts the authoritarian developmental elite
• financial globalization the domestic
  capitalists no longer need the financial
  subsidies from the state to grow
• According, the developmental states in East Asia,
  Taiwan, South Korea, and Japan ultimately lose
  their power over the economy and society, except
  Singapore
• Globalisation is also context-bounded, i.e.,
  affected by regime type class coalition, e.g.
  Singapore is still state-led

13

• The exception of Singapore due to two reasons
• First, Singapores government does not
  collaborate with domestic capitalists, but
  transnational ones.
• Therefore, the domestic capitalist class has not
  developed into an autonomous and powerful social
  agent with the capacity to challenge the
  authority of the developmental elite.
• Second, because of a weak and subordinated civil
  society largely due to effective governance
• Singapores working class enjoys the fruit of the
  developmental state and its trade unions are
  tightly controlled by the state.
• Political democracy and a global economy explain
  the recent divergent national development of East
  Asian societies.

14

• The application of developmental state in welfare
  development in East Asian welfare regimes
• Welfare developmentalism and productivism are
  similar concepts, that suggests that the state
  subordinates welfare development to economic
  growth.
• Government intervention and policies are used
  extensively to promote industrialization by
  investing heavily in the education and health of
  the workforce to enhance the legitimacy of the
  government and to pacify labour (Aspalter, 2006
  Kwon, 2002 Tang, 2000).

15

• So, how could welfare developmentalism become
  inclusive welfare or universal welfare such as
  the extension of the decommodified welfare
  programme?
• Political democracy seems to be the answer in
  view of the recent experiences in South Korea and
  Taiwan (Ahn Lee, 2005 Croissant, 2004 Back,
  2005 Hill Hwang, 2005 Hort Kuhnle, 2000
  Kwon, 2002 Yasuhiro, 2005).
• In the case of Koreas change to inclusive
  coverage, according to Kwons account (2002, pp.
  30-32), the development of universal health
  insurance was a long process fuelled by
  democratization.
• In the case of Taiwans expansion of its
  decommodified welfare programme, both Kuomintang
  and the Democratic Progressive Party applied a
  strategy of promising social welfare policies in
  highly competitive elections during the process
  of democratization (Aspalter, 2002, 2006 Ku,
  2002 Wong, 2005).

16

• Two models as concluded on the experiences of a
  few East Asian welfare regimes
• The first model, seen in Korea and Taiwan, is the
  shift from state-led welfare development to
  society-led after the democratic institution of
  society dominates.
• In the second model, seen in Singapore, the
  developmental elite hold its power even in
  economic affluence due to its deliberate polices
  and exercise political control over trade unions.
  

17
The case of China as an evolving Welfare Regime

• The application of the tripartite framework
• Institutional China lacks a democratic
  institution of society but it adopts market
  mechanism and principles in economic reform
• The need to address the structural contradiction
  imposed from the logic of capital accumulation
  (state-led factors)
• Also the constraint imposed by globalisation
  (internationalisation?)
• Ideological to look at trait of ideological
  shift relevant to welfare development.
• Developmental to see whether the new social
  resources from economic growth are turned into
  fiscal support for welfare development

18

• Four types of statistical data are presented as
  empirical evidence for our tripartite analysis of
  Chinas evolving welfare regime they are
• 1. the share of social expenditure as a
  percentage of GDP
• - to indicate the commitment of the state to
  citizen rights
• 2. the share of SOE employment as a percentage
  of total urban employment
• - to indicate the extent of the need for
  redistribution by the welfare state
• 3. health care expenses
• - to see whether welfare development as
  depicted by macro-level data of social
  spending matches that of the microlevel specific
  policy area
• 4. the division of expenditure and revenue of
  central government and local governments.
• - to see whether China has commanded the required
  social resources for redistribution.

19
The institutional dimension

• Table 1 reveals the social expenditure patterns
  of China during economic reform and its different
  institutional arrangements of welfare.
• In the pre-reform period, China spent very little
  of its national wealth for social expenditure (a
  broader definition to include education and even
  cultural activities due to inseparable official
  statistics)
• 3.61 percent of GDP in 1978, when Deng Xiao-ping
  started the reform process. That share increased
  to 9.48 percent in 1985 because we include 5.62
  percent of GDP as subsidies to loss-making
  enterprises in the social expenditure budget.
• Up to 3.84 of GDP in 2002 during the last year
  of Jiang Zemin, and before Hu Jintao became the
  party chief secretary
• This reveals the low level of social expenditure
• E.g., OECD countries spend on average 20 of GDP
  in social protection
• This is why Chinas welfare regime is immature

20
(No Transcript)
21

• Table 2 is the share of employment of SOEs as a
  percentage of total urban employment. In 1978
  when Deng Xiao-ping initiated economic reform,
  SOEs had 78.3 percent of total urban employment,
  but that figure declined to 35 percent in 2000,
  one year before China was admitted into the World
  Trade Organization.
• The share of SOE employment declined to 21.3
  percent in 2008.

