The Great Transformation:
Double Movement in China
Shaoguang Wang
Department of Government & Public Administration
The Chinese University of Hong Kong
School of Public Policy & Management
Tsinghua University
Karl Polanyi: Double Movement
“The expansion of market forces would
sooner or later be met by a
countermovement aiming at conservation
of man and nature as well as productive
organization, and using protective
legislation and other instruments of
intervention as its methods”
Karl Polanyi, The Great Transformation,
pp. 130-134
Main Argument

China has undergone a “great
transformation” which consists of a “double
movement” since 1978
 The
politically induced transformation to the
market system
 The countermovement and self-protection from
society
Outline
1.
2.
3.
Double movement: Three periods
The emergence of social policies
Two key explanatory factors
Double Movement in China
Three Periods
1949-1984: Moral economy, no need for
direct state provision of social policies
 1985-1998: Efficiency (growth) as priority,
no attention to social policies
 1999-present: The emergence of social
policies

Moral Economy, 1949-1984

The planned economy consciously subordinated the economy to a set
of social values.





Distribution (not redistribution) was the main forms of resource
allocation and social integration
Such a distributive system would not be able to proceed without an
established center (the state) from which distribution took place
The provisioning of humans—the securing of their livelihood—was
located in, or integrated through, urban work-units and rural
communes, which were as much social as economic institutions
The logic of the economy was embedded in society through two
mechanisms



The securing of human livelihood was submerged in and determined by a
nexus of non-economic institutions (e.g. work-units, people’s communes)
and institutionalized norms (e.g. equality and solidarity).
Soft-budget constraint
Iron rice bowl
The market played no vital role in human social life
Distribution under the Moral (Planned) Economy
Central Budget
Soft budget constraints
Local Budget
Unit
Unit
Soft budget constraints
Unit
Iron rice bowl
Paradigm Shift in Ideology: 1984-1999



Rather than equity and security, Chinese policymakers placed their top priority on rapid aggregate
economic growth.
The obsession with fastest possible GDP growth
rates made them ready to tolerate a certain degree
of inequity and to sacrifice some basic human
needs, including health care.
It was their belief that, as long as the “pie”
continued to grow bigger, all other problems
would eventually be solved.
How Did the Economy Become Disembedded?


The transition from the embedded economy to market society marked
a radical watershed in China’s history
The development of markets: 1979-1983



The development of market system: 1984-1992



Markets began to emerge but they were marginal, often heavily
administered.
There was still the dominance of non-market institutions and relations
A system of interrelated markets (commodity, labor, financial, etc.)
Competition and the law of supply and demand did exist, but was not
universal or omnipotent
The development of market society: 1993-1999



No end other than economic ones were pursued
The market threatened to become the dominant mechanism integrating the
entirety of society.
The magnitude of the market’s reach can be measured by the extent of
commodification, by the range of goods subject to commercial traffic
(healthcare, education, environment, etc.).
19
65
19
70
19
7
19 5
78
19
79
19
80
19
81
19
82
19
8
19 3
84
19
85
19
86
19
87
19
88
19
8
19 9
90
19
91
19
92
19
93
19
94
19
9
19 5
96
19
97
19
98
19
99
20
00
20
0
20 1
02
20
03
20
04
State Retreat from Healthcare
Structure of Total Health Expenditure
100
90
50
10
Government
80
70
60
Social
40
30
20
Out-of-Pocket
0
State Retreat from Education
Budgetary Allocationas % of Total Expenditure on Education
66%
64%
62%
60%
58%
56%
54%
52%
50%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
The Breakup of the Moral (Planned) Economy
Central Budget
Eating in separate kitchens
Local Budget
Unit
Unit
Hard budget constraints
Unit
Contract
Disembedded Economy




In a market society, the livelihood of human being is market dependent
As markets became universal and hegemonic, the welfare of individuals
came to depend entirely on the cash nexus
Consequently, workers and farmers were forced to get by with reduced
entitlement to assistance and security
Growing inequalities
Income
Rural-urban
Regional
Within rural
Within urban
Wealth
Healthcare
Education
Consequences of the Disembedded Economy,
1985-1998
Gini Indices of Income Inequality
50
45
40
35
30
25
20
15
10
Rural
Urban
National w/o COL adjustment
5
National with COL adjustment
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0
Selected Studies of Inequalities
The Emergence of Social Policies,
1999-Present
The Reembedding of the Market since 1999
Market liberalism made demands on
ordinary people that were simply not
sustainable
 As such dissatisfactions intensified, social
order became more problematic and the
danger increased that political leaders
sought to divert discontent by somehow
reembedding the economy
 A countermovement

