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                      Introduction: Changes in Social Stratification in China Since the Reform
                      Li Peilin        2012-11-10

                       

                      Very profound economic and social changes have taken place in China in the 20 years since the reform. One of the main features these changes is the synchronicity of economic institutional transition and social structural transformation. China is now changing from a redistributing economy into a socialist market economy, and at the same time from a traditional agricultural country into a modern industrial country. It is because of this that China is different to a large degree from both the former Soviet Union and East European countries on the one hand and the newly emerging East Asian countries on the other in its path of development. The experience and lessons gained by China during the transition and transformation will contribute substantially to the theory of growth and development in the world.     

                       

                      During the 20 years preceding the reform and opening-up, China tried to build an ideal new society in which there was no private possession of means of production and wealth and no classes through the "great leap forward in economics" and "class struggle" in politics. But things turned out contrary to those hopes: what China achieved was general poverty instead of common prosperity. China found a way out by embarking on the reform and opening. The pivot was a switchover from "taking class struggle as the key link" to"taking economic construction as the central task."     

                       

                      The key industrial cities were originally earmarked as the starting point for the reform and the first step was to enlarge the decision- making powers of enterprises. But the reform program met with great resistance in these places. Unexpectedly, the reform made a breakthrough at the weakest point in the rural areas. The system of people's communes painstakingly established over a long period disintegrated within two or three years with the adoption of the contracted responsibility system with remuneratiori linked to output. The economic structural transformation resulted very soon in changes in social structure. The peasants with the autonomy of management in their own hands began to make rational choices and shift a large part of setting-up of firms by Chinese students who returned after studying abroad ushered in a high-income white-collar social stratum in urban areas. Lawyers, doctors, accountants and business brokers have also joined the white-collar ranks. Within the spectrum of state-owned enterprises, another stratum of enterprises and managers has gradually emerged in the course of property rights reform. In the luxurious gardens and villas in various Chinese cities now live nouveaux riches known as tycoons, a large part of whom are famous singers, film stars, dancers and outstanding sportsmen.      

                       

                      However, during the reform some people have got relatively small gains. The institutional reform in the state organiTations and enterprises has changed the practice of "large canteen cauldron" that existed for decades, getting a job no longer means a life- long employment; old-age provision and medical expenses are not born wholly by the state, and the apartments formerly distributed are sold to the owners. In the traditional industries under readjustment like coal, steel and iron, textile and machinery, millions of workers and staff members lost their jobs or are laid off. These unemployed and laid-off people constitute the main body of low- income groups in the cities and towns of present China.     

                       

                      The reform has quickened social mobility and social interest groups have become pluralistic with new social strata constantly emerging or on the horizon and the social stratification undergoing adjustment and regrouping. New gaps, frictions and conflicts in interests between different social strata have arisen but there does not appear a stable and ordered structure of social stratification.    

                       

                      Firstly, before the reform, with the disappearance of classes in possession of  means of production and wealth the hierarchy  in order of administrative power became the  sole social estate system and the social status  of every people was determined in reference to this system. After the reform the social stratification was multiplied and a trio-system appeared - in terms of wealth, in terms of power and in terms of social prestige. More channels are open before the people to promote their status. But no proper relations have been established between the three systems in the process of rapid social mobility. Some social groups of higher social prestige and greater power, for example, the intellectuals and cadres, have less income and wealth while other social strata with higher income and more wealth, for example, the self-employed households and owners of private businesses, are low in social prestige. This situation results in a psychological unbalance of many people and some people, tempted by selfish interests, take advantage of social resources in their hands to barter power and fame for money and wealth.     

                       

                      Secondly, before the reform egalitar- ianism dominated in distribution in China under the planned economy and all the people ate from the same big pot-one got the same reward or pay as everyone else regardless of one's performance in work. After the reform the incentive mechanism was introduced under a market economy, allowing some people to become well-off first through hard labor and honest business. But the accompanying result is that the gap in income and in the possession of wealth gets increasingly bigger between the urban and the rural areas, between different regions, between distribution under the state plan and distribution under market arrangements, between units with different power of resources allocation, and between different  individuals. At first although the gap existed all the social strata benefited from the reform with the difference that some strata benefited more while others benefited less. However, over recent years the income of wealthier strata has continued to rise while the absolute income of poorer strata has been on the decrease. This phenomenon, seldom seen during the reform, has roused great concern among the scholars, who appeal to the government to adopt new tax and welfare policies to regulate people's income.     

                       

                      Thirdly, during the economic in- stitutional transition the anomies in the substitution of the new institution for the old undermines the order of social stratification. The gap between the rich and the poor that accompanies the fair competition under a market economy is absolutely different in nature and consequences from that under a power economy, an illegal economy or a criminal economy. A market economy is based on fair competition, the full use of resources, efficiency earnings and surplus added value it brings about will give the state adequate capability to regulate the gap and bear the cost. A power economy, an illegal economy and a criminal economy undermines the efficient allocation of resources, their "competitive edge" comes not from lowering the cost, but from shifting the cost. As a result, the inferior takes the place of the superior and wealth and income are illegally concentrated in the hands of the minority. In some places and fields power economy, illegal economy and criminal economy took advantage of the transitional period when the planned economy had been replaced by an imperfect market economy to corrupt the last vestige of the planned economy and undermine the market economy in the cradle. They also stimulate and activate a strong desire and dream to "grasp the opportunity, illegally finish primitive accumulation, to become rich quick and self-promote the social status."     