22
(No Transcript)
23

• This gradual decline of employment of SOEs as a
  percentage of total urban employment had an
  important implication to the welfare regime of
  China, a need for the state to intervene to
  alleviate the capital accumulation function due
  to the following reasons
• 1. Foreign direct investment comes to China to
  lower cost of production
• 2. Private-sectors do not enjoy financial
  subsidies from the state
• 3. Disquiet organized labour and subordinated
  civil society are not in favour of labour

24

• Therefore, despite the introduction of a
  capitalist market system, the protection of
  labour is at the mercy of the developmental elite
  because of inadequate citizen rights.
• If structural factors do not favour non-state
  sector employees in primary distribution, it is
  necessary to look at secondary distribution that
  is, redistribution by the state in Chinas
  welfare regime.
• Table 1 also reveals substantial increases
  recently
• Social expenditure as a share of GDP rose from
  3.83 percent in 2005 to 4.04 percent in 2006,
  6.19 percent in 2007, and 6.66 percent in 2008,
  substantial increases in a short time.
• In absolute terms, spending on culture, education
  and health care jumped from 610 billion?in 2005
  to 1,286 billion?in 2008, an increase of 210
  percent over four years.
• The corresponding rise in social expenditure on
  pension and social welfare was even more
  impressive, from 71.6 billion?in 2005 to 680.4
  billion?in 2008, a jump of 950 percent in four
  years.
• See Table 1

25

• It can be concluded that redistribution in China
  is at a pretty low level but there have been
  impressive increases recently.
• Judging from the evidence available, the present
  level of social resource redistribution seems
  unlikely to legitimize the accumulation function
  of capital
• Empirical evidence of social discontent
• E.g. inadequate redistribution resulted in social
  miseries is paraphrased in terms of the Three
  Mountains facing peopleschooling, medical
  consultation, and housing are not affordable.
• E.g., a stability maintenance office was set up
  in 2006 in different tiers of the government to
  oversee social unrest and propose initiatives to
  maintain social stability.

26

• Look at health care expenses data
• Urban health care system is reformed to
  facilitate the marketisation of the economy
• In 1998, the reform of two traditional health
  insurance systems
• labour insurance and government insurance into
  the basic health insurance system for urban
  employees, included private-sector employees
• The following data illustrates that it was about
  a shift of source of finance to social insurance,
  whilst individual self-payment remained at a
  similar in five years time

27
Source Wong, Tang Lo, 2006
28
(No Transcript)
29

• Inclusion of private-sector employees in cities
  did not lessen the affordability issue
• Therefore, it does not help in terms of political
  legitimization
• Affordability of medical consultation is still
  one of the Three Mountains in public discourse
  about their hardship in daily life.
• Two examples illustrate the tension due to the
  application of market mechanism into the
  operation of public hospitals in China
• Public hospital doctors were called white
  wolves by patients in some reports
• Some public hospitals had to ask police to be
  stationed in hospitals due to poor relations with
  patients

30

• The underlying factor of the bad relationship
  between public hospital doctors and their
  patients can be traced back to the early 1980s
  when the central government began to freeze its
  subsidies to public hospitals (Zheng Hillier,
  1995).
• This forced hospitals to rely upon profits from
  two sources
• Charges on the use of high-end medical equipment
  and the sale of medicine.
• This started the decline of the subsidies from
  government as a share of the total income of
  public hospitals, e.g. only 7-8 from financial
  subsidies of governments in comprehensive public
  hospitals in 2008.
• But recent increases in government health
  expenses as a percent of total health care
  expenses was correlated with the decline of
  individual health care expenses as a share of
  total health care expenses

31
Ideological shift

• When Deng Xiao-ping launched economic reform in
  1978, he followed the developmental state theory
  by using market forces to catch up with advanced
  countries in national development.
• In ideological terms, it is a shift from Mao
  Ze-dongs egalitarianism to market socialism,
  i.e., an ideology emphasizing growth first
  development and the subordination of social
  welfare and social development to economic
  development (Chau Yu, 1999 Walker Wong,
  2009).

32

• Deng Xiao-pings goal of building a xiao-kang
  society was modified to the building of a
  comprehensive xiao-kang society in 2002 by the
  Chinese Communist Party under the leadership of
  Jiang Ze-min (2002)
• Not only economic development was targeted, but
  also higher levels of democracy, culture, science
  and education, social harmony, and peoples
  standard of living.
• However, Jiangs major ideological advancement
  was the Three Represents, which includes the
  capitalist class as people, and not an
  ideological shift with direct implication on
  welfare development.

33

• In late 2002, Hu Jin-tao became the party chief
  secretary and the concept of social harmony was
  put forward.
• Among the six essential components of the concept
  of social harmony, the component of fairness and
  justice implies the reconciliation of the
  interests and relations of all parties concerned,
  under which peoples internal and other social
  conflicts are properly settled and social equity
  and justice were implemented (Hu, 2005).
• This is also evident in the discourse of the
  Five Co-ordinations (Hu, 2003)
• With seemingly direct implications on welfare
  development are the coordination of rural and
  urban development, regional development, economic
  and social development

34

• Both constructing a harmonious society and the
  Five Co-ordinations indicate a shift from the
  trickle-down neo-liberal ideology of markets
  unequal distributiona few get rich first
• to striking a proper balance between economic
  growth and social development and an emphasis on
  getting rich both in either the markets
  primary distribution or the welfare states
  secondary distribution.

