02 August 2011

The distributist model, not quite dead in China

Having worked and researched at PlaNet Finance China for two and a half months now, it certainly appears as though there is a long way to go in mitigating the excesses of both state and market here, particularly when it comes to financing small businesses. On the one hand, there is only one among the five large state-run banks which pulls its weight much at all in terms of small-business lending , and that is the Agricultural Bank of China. There is, as is to be expected somewhat, a self-serving relationship between the state-run banks and large businesses here. Mr He (何先生, a good, loyal and efficient People’s Bank of China or China Banking Regulatory Commission functionary from Beijing) enjoys having banks loan money to Mr Ge (葛先生, a liberal, well-respected member of the Shanghai executive class) because he knows Mr Ge can pay him back and produce the GDP growth he desperately wants; and Mr Ge enjoys his privileged access to loans from Mr He because it means he can leverage that much more power over Mr Zhang (张先生, who might be a hard-up farmer in rural Gansu or a worker from Anhui sending remittances back to his family), who is in many real ways shut out of the entire process. The names might be different, but the dynamics are the same everywhere in this brave new neoliberal world.

On the other hand, though, even in Beijing and other large cities around China, the family business – the getihu 个体户 – continues to be a quietly persistent feature. I noted in one of my past blog entries that I enjoy frequenting a small restaurant on my street, run by one family from Sichuan. Ninety-nine percent of China’s formal economy is made up of small- and medium-sized enterprises (SMEs, though many of the enterprises here considered ‘medium-sized’ would actually be considered ‘large’ in the United States), and they account for a solid majority of jobs. When it comes to financing, however, the situation becomes tough on account of the problems mentioned above. Several different approaches are being tried – rural credit cooperatives, mutual funds, village and township banks, and the Postal Savings Bank (which, along with the Agricultural Bank of China, is one of the few unqualified success stories coming from either the public or for-profit banking sectors); even so, credit is bottlenecked. Many family businesses still turn to pawnshops, loan sharks or other shady side ventures for funding, if they look for funding at all, and end up indebted. I think PlaNet Finance China is doing a fine job of keeping their horizons broad – I was pleasantly surprised at their positive reactions to the critique by Ha-Joon Chang of common microfinance practices, and a heartening approach to microfinance which gives equal if not greater weight to SME financing as to ‘classic’ microfinance.

Hopefully, Mr Zhang will not go without other allies in the coming decades. Though much of the Chinese New Left is still wrapped in nationalism and veneration of Mao Zedong, there are a few voices within this movement who are calling for a solution that carries the spooky echoes of a distributist economic philosophy. I’ve mentioned Wang Hui 汪晖 already fairly frequently in my blog, but it also strikes me that his colleague Cui Zhiyuan 崔之元 is also trying to articulate and study a kind of human-scale market economics which directs private property to what might be considered distributist ends (this depends on our reading in his use of the term ‘socialist’ a broader, religious-tinged tradition which includes the thought of Ruskin, Oastler, Morris, Maurice, Cole and Penty – though both Dr Cui and Dr Wang would likely describe themselves as influenced more by the liberal utilitarianism of JS Mill and the post-Keynesians). This article provides a very interesting perspective of the work of Dr Cui in Chongqing under Party Secretary Bo Xilai 薄熙来. It’s worth a read even if one doesn’t agree with all of the policies and directions the Chinese New Left is taking. Particularly of interest to me is how Dr Cui sees China’s institutional environment as more malleable and amenable to change than those in the West.

Dr Cui Zhiyuan 崔之元博士 of Qinghua University

I have two weeks left in Beijing, and I am left with the bittersweet emotions of leaving a beloved friend to return to an even more beloved home. I hope everyone there is doing well; I should have time and opportunity to make a couple more posts before the long flight home. Be well, gentle readers.

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