The Facts Are In: Foreign Investment Spurs Deep Reforms in China
By DOUG GUTHRIE
(Virtual China Commentary -- May 8)
The debate over engagement with China is implicitly about the effect of foreign
investment on new laws, labor practices, and civil rights in Chinese society.
Proponents of the WTO deal argue that engagement is preferable to isolation,
and that it is only through continued contact with the international community of
nations that the Chinese political and economic systems will become more like
the rational-legal systems of the West.
Opponents of the deal advocate isolation and continued political pressure,
arguing that trade is a privilege and that if China wants to take advantage of this
privilege, the government must show its commitment to human rights and radical
political reform.
Despite the strongly held positions on both sides of the debate, there has been
surprisingly little research on the actual effects of foreign investment in China. As
a result, the positions of politicians and advocates are based upon rhetoric rather
than evidence. It is here that research in the social sciences can have the greatest
impact.
Radical Change
By carefully examining the changes that have occurred in China -- and the causes
behind these changes -- we can contribute empirically grounded information that
most politicians and pundits lack. As a sociologist studying China's economic
reforms, I have spent the last decade interviewing officials, managers, and
workers and conducting systematic studies of Chinese factories to assess the
extent of the reforms and the impact of foreign investment in this area.
My research offers unequivocal support for engagement.
In our desire to observe something dramatic and photogenic, like the fall of the
Berlin Wall, we ignore the fundamental building blocks that are gradually creating
a new society in China. The changes in this authoritarian system, while gradual
and incremental, have also been radical and fundamental in their own ways.
Statutes such as the State Compensation Law (1995), which allows Chinese
citizens to sue the government for past wrongs, and the Prison Reform
Law(1994), which ensures the rights of prisoners, were utterly inconceivable two
decades ago.
Institutions such as the Labor Arbitration Commissions, which allow workers to
file grievances against authority figures in the workplace, would also have seemed
impossible when the reforms began in the early 1980's. Those are only a few of
the hundreds of new laws and institutions that are reshaping Chinese life.
Steps Backward
We should also acknowledge that the question of progress on human rights is a
multifaceted issue, and that a U.S. policy that makes sense for one set of
concerns may not be the same policy that makes sense for others.
Human rights in China can be broken down into several categories, including the
treatment political prisoners and dissidents, the treatment of common prisoners in
China's labor camps, the treatment of everyday citizens, and religious freedom.
When proponents of a tough-on-China stance blithely claim that engagement has
not worked, they are almost always talking about only one or two of the
categories on this list.
To be sure, when it comes to religious freedom and the treatment of political
prisoners and dissidents, there have been few steps forward. The recent
crackdowns on the China Democratic Party, the jailing of Xu Wenli and Qin
Yongmin, and on the Falun Gong religious group were two of many recent steps
backward.
China's recent record on this front has been atrocious, and aggressive
international political pressure is essential to continue the process of change.
However, significant progress has been made in the treatment of China's two
million to three million prisoners. James Seymour and Richard Anderson, in their
1998 book New Ghosts, Old Ghosts: Prisons and Labor Reform Camps in
China -- the most extensive research on the topic to date -- shows very clearly
that the Prison Reform Law of 1994 has unequivocally improved the treatment of
prisoners in China's labor camps.
Workers' Rights
The Prison Reform Law, which explicitly protects prisoners' civil liberties, is a
radical piece of legislation for China, and the fact that these changes are so often
ignored is baffling. According to Seymour and Anderson, who draw on accounts
given by prisoners in China's labor camps, violence toward prisoners has
dropped dramatically since the law was promulgated.
It is in the transformation of the workplace that reform catalyzed by engagement
is most extensive. It is strange, then, that we seem to know the least about these
changes, despite the fact that they directly affect a far greater number of citizens
than any other area of Chinese democratization.
My own research suggests that more than 60 percent of Shanghai's factories
have set in place grievance filing procedures and mediation committees, so that
workers now have formal avenues for filing grievances against superiors in the
workplace.
At one factory I visited recently, the general manager told me that workers
received individual copies of the Labor Law to "help them learn about their rights
as workers." At another, banners exhorted workers to "exercise their democratic
rights" by attending the factory's Workers' Representative Committee meetings.
A Year of Fieldwork
Foreign investment influences the emergence of rights-based labor relations in
fundamental ways. Foreign investors generally seek Chinese partners who are
predictable, stable, and knowledgeable about Western-style negotiations and
business practices.
Chinese factories, for their part, want desperately to land these partnerships, and
they position themselves as suitable investment partners by adopting a number of
the practices that Western partners will recognize as stable, reform-minded
business practices. Thus, the signaling of commitments to stable Western-style
business practices leads to fundamental changes in the authority structures of the
Chinese workplace.
True, neither foreign investors nor Chinese companies are necessarily, or
primarily, interested in human rights per se. But the negotiations in the
marketplace lead to transformed workplaces.
During a year's fieldwork in China I conducted in-depth interviews with 155
managers and workers at medium to large factories in Shanghai, and with
lawyers, business consultants, and government officials. I learned that Chinese
corporations that have formal relationships with foreign firms are significantly
more likely to have established not only grievance-filing procedures and
worker-representative committees, but also organizational rules, formal hiring
protocols, and significantly higher wages.
A True Gauge
On average, Chinese factories that have formal relations with foreign firms pay
their workers about 4,500 yuan per year more than their counterparts that do not
have formal relations with foreign firms (the average salary in industrial Shanghai
is about 8,800 yuan per year), and they are about 17 times more likely to have
formal grievance filing procedures in the firm.
Those corporations are also more likely to adopt China's new Company Law
(effected in 1994), switching their registered status from "enterprise" to
"company," a transition that forces them to adhere to the norms of international
business--institutionalizing boards of directors, open accounting systems, and the
like. They are also more likely to respect international legal institutions such as the
Chinese International Arbitration Commission, an international panel of
arbitrators charged with the task of governing economic disputes within China.
Research such as mine is obviously just a beginning. To truly gauge the economic
transformation of such a vast nation is a daunting and never-ending task that will
require the commitment of many disciplinedsocial scientists. Particular attention
should be paid to the growing gap in wealth between urban and rural areas in
China; the transformation of specific sectors, such as banking and the country's
emerging telecommunications economy; and the ongoing problem of corruption.
Scholarship on China's reforming economy must remain empirical, and scholars
must stay deeply attuned to the everyday lives of Chinese citizens. Study must
also remain relevant to crucial political questions concerningU.S. engagement.
But even now, the limited data we have on China's responses to international
engagement are compelling - so any compelling argument about American policy
toward China must take them into account.
Doug Guthrie is Associate Professor of Sociology at New York University
and a Program Director at the Social Science Research Council. He is
author of Dragon in a Three-Piece Suit: The Emergence of Capitalism in
China (Princeton 1999). The above article was published in a slightly
different version in The Chronicle of Higher Education. |