35
Developmental dimension

• Development means more resources available for
  redistribution
• In 2009, Chinas GDP was equivalent to US4.985
  trillion, making China the third largest economy
  in the world after the U.S. and Japan (Wall
  Street Journal, July 2, 2010).
• China, with 1.3 billion people, is still a
  developing lower-medium income nation at best
• Nevertheless, the sustained growth rate of up to
  8 percent-10 percent per year over a period of
  thirty years is phenomenal and has enabled the
  country to accumulate sufficient wealth for
  redistribution.
• This was especially the case after 1994 when the
  central government reformed the tax system and
  allowed the central government to have a greater
  share of tax money for redistribution.

36

• In this light, when Hu Jin-tao came to power, the
  ratio of central-local government in fiscal
  expenses declined from a 30.1/69.9 pattern in
  2003 to a 21.3/78.7 pattern in 2008.
• Table 4
• This indicates that more social resources are
  available from Chinas growth state for the use
  of the local government
• The GDP in 2003 was 2,171.53 billion ?.
• In 2008, it jumped to 6,133.04 billion ?, an
  enormous rise of 282 percent (Table 1)

37
(No Transcript)
38
Conclusion

• Chinas welfare regime is characterized by the
  domination of the developmental elite in the
  distribution of benefits and costs.
• Prevalent Western welfare theories are inadequate
  to explain welfare development in China it has
  different institutional logic
• China is expanding its welfare, e.g., social
  expenditure despite it increases the exposure to
  international capital in terms of foreign direct
  investment
• It seems that internationalisation is more
  appropriate on Chinas exposure to international
  economy its SOEs still not expose to
  supranational economic influences and still
  amendable to national control
• Globalisation seems not a key factor in Chinas
  evolving welfare regime
• Its low social expenditure as a share of its
  national wealth is a clear indicator of its
  immaturity.
• The increasing share of non-SOE employment
  suggests that a larger share of urban employees
  receive second-class remuneration and welfare
  packages compared to their SOE counterparts.
• In principle, their poor conditions in primary
  distribution should be compensated by secondary
  distribution in welfare for the sake of the
  political legitimization of the state.
• On the contrary, welfare reform is found to shift
  the financial cost of state welfare to society as
  in the case of the basic health insurance for
  urban employment

39

• The new leadership of Hu Jin-tao, with the new
  discourse of constructing social harmony and the
  Five Co-ordinations, departs from the
  growth-first developmental strategy and
  trickle-down neo-liberal ideology.
• The ideological shift to a fine balance between
  economic development and social development
  coincided with a slow but continuous process of a
  rise in social expenditures in general and
  government health care expenses in particular.
• The recent increases in social expenditures were
  substantial and a greater share of national
  revenue was channelled to local governments for
  redistribution after Hu Jin-tao took office in
  2003. In other words, the developmental factor,
  i.e., resources, is also important.

40

• To conclude, Chinas welfare regime is still
  evolving.
• As a typical developmental state, welfare
  development in China and the well-being of its
  citizens depend very much on the ruling ideology
  and the transformative power of the developmental
  elite
• Specifically, whether the political elite,
  experts and bureaucrats are able to design social
  settlements that are fair to the labour and
  common people.
• In this regard, abandoning the use of
  marketization in Chinas welfare reform is
  significant in enhancing the political
  legitimization function of the state.

41

• At last, if China wants to lessen the social
  miseries resulted from capital accumulation and
  to enhance its political legitimacy, the
  Singapore model seems a viable alternative.
• Of course, it will be a challenging task to
  manage rising expectation of its people fuelled
  by economic affluence and the moral driving force
  of the democratic institution of society.
• In other word, the challenge is not only about
  material resources, but also institutional and
  ideological.
• Thank you.

42
Selected key references

• Esping-Andersen, G. (1990) The Three Worlds of
  Welfare Capitalism. Cambridge Polity Press.
• Johnson, C. (1982) MITI and the Japanese Miracle,
  The Growth of Industrial Policy, 1925-1975.
  Stanford Stanford University Press.
• Leftwich, A. (1995) Bringing Politics Back In
  Towards a Model of the Developmental State, The
  Journal of Developmental Studies, 31(3), 400-427
• Pang, Eul-Soo (2000) The financial crisis of
  1997-98 and the end of the Asian Development
  State, Contemporary Southeast Asia, 22 (3)
  570-593
• Tang, K.L. (2000) Social Welfare Development in
  East Asia, Hampshire Palgrave
• Walker, A. and Wong, C.K. (2005) East Welfare
  Regimes in Transition, From Confucianism to
  Globalization, Bristol Policy Press
•  Walker, A. and Wong, C.K. (2009) The
  relationship between social policy and economic
  policy Constructing the public burden of welfare
  in China and the West, Development and Society,
  38(1) pp.1-26.