AAS Annual Meeting

China and Inner Asia Session 36

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Session 36: Neither Black Cat nor White Cat: The Informal Economy in Contemporary China

Organizer: Paul Festa, Stanford University, USA

This panel explores those aspects of everyday economic life in China that remain off, or around the edges of, the radar screen of the formal economy and are therefore largely unaccounted for in formal statistics. We consider what scholars have alternatively called the “informal economy,” “ritual economy,” “occult economy,” “hybrid economy,” “redistributive economy,” “illicit economy,” and “gift or exchange economy.” Panelists study a diversity of cases. Festa examines illegal pyramid schemes, juxtaposing popular attitudes and an official ‘clean-up’ campaign in Nanning. Li probes the case of China’s courts, showing how the formal features of the market economy abet legal corruption. Kao traces the socio-economic implications of informal waste recycling, particularly in old bricks from demolition sites in Beijing. Cheng tracks the institutional dynamics of China’s cigarette industry, focusing on how informal activities overcome market obstacles. And Lin tackles the economic and ethical implications of the fake tobacco and liquor trades in Tianjin and Guangdong. Through these cases, we address the following questions: In the underground economy, how are monetary, social, political, and symbolic capital mutually translatable and transferred, circulated and exchanged? What kinds of communities are formed and sustained through informal economies? In what ways do informal (including illicit or illegal) economies piggyback upon, supplement, or subvert the formal or official sector, and how are the meanings, values, and ethics of each mutually (re)defined in the process? What histories and/or futures are imagined through participation in underground economies, and how are such imaginings shaping the “rise” of China today?

The Specter of Socialism in China’s Informal Economy: The Official ‘Stamp-Out Direct Sales’ Campaign and Popular Sentiments
Paul Festa, Stanford University, USA

On June 30, 2010, the city government of Nanning, capital of Guangxi, launched a six-month campaign to stamp out direct sales activities and pyramid schemes (chuanxiao). Although illegal since the late-1990s, direct sales have flourished nationwide, emerging as a prominent part of the underground economy. This is particularly so in Guangxi, where direct sales are decried as a “scam” akin to “religious cults” with daily “brainwashing study sessions.” Following police raids of dozens of direct sales “nests,” local media have been awash in dramatized accounts of busted rings, according to which thousands of people “lured into the trap” of direct sales have been “liberated.” In this paper, I examine the official discourse of the anti-direct sales campaign and juxtapose it to insider reportage as well as popular discourses and sentiments relayed to me during fieldwork in Nanning. In what ways does the campaign at once strategically invoke idioms and images of Mao-era mass movements and redeploy them to define the normative values of a liberal economy with socialist trappings? What are the popular attitudes towards direct sales and how do ordinary people apprehend and respond to the official campaign? What does this juxtaposition suggest about the role of the informal economy, the relationship between the moral economy and the (il)legal, and the embedded legacy of the socialist past in the unfolding present of a “rising” China?

The City Recycled: Land Development and the Trading of Old Bricks in Postsocialist Beijing
Shih-Yang Kao, University of California, Berkeley, USA

The informal sector of waste recycling in developing countries is not always structured toward the benefits of capitalist enterprises. In this paper, I articulate this position by discussing the recycling and the reuse of old bricks from demolition sites in postsocialist Beijing. In Beijing, a vibrant informal trade of old bricks is created and sustained through the process of land development. On the production side, demolition projects release mountains of old bricks from traditional courtyard houses and socialist danwei compounds each year. On the consumption side, relocation projects, especially those in urban villages (i.e., chengzhongcun), constantly boost up demand for old bricks. This is because to-be-relocated households, for the purpose of negotiating a better compensation package with developers and urban governments, would often work to create extra floor areas by adding new building structures upon existing properties. Old bricks, therefore, closely follow government-issued relocation notices (chaiqian gonggao), continuously flowing from one demolition site to another. Most of the time, the real estate industry would compensate for those extra-legal building structures in order to avoid delays of development projects. Property owners in urban villages, on the other hand, reduce loses in (and in some cases, benefit from) property expropriations through the consumption of old bricks. The real loser in this informal brick trade are rural migrants who are tenants in urban villages. They constantly find themselves trapped in a chaotic environment where the building of temporal extra-legal structures turns their neighborhoods into dusty and noisy construction sites.