Decommodification & Redistribution
“De-commodification occurs when a
service is rendered as a matter of right, and
when a person can maintain a livelihood
without reliance on the market” (EspingAnderson, pp. 21-22)
 Redistribution entails contributions to the
center (e.g. taxes) and payments out of it
again (e.g. social assistance and social
security)

How does Redistribution Work?
The State
Taxation
Social assistance
& social insurance
New Social Policies，1999-2007
Year
New Social Policies
1999-
Go-West program
2002-
Urban minimum income guarantee program
2003-
Rural fee-tax reform; reestablishing rural Cooperative Medical Systems (CMS)
2004-
Lowering agricultural taxes; introduction of 3 types of rural subsidies
2005-
Partially abolishing agricultural taxes
2006-
Abolishing all agricultural taxes; introduction of comprehensive rural subsidies;
free compulsory education in western and central rural areas; public housing for
urban poor
2007-
Free compulsory education in all rural areas; basic health insurance for all urban
residents; CMS for over 80% of rural population; promoting rural minimum
income guarantee program, promoting public housing for urban poor
To Reduce Inequalities



To reduce regional income inequality
To reduce urban-rural income inequality
To reduce human insecurity





Minimum income
Work-related injury
Healthcare
Unemployment
Old-age pension
To reduce regional income inequality
Intergovernmental Transfers (billion yuan)
1800
1600
1400
1200
1000
800
600
400
200
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
To reduce regional income inequality
During the period of 1994-2005, 10% of the
central fiscal transfers went to eastern
provinces, 44% to central provinces, and
46% to western provinces
 Central fiscal transfers have helped reduce
both vertical and horizontal fiscal imbalance
and thereby regional inequalities

Convergence of Provincial Growth Rates
Gini Coefficients of Provincial Per
Capita GDP (1978 constant price)
To reduce rural-urban gaps: Taking less
Agricultural Taxes (billion yuan)
100
90
80
70
60
50
40
30
20
10
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
To reduce urban-rural gaps: Giving more
Central Transfers to Support Rural Fee-to-Tax Reform
(billion yuan)
90
80
70
60
50
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
To reduce rural-urban gaps: Giving more
Central Budget for Agriculture, Rural Areas and Farm ers
(billion yuan)
450
400
350
300
250
200
150
100
50
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
19
7
19 8
7
19 9
8
19 0
8
19 1
8
19 2
8
19 3
8
19 4
8
19 5
8
19 6
8
19 7
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
06
Urban-Rural Income Gap
3.5
Rural income as 1
Leveling off
3
2.5
2
1.5
1
0.5
0
Per Capita Expenditure on Healthcare and Education
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Per capita health expense
Per capita income
per capita education expense
To reduce human insecurity:
Urban Minimum Income Program
25
25
20
20
15
15
10
10
5
5
0
0
1996
1997
1998
1999
2000
2001
# of persons covered (million)
2002
2003
2004
2005
Total expenditure (billion yuan)
2006
To reduce human insecurity:
Rural Minimum Income
30
25
20
15
10
5
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
# of persons receiving social assistance
# of persons covered by rural minimum income guarantee program
To reduce human insecurity:
Increased government and social health spending
Total
Gov't
Social
OOP
% OOP
growth
Gov't
Social
OOP
1998
377.7
58.72
100.6
218.33
58%
2000
458.7
70.95
117.19
270.52
59%
2002
579
90.85
153.94
334.21
58%
2004
759
129.36
222.54
407.14
54%
21%
16%
24%
28%
31%
24%
42%
45%
22%
19
65
19
70
19
7
19 5
78
19
79
19
80
19
81
19
82
19
8
19 3
84
19
85
19
86
19
87
19
88
19
8
19 9
90
19
91
19
92
19
93
19
94
19
9
19 5
96
19
97
19
98
19
99
20
00
20
0
20 1
02
20
03
20
04
State Re-engaged in Healthcare
Structure of Total Health Expenditure
100
90
50
10
Government
80
70
60
Social
40
30
20
Out-of-Pocket
0
To reduce human insecurity:
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
30
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
No. of urban residents insured
% of urban residents insured
Percentage
Million
Coverage of Urban Basic Healthcare Insurance
To reduce human insecurity:
Health Insurance Coverage of Active Employees & Retirees
Coverage of Active Employees & Retirees
90
Share of em ployees in state & collective sectors
80
70
60
50
40
30
20
10
0
1994
1995
1996
1997
1998
% of employees covered
1999
2000
2001
2002
2003
2004
% of retirees covered
2005
19
7
19 8
7
19 9
1980
8
19 1
8
19 2
8
19 3
8
19 4
1985
8
19 6
8
19 7
8
19 8
8
19 9
1990
9
19 1
9
19 2
9
19 3
9
19 4
1995
9
19 6
9
19 7
9
19 8
9
20 9
2000
0
20 1
0
20 2
0
20 3
0
20 4
2005
0
20 6
0
20 7
08
To reduce human insecurity:
Coverage of Rural Cooperative Health Insurance
100
90
80
70
% of rural population covered
60
50
40
30
20
10
0
Counties with Coverage of Rural
Cooperative Health Insurance
To reduce human insecurity:
(Millions)
Coverage of Unemployment Insurance
120
120%
100
100%
80
80%
60
60%
40
40%
20
20%
0
0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
# of employees covered
% of formal sector employees covered
To reduce human insecurity:
Urban Basic Pension Program #
200
180
160
140
120
100
80
60
40
20
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
0
# of active employees
# of retirees
To reduce human insecurity:
Urban Basic Pension Program %
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
0%
% of retirees covered
% of urban employees covered
To reduce human insecurity:
Coverage of Work Injury Insurance
Work Injury Insurance
40%
35%
30%
% of Urban Employed Population
25%
20%
%
15%
10%
5%
0%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
To reduce human insecurity:
Budgetary Expenditure on Social Welfare/Security, 1978-2005
9%
8%
1.6%
Social w elfare & social security/Total government expenditure
Social w elfare & social security/GDP
7%
6%
1.4%
1.2%
1.0%
5%
0.8%
4%
3%
2%
0.6%
0.4%
0.2%
0%
0.0%
19
7
19 8
7
19 9
8
19 0
8
19 1
8
19 2
8
19 3
8
19 4
8
19 5
8
19 6
8
19 7
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
05
1%
Two Key Explanatory Variables


