AAS Annual Meeting

China and Inner Asia Session 624

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Session 624: Fiscal Modernity: a critical review of China’s fiscal regimes from 16th to 21st centuries

Organizer: Siyen Fei, University of Pennsylvania, USA

Chair: R. Bin Wong, University of California, Los Angeles, USA

Discussant: R. Bin Wong, University of California, Los Angeles, USA

Bringing together a group of historians and social scientists, this panel aims to facilitate a cross-disciplinary dialogue on the long-term historical trends of China’s fiscal regimes. In particular, the panel will use the concept of "fiscal modernity" to bridge and reconcile two opposing views on Chinese modernity defined respectively in economic and political terms. Whereas there have been lively debates about early modernity (or its earlier incarnation as " incipient capitalism") constructed around economic development, when it comes to government, the divide between pre-modern and modern remains rigid. The angle of fiscal regime will allow us to revisit the issue of modernity in a very different, yet we believe, productive light. In a collective effort to locate and define China’s fiscal modernity, each panelist will bring to discussion one long-term continuity/discontinuity in China’s fiscal regimes. Fei Siyen will examine an unlikely parallel between two fiscal reforms four centuries apart-- the Single Whip reform in the late Ming and the tax-for-fee reform in late 20th century PRC. Both shared a strong populist drive symptomatic of an enduring struggle between a centralized agrarian state against a bureaucracy entrenched in local interests. This struggle, as Li Huaiyin will show, is partly stemmed from a light taxation policy and its resultant "low-level equilibrium” that continued to haunt China’s modernization process. Continuities aside, China’s fiscal regime also underwent drastic changes in modern times. He Wenkai’s paper will examine Qing state’s futile efforts in monitoring tax collection, the mechanism of which is nevertheless greatly improved by the end of the 20th century, thanks to the help of modern communication technology. Finally, Wu Jieh-min’s study of “processing fee” in Guangdong will bring our discussion to date by showing how China’s fiscal regime reinvented an old practice to meet new challenges under a globalizing economy.

From Single-Whip to Tax-for-Fee reforms
Siyen Fei, University of Pennsylvania, USA

This paper will compare the late Ming Single Whip reform with the tax-for-fee reform in contemporary China and discuss the reasons and implications of many similar measures in two fiscal reforms that were four centuries apart. Both reforms aimed to streamline local fiscal revenues and established a more transparent and efficient process of tax collection. Both were prompted by a shared impulse to bypass a corruption-ridden local bureaucracy and instead, built direct channels between the peasants and central government. As a result, we find central governments—albeit four centuries apart—resorted to populist measures to implement fiscal reforms such as sending direct notice to each household or creating venues for direct petition. In fact, the Ming reform even went a step further than the PRC in convening town hall meetings and giving out ballots to ensure that local tax reforms were in line with central directives. Given the starkly different economic and political conditions between 16th and 21st century China, the parallel between the Single Whip and tax-for-fee reforms is indeed uncanny but not inexplicable. It indicates an enduring struggle of the Chinese state against its local bureaucracy. The resultant impulse to create more transparency and accountability in fiscal practice constituted one main continuity in China’s fiscal regimes.

Fiscal Cycles and the Low-Equilibrium Trap under the Qing
Huaiyin Li, University of Texas, Austin, USA

This article begins with an examination of the "fiscal cycles" in eighteenth-century China and argues that most of the cost of the Qing empire's military campaigns on its borders was covered by the surplus of cash reserves of the Board of Revenue as well as the voluntary contributions from salt merchants; interstate wars, in other words, did not function as a decisive factor in shaping the Qing state's financial needs and systems. After an analysis of the light taxation policy and the factors behind it, the article discusses the "low-level equilibrium" in Qing finance and its implications for the fate of the Chinese state in the nineteenth century.

Information and Discipline: Qing Central Efforts to Monitor Local Tax Collection, c. 1730-1840
Wenkai He, Hong Kong University of Science & Technology, Hong Kong

It is widely acknowledged that the Qing central government had no effective means to monitor tax collection by officials in localities. A large amount of revenue collected locally was not even reported to provincial governors, let alone the center. Although the Qing government indeed implemented a wide range of innovations to better monitor local tax collection, these efforts invariably failed to enhance its taxing capacity. To explain the problem, I use the principal-agent theory to analyze archival materials on the collection of land taxes and domestic customs in the period from 1730 and 1840 and find that the lack of concentrated production of commodities and the prevalence of small farming seriously restricted the effectiveness of Qing institutional innovations: the center had little means to obtain the information necessary to tell whether tax arrears were caused by economic downturns, by officials’ under-performance in collection, or by the diversion of revenues. In contrast, similar methods to supervise tax collection were much more successful in eighteenth-century England and late nineteenth-century Japan where the production of major consumer goods was concentrated and large-scale. I argue that existing explanations of the insufficiency of Qing taxing capacity both underestimate the Qing government’s attempts to address the monitoring issue and fail to appreciate the crucial role of the broader socio-economic conditions to the development of bureaucracy. In contrast, the increasing scale of commodity production and progress in communication technologies significantly facilitated the Chinese central government’s endeavors to extract taxes after 1993-4 fiscal reforms.

Developmental Pattern, Processing Fee, and Fiscal Modernity in China: A Focus on Guangdong 1979-2010
Jieh-min Wu, National Tsing Hua University, Taiwan (R.O.C.)

Why and how the Chinese state has become so financially strong over the last decade? How does the financial strength related to China’s developmental strategy? Is the current financial system a “modern” one? This paper will address these questions through the case of Guangdong, a pioneer province in promoting the export-processing industrialization during the “open-reform” era. I will demonstrate how the pattern of export-processing developmentalism goes hand in hand with a special taxation arrangement – the processing fees and related levies; and that how this pattern of development has shaped the financial structure and performance over the last three decades. The case of Guangdong exemplifies a turning moment when China faces a strong pressure to reorient its developmental strategy from export-processing to boosting domestic consumption. By implementing “processing fee,” the state was able to create a type of “economic rent” generated from the export-oriented industries that has constituted a major part of local financial revenues. This economic rent, arguably a special kind of “tax,” fundamentally changed the sources of financial revenues and altered the relationship between local authorities and foreign capital. As yet, this pattern of government-business taxation arrangement has been under transformation during the last decade. I will expose this process by using data composed of field interviews, governmental reports and yearbooks and aggregate statistical data that I have collected in the region over the last 15 years.