Fake Tobacco and Fake Liquor in China
Yi-Chieh Lin, National Chung Hsing University, Taiwan (R.O.C.)

Fake tobacco and fake liquor have presented major risks for human health and wealth fare of Chinese people through delicate labor division by provinces. In one case, two male suspects sold fake Brandy of Hennessey,Chivas, and Remy Martin with tags and “anti-counterfeiting” stickers at 70 percent off the original price of authentic liquor in nightclubs and bars across the northern Chinese city of Tianjin. The alcohol turned out to be imported from Zhongshan City in Guangdong Province; the fake price tags came from Xantou, Guangdong, the alcohol is imported from Tianjin City, while bottles came from a recycler of wine bottles for clubs and bars. In this study I conduct a multi-sited ethnographic research to examine impact brought by the trade in counterfeit tobacco and fake liquor as well as producer and trader’s beliefs and behaviors in mainland China. Using depth interviews, I examine the understudied informal economy of these two peculiar commodities and pay closely attention to justifications offered for the lack of concerns about business ethics and consider implications for altering producer behavior in terms of how the norms and by whom are they formulated. Across time, these norms are re-enforced and transmitted, challenging the stability of society and rule. Understanding the rationale of producer’s and trader’s ethics may lead us to better understanding how to bridge the disconnect between beliefs and behavior.

The shaping of the hidden economy of corruption in contemporary China – the case of corruption in China’s courts
Ling Li, Independent Scholar, People's Republic of China

This paper discusses two forms of the hidden economy of corruption: “parochial corruption” and “market corruption.” “Parochial corruption” refers to corrupt social exchanges in which the identity of the briber matters. It tends to be hidden, its operation more individual-based, and the corrupt services more idiosyncratic. The typical example is the “guanxi-practice” or favor-exchange through social ties. “Market corruption” occurs through market exchanges in which the identity of the briber matters less. It is more transparent, more organized, and more standardized. One example is the collection of fees by courts from litigants for illicit services. By demonstrating the co-existence of “market” and “parochial” corruption in China’s courts, this study shows that the form that corruption takes is less a function of institutional governance than of the nature of the corrupt services provided, the volume of exchange activities, and the “business orientation” of the concerned parties. This paper also highlights how the market economy facilitates corruption due to the improved efficiency of corrupt transactions. This paper adopts a widely accepted definition of corruption as the use or misuse of power in exchange for private gain. Empirical data include officially punished and reported cases concerning 398 judges of various ranks. The dataset covers all administrative regions except Tibet and all levels of courts in China, from the lowest people’s tribunal to the Supreme People’s Court. The empirical data also include unreported every day corrupt conduct obtained through interviews and from personal accounts provided by court-users on the internet.

Informal Economic Activities under Formal Economy: An Analysis of Cigarette Distribution in China
Yi-Wen Cheng, Leiden Institute of Area Studies, Netherlands

The paper aims to explore the informal economy activities of cigarette distribution and its development in Yunnan since the tobacco state monopoly system was established in 1982. This system combines “monopoly,” in which the Chinese National Tobacco Corporation (CNTC) is the only cigarette seller in the consumer market, and “monopsony,” in which the CNTC is the sole buyer of cigarette products for the manufacturing enterprises. Although the CNTC performs the monopoly and monopsony operations on behalf of the state, its local agencies, mainly at the county level before 2004 and city level afterward, represent the CNTC to implement the practical business in their individual jurisdiction. Under this structure, all the cigarette manufacturing enterprises compete to sell their products to local tobacco corporations around China but face market blockage in varying degree because the sales of local cigarette enterprise would influence local fiscal revenue directly. In order to break the local protectionism, the cigarette manufacturing enterprises have conducted diverse forms of informal economy activities with the other local authorities for market access, and this kind of exchange has evolved with the development of tobacco industry. By analyzing the exchange forms and its changing track, this paper will try to draw another picture of China’s economic reform.