PRIVATE ENTREPRENEURS IN CHINA AND VIETNAM CHINA STUDIES Published for the Institute for Chinese Studies University of Oxford EDITORS: GLEN DUDBRIDGE FRANK PIEKE VOLUME 4 PRIVATE ENTREPRENEURS IN CHINA AND VIETNAM Social and Political Functioning of Strategic Groups BY THOMAS HEBERER TRANSLATED BY TIMOTHY J. GLUCKMAN BRILL LEIDEN • BOSTON 2003 This book was first published in German as Unternehmer als strategische Gruppen: Zur sozialen und politischen Funktion von Unternehmern in China und Vietnam, Hamburg (Mitteilungen des Instituts für Asienkunde) 2001. On the cover: Life-style is an important feature of strategic groups. The photograph shows two major entrepreneurs in the Eastern China city of Qingdao on their wedding reception at the end of December 2002. © Copyright by Wang Weimin. This book is printed on acid-free paper. Library of Congress Cataloging-in-Publication Data Heberer, Thomas. Private entrepreneurs in China and Vietnam : social and political functioning of strategic groups / by Thomas Heberer ; translated by Timothy J. Gluckman. p. cm. — (China studies, ISSN 0928-5520 ; v. 4) Text originally written in German, but published first in English. Includes bibliographical references and index. ISBN 90-04-12857-3 (alk. paper) 1. Entrepreneurship—China. 2. Entrepreneurship—Vietnam. 3. Privatization—China. 4. Privatization—Vietnam. 5. Businesspeople—China. 6. Businesspeople—Vietnam. I. Title. II. China studies (Leiden, Netherlands) ; v. 4. HB615.H229 2003 338’.04’0951—dc21 2003051911 ISSN 0928–5520 ISBN 90 04 12857 3 © Copyright 2003 by Koninklijke Brill NV, Leiden, The Netherlands All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Brill provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910 Danvers, MA 01923, USA. Fees are subject to change. printed in the netherlands CONTENTS FOREWORD . ix PART ONE: THE APPROACH 1. China, Vietnam, Entrepreneurship and Social Change 1 1.1. Emergence of a new, economic elite 1 1.2. Entrepreneurship and social change . 3 1.3. Research design and structure of this book . 7 1.4. China and Vietnam: commonalities and differences 8 2. Privatization processes in China and Vietnam – precondition for the emerging of new entrepreneurs 11 2.1. Privatization initiatives on the part of peasants through collective action and limited fence-breaking 11 2.2. Development and state of bottom-up privatization . 17 2.2.1. China 18 2.2.2. Vietnam . 28 3. Entrepreneurs as new economic and social actors . 45 3.1. Entrepreneur as a category 46 3.2. Entrepreneurs – a deviant group? . 50 3.3. The discussion about entrepreneurs in China and Vietnam 53 3.3.1. The Chinese discussion 53 3.3.2. The Vietnamese discussion 58 4. Entrepreneurs as a social group: class, middle strata or strategic group? 60 4.1. Entrepreneur as a class 60 4.2. Entrepreneur as a “Middle class” likewise “Middle strata” 62 4.3. Entrepreneurs as a strategic group 70 PART TWO: THE EMPIRICAL WORK: THE PROFILE OF THE STRATEGIC GROUP ENTREPRENEURS 1. Choice of the research localities, methodological procedures and frameworks in the regions studied 77 1.1. Choice of areas to be surveyed and methodological procedures 77 1.1.1. The survey in China . 79 CONTENTS vi 1.1.2. The survey in Vietnam . 80 1.1.3. Practical research problems . 83 1.1.4. Cooperation partners and institutional surveys 84 1.2. The framework conditions in the research areas . 84 1.2.1. Framework conditions in the research areas of China . 85 1.2.2. Framework conditions in the research areas of Vietnam . 87 1.2.3. Framework conditions for the development of the private sector 89 1.2.3.1. China . 89 1.2.3.2. Vietnam 92 1.3. The Development of the Private Sectors in the Regions Surveyed . 96 1.3.1. Chinese survey areas 96 1.3.2. Vietnamese survey areas 99 2. Texture, Differentiation and Strategic Capital . 104 2.1. Composition and Starting Conditions of the Interviewed Entre- preneurs 104 2.1.1. Age structure 104 2.1.2. Familial and social origins . 105 2.1.3. Prerequisites for founding an enterprise: material factors . 115 2.1.4. Prerequisites for founding a company: human capital . 120 2.1.4.1. China . 120 2.1.4.2. Vietnam 128 2.1.5. Preconditions for founding companies: social und strategic capital in the form of social relationships and networks 130 2.1.5.1. Guanxi as social capital 130 2.1.5.2. Networks as strategic group capital 134 2.1.6. Motivation to found a company . 