Ability: Recuperating State Extractive Capacity
Willingness: Changing Model of AgendaSetting in Policy-Making
Recuperating State Extractive Capacity:
Gross Fiscal Revenue, 1978-2005
Gross Fiscal Revenue, 1978-2005 (0.1 billion yuan)
50000
Budgetary Income
45000
Extrabudgetary Income
Social Security
40000
35000
30000
25000
20000
15000
10000
5000
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
0
Recuperating State Extractive Capacity:
Gross Revenue & Expenditure/GDP, 1978-2005
Gross Fiscal Re ve nue & Expe nditure /GDP, 1978-2005
45%
Gross Fiscal Revenue/GDP
Gross Fiscal Expenditure/GDP
40%
35%
30%
25%
20%
15%
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
10%
Changing Model of Agenda-Setting in Policy-Making:
Six Model of Agenda-Setting
Initiator of Agenda
Degree of
Popular
Participation
DecisionMakers
Advisers
Citizens
Low
I.
Closed Door
III.
Inside Access
V.
Outside
Access
High
II.
Mobilization
IV.
Reach-out
VI.
Popular
Pressure
王绍光，“中国公共政策议程设置的模式”， 《中国社会科学》2006年第5期
The Popular Pressure Model of Agenda-Setting


Where do pressures come from?
Why do pressures have impact on agenda-setting?




Stakeholders have become more assertive (e.g. regional
policy)
Involvement of NGOs (e.g. environmental policy)
Changing role of mass media (e.g. work safety,
education, healthcare)
Rise of the internet
The Rise of the Internet
15000
7000
14000
6000
PC connected to the Internet
Internet users
5000
13000
12000
11000
10000
4000
9000
8000
7000
3000
6000
5000
2000
4000
3000
1000
2000
1000
19
97
.1
19
98
.7
19
99
.1
19
99
.7
20
00
.1
20
00
.7
20
01
.1
20
01
.7
20
02
.1
20
02
.7
20
03
.1
20
03
.7
20
04
.1
20
04
.7
20
05
.1
20
05
.7
20
06
.1
20
06
.7
20
07
.1
0
0
Policy Re-orientation


From “efficiency first” to “Human-being first” to
“harmonious society”
Those issues on which people have called for
changes (such as environmental crisis, regional
disparities, rural problems, landless farmers, urban
poverty, unemployment, growing inequality, rising
costs of education and health, coalmine safety,
skyrocketing housing prices, and the like) have
been put on the government’s agenda.
Summary I
Now the government has fiscal capacity and
political will to introduce social policies,
although neither is sufficiently strong.
 There is still big room for improvement on
both fronts.
 Nevertheless, the emergence of social
policies marks a historical turning-point.

Summary II
The case of China seems to bear testimony to Karl
Pplanyi’s insight on the dynamics of modern society:
“The idea of a self-adjusting market implied a stark utopia.
Such an institution could not exist for any length of time
without annihilating the human and natural substance of
society; it would have physically destroyed man and
transformed his surrounding into a wilderness.”
Karl Polanyi, The Great Transformation, p. 3