                       

                      Finally, after over twenty years of reform and opening-up the achievements scored during this period of time have convinced the Chinese people that the reform and opening- up are the only road to development for China. Although more pressures and fiercer competition await China after the entrance into the WTO it will not embark on the road back. On the other hand, the people have gained a fuller understanding of development and a new view of the positive and negative aspects of market mechanism. It is imperative to solve the social issues of the gap between the rich and the poor, environmental pollution, corruption and poverty during the economic growth and it is of utmost importance to establish a common concept of social justice under a market economy. It is now an in- creasingly common demand of ideologically different schools to have a mutual social identification, to set up an ordered social hierarchical structure and to mold values of social justice compatible with fair market competition among different interest groups through dialogue, communication and understanding.     

                       

                      Therefore, it is essential for future sustainable development in China to bring about a reasonable order of social stratification with the aid of legal system. In fact, without a legal economy there will be no moral economy.     

                       

                      The market economy, now more and more complex, is still new to China. Although a series of laws and regulations in coordination with the market system have been adopted since the beginning of the reform, at a rate unprecedented in the history of China, there are still a lot of gaps in legislation and therefore still an urgent need for more laws and regulations, for such gaps in legislation are still causing great harms. For example, research on income and distribution of wealth in all countries points to a greater gap in wealth than that in income. Therefore there should be stricter supervision over wealth than over income. Transparency of wealth possessed by individuals has a great bearing on the ability of the state to control the gaps between the rich and the poor and combat corruption. In China there are no property registration system and the system of supervision of property transfer, the system of taxation on the added value and the transfer of properties will be inevitably imperfect. The transfer of property has a multi-fold meaning, consisting not only regional transfer (e.g.,from China to abroad), transfer between different people (e.g., a son inherits his parents' property), but also transfer in the field of use (e.g., from the field of production to the field of consumption). Want of the system of property registration and the system of supervision over property transfer has led to frequent cases where the managers of a state- owned enterprise get rich while the enterprise goes broke (the so-called "rich monks in a poor temple"). And many big debtors and embezzlers transferred their wealth into foreign banks.      In addition to no laws to go by there is another big problem: the laws are not followed. In the Western society there is a popular saying that two things are certain during a lifetime: death and paying tax. In contrast, there spreads far and wide a trick of making a fortune in China: more money for bribery and less money for tax. As a matter of fact there are laws to go by with regard to value- added tax, income tax and customs duty, but many loopholes exist in the implementation of these laws, especially there is no effective way to tax the enormous number of cash transactions. The so-called "responsibility system of taxation" is practiced in many places, but the actual tax revenue is less than ten percent of the amount of tax that should have been paid. What is more, some revenue offices and officers knowingly violate the law and channel state revenue into personal gains or welfare of their own unit. Taxation is the most effective lever to regulate the gap between the rich and the poor, if something goes wrong with it there will be very serious consequences. "No laws and regulations to go by" is a problem at the level of admin- istrative experience and ability while "laws and regulations are not abided by" would undermine the prestige of the government and the authority of governmental supervision.     

                       

                      Furthermore, there is the problem of institutional reform. Over recent years repeated emphasis has been given to increase in peasants' income and lightening of their burden and hundreds of items for alleviating their burden have been published by the government, but their burden remains the same and the contradictions and conflicts arising from peasants, heavy burden are still being intensified. Why? The cardinal fact is that the labor force in agriculture accounts for about 50% of the national total but the added value of agricultural production makes less than 17% of the GDP. This small share of GDP has to be distributed among the 50% of the national total labor force: it is impossible to considerably raise the income of the peasants and to reverse the situation of low level of comparative profit of agriculture. So the institutional reform is a must. Through institutional reform the rural surplus labor and the surplus time of the peasants will be  integrated with land, capital, technology and  market and through transfer of profits to  peasants and the rural areas the vigor of the  peasants will be regained and their income  increased. Then a reasonable social strati-  fication will ensue.      

                       

                      China's reform as a rational choice with  anticipatory results has also brought about  some unexpected social consequences. We  will make adjustments to our policies in the  future. China's experience demonstrates that  the development of modem society is more  and more related to the order of social  stratification. In other words, the order of  social stratification has become an in-  creasingly important aspect of modem social  development. The following nine brief papers  reflect from different perspectives the changes  and development of social stratification  structure in China since the initiation of reform  and also embody Chinese sociologists' understanding of these changes.       

                       

                       

                      * Li Peilin, born in 1955. Doctor of Sociology of University of Paris I (Sorbonne). Professor and Deputy Director of the Institute of Sociology, Dean of the Department of Sociology of the Post-graduate School, CASS. Research interest: enterprise organization, changes in social structure, development assessment and social stratification. Recent publications: Employment and Institutional Changes (2001), An Analysis of Social Cost of State-owned Enterprises (2001) and Social Structural Transformation in China: A Sociological Analysis of Economic InstitutionalReform (1995). Address: The Institute of Sociology, #5 Jianguomennei Street, Beijing 100732. Telephone no.: 65248032 (O) 68015171 (H). E-mail: lipl@sociology.cass.net.cn 

                       

                      Translated by Song Jun

                       

                      Revised by Denise Henry