155 3. Relations with local government . 169 3.1. Assessments of local policies by entrepreneurs 169 3.2. Negative impacts of the local bureaucracy on private sector com- panies . 180 3.3. Associations representing the interests of entrepreneurs 190 3.4. Opportunities which entrepreneurs have to influence local politics . 213 4. Cognitive patterns, interests and preferences . 229 4.1. Social morality and social obligations 229 4.1.1. Money and social morality 229 4.1.2. Social obligations: entrepreneur and wage-dependent employees . 233 4.1.3. Social obligations: entrepreneur and government 252 4.1.4. Attitudes towards income differences 258 4.2. The entrepreneurs’ goals in life 266 4.3. Attitudes to the market economy 276 CONTENTS vii 5. Political and participative basic attitudes . 285 5.1. Comprehension of politics 285 5.2. Attitudes to political participation 286 5.3. Attitudes concerning the role of the Communist Party and of the state in the reconstruction towards market economy 300 PART THREE: THEORETICAL IMPLICATIONS AND CONCLUSIONS 1. Summary of the most important conclusions: Group profile of the entrepreneurs . 313 2. The transformative potential of entrepreneurs as the precondition for strategy formation 323 3. Entrepreneurs as social group 330 3.1. The societal volume of capital as strategy capital . 330 4. Summary: Entrepreneurs as a “strategic group” 340 4.1. Group cohesion . 347 4.2. Group aims . 349 4.3. Law, legislation and organized anarchy: strategic groups as play- ers in the legal domain . 351 4.4. Conclusion: Entrepreneurs as strategic group and political change 359 REFERENCES . 365 INDEX 391 This page intentionally left blank FOREWORD This book is the outcome of a comparative survey in China and Vietnam. Until now there has been no such study concerning itself with entrepreneurial strata and the private sector in both those countries. What is more, comparisons of the current developments in the two countries are rare. This study is based on the results of a research project that was supported between 1996 and 1998 by the Deutsche Forschungsgemeinschaft (German Research Foundation). The project included two periods of fieldwork in China and Vietnam. The research in the field was for the most part carried out by two research assistants (Ji Xiaoming in China and Arno Kohl in Vietnam). Immediately after the end of the period of financial support, both colleagues found employment in other areas, and unfor- tunately were no longer available for the processing of the fieldwork in this book. The goals for the field research in both countries were achieved: in each case quantitative und qualitative surveys of entrepreneurs in three locations with differing levels of development. At the same time, supplementary material from both nations was collected which made possible a deeper and better clas- sification of the empirical material. For their financial support we would like to thank the Deutsche Forschungs- gemeinschaft, the Bundesministerium für Wirtschaftliche Zusammenarbeit (Federal Ministry for Economic Cooperation) and the Gesellschaft für Tech- nische Zusammenarbeit (Corporation for Technical Cooperation, GTZ); they made possible the carrying-out of this research. We would like too to thank partner institutes in China and Vietnam principally the Institute for Manage- ment under the State's Commission for the Reform of the Economic Structure in Peking, in Vietnam the National Political Academy Ho Chi Minh (Institute for Sociology) and the Institute for Sociology in Hanoi. Above all we would like to express our heartfelt appreciation to the directors of the Institutes Prof. Cao Yuanzheng, Prof. Chong A and Prof. Tuong Lai, who with undoubted com- mitment did their utmost to enable the implementation of this project on the ground. Our sincere gratitude as well to the administrations of the cities and counties where our study was carried out, and without whose support this re- search project could not have been so successfully managed. Further thanks go to René Trappel and Christian Bollmann who with great enthusiasm contrib- uted to the formal preparation of this manuscript. Finally, we are grateful to Internationes for enabling the translation of this book. Duisburg, April 2003 Thomas Heberer [...]... Number of private companies (19 90–20 01, China) (Unit: 1, 000) 2250000 2000000 17 50000 15 00000 12 50000 10 00000 750000 500000 250000 0 19 89 19 90 19 91 1992 19 93 19 94 19 95 19 96 19 97 19 98 19 99 2000 20 01 Source: Gongshang xingzheng guanli tongji huibian (19 89–20 01) Diagram 7: Growth rate of private companies (19 90–20 01) (in %) 10 0 Increase (in %) 80 60 40 20 0 19 90 19 91 1992 19 93 19 94 19 95 19 96 19 97 19 98 19 99... February 19 94: 17 6; Pfeifer 19 90; Tran Trung Dung 19 91: 14 4 In Vietnam at the beginning of the 19 90s, about 1. 2 m school children aged 6 to 10 and about 1 m aged 11 to 14 finished their school careers prematurely, cf Südostasien Informationen, 4 /19 91: 8 17 China aktuell, February 19 94: 18 7 18 Far Eastern Economic Review, 13 January 19 94: 71 19 Le Ngoc Hung/Rondinelli 19 93: 17 14 ENTREPRENEURSHIP AND SOCIAL... that they have in fact increased), then at the end of 19 98 the private sector might have included more than 200 m people (cf below) Increase (in %) Diagram 5: Growth rate of the individual companies (19 90–20 01, China) 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 19 89 19 90 19 91 1992 19 93 19 94 19 95 19 96 19 97 19 98 19 99 2000 20 01 Source: Gongshang xingzheng guanli tongji huibian (19 89–20 01) The following diagrams... that private businessmen from now on were permitted to join the Communist Party.42 Diagram 4: Number of individual companies (19 90–20 01, China) 35 Number (in millions) 30 25 20 15 10 5 0 19 90 19 91 1992 19 93 19 94 19 95 19 96 19 97 19 98 19 99 2000 20 01 Source: Gongshang xingzheng guanli tongji huibian (19 89–20 01, different editions) At the end of 19 98 according to official statements, the following kinds... and banks higher in China than in Vietnam As a result in China the change from the state to the private sector was for a long time not so simple and attractive as in Vietnam - - - - - - 22 See for instance McCormick 19 98: 12 2 ENTREPRENEURSHIP AND SOCIAL CHANGE - - 11 Measured by the percentage proportion of the GDP, industrialization is more advanced in China than in Vietnam where in this respect the... low, and foreign investments up till now were comparatively insignificant China which for a long time had pursued a policy of self-reliance, since the beginning of the reforms has had a magnetic effect on foreign investors China had far and away in the 19 80s and 19 90s the highest foreign investment of all developing nations In that process investments by Chinese residents abroad (including Hong Kong and. .. significantly increased in recent years due to closure of companies For example, a survey at five universities and colleges in Hanoi found 85% of those studying would still prefer a job in the state sector .19 The restructuring of the state companies and the consolidation 13 China aktuell, January 19 94: 46 Südostasien Informationen, 4 /19 91: 7 15 Far Eastern Economic Review, 13 January 19 94: 71 16 China aktuell,... (12 .1, 11 .7 likewise 11 % of the companies) Urban and rural areas are approximately equally balanced. 51 Seen in terms of space, the private sector concentrated first of all in the more developed areas in East China, where better access to markets and a more developed infrastructure are available Private companies in East China are qualitatively i.e in technological and capital terms better equipped and. .. Heberer/Taubmann 19 98 10 Dangdai (Hong Kong), 15 June 19 94 11 China aktuell, April 19 94: 413 f.; ibid., May 19 94: 483f 12 Far Eastern Economic Review, 13 January 19 94: 71 PART ONE: APPROACH 6 In both nations one can discern a significant change in values and attitudes This applies, for example, to the evaluation of wealth or prosperity In contrast to the pre-reform socialist phase in which wealth was... alterations in the total societal value and norm systems Here we are interested first of all only in governmental and party institutions insofar as they stand in direct connection with the privatization process This is most clearly shown in changes in the number of staff, in the guiding principles and the functions of institutions The existence of the private sector requires institutions that can behave in . Kong), 15 June 19 94. 11 China aktuell, April 19 94: 413 f.; ibid., May 19 94: 483f. 12 Far Eastern Economic Review, 13 January 19 94: 71. PART ONE: APPROACH 6 In. consolidation 13 China aktuell, January 19 94: 46. 14 Südostasien Informationen, 4 /19 91: 7. 15 Far Eastern Economic Review, 13 January 19 94: 71. 16 China aktuell,