SERVICE ORGANIZATIONS IN CHINA: Reforms and Institutional Constraints

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SERVICE ORGANIZATIONS: THE BIG SHADOW OF THE STATE

In a socialist state such as China, the public sector is expansive, so much so that before the reform era it was virtually impossible to distinguish between the state and society, and between the public and private sectors. Since the 1950s, the Chinese state has comprised three institutional components: the administrative agencies (xingzhengjiguan), service organizations (shiye danwei), and economic enterprises (qiye). These categories remain the key concepts for understanding the Chinese State. Of these three categories of organizations, the most unique, and probably most difficult to understand, is the service organizations. They find no exact parallel in Western countries, although many organizations falling into this category surely exist in Western countries.

In China, service organizations are distinguished from the administrative organs in that they do not have administrative functions and powers, i.e. they do not regulate the behavior of other bodies. On the other hand, they are distinguished from economic enterprises in that they are not supposed to be oriented to profits and the accumulation of wealth for the country. Service organization has often been used as a residual category; whenever an entity cannot be put into the other two categories it is classified as a service organization. As explained later, although there are some analytical dimensions separating a service organization from an administrative organ or a state enterprise, in reality, how a particular organization is categorized is often guided by other considerations, rendering this category even more messy.

Currently there are about 32 million state cadres in China. Only slightly more than 5 million of them are from the administrative agencies, while the service organizations and state economic enterprises account for 13.6 and 13.3 million cadres, respectively (Zhongyang jigou bianzhi weiyuanhui bangongshi benshu bianxiezu, 1993: 229). At the central level, service organizations account for about 2.4 million cadres, some 40 times the staffing for all central administrative agencies. At the local level, the staff establishment of service organizations is 3.85 times the staff establishment of local administrative agencies. Each year between one-third to one-fourth of the state budgetary expenditures go to the service organizations. The service organizations thus constitute a big shadow of the Chinese State. The expansive public sector has been under strain in China in recent years, and has been a major target of reform. Just as economic reform has sought to make state economic enterprises relatively autonomous entities, one of the main objectives of China's administrative reform is to de-couple the service organizations from the state and to make them more autonomous entities. In 1996, a long overdue strategy of reforming the service organizations was released.

This reform strategy seems to call for a type of organization that is analogous to the non-governmental organizations (i.e. the third sector) in Western countries that have become increasingly popular in recent years (Osborne & Gaebler, 1992). However, the reform of the service organizations in China is an extremely complicated matter. This article shows that the reform has to be undertaken in an institutional environment that is inherently at odds with its objective of making the service organizations more autonomous. Unlike the nonprofits in Western countries, the service organizations have to operate in a fundamentally different environment and institutional context.

China's reform has become a topic for much academic analysis in recent years. However, the service organizations have been virtually neglected. Most of the research on China's reform has focused either on state enterprises or the party-state itself, leaving this vast and messy shadow of the state in between state enterprises and party-state organs largely unexamined. This is unfortunate, because this shadow of the state is several times the size of the party-state narrowly defined and claims a large amount of state revenue.

This article seeks to better understand China's service organizations, and more importantly, the forces and institutions constraining reform. We argue that despite the apparent consensus on the need for reform, key institutional forces are operating in the opposite direction. We make a distinction between financial self-sufficiency and real autonomy, and argue that although some service organizations have achieved financial self-sufficiency, they remain dependent on the party-state agencies to which they are attached.

These institutional forces explain why the problems associated with service organizations have been extremely difficult to deal with. Institutions are here referred to as formal or informal rules and patterns of behavior that constrain policy choices and shape policy consequences (Hall, 1986: 19). One of the institutions that sets limits to reforming the service organizations is the monopoly of political power and political organizations of the ruling party. The second is the unified cadre management system which makes it imperative for many of the current structural features of service organizations to remain unchanged. Another institutional constraint refers to the new relationship between the party-state agencies and the service organizations and the growing dependence of the administrative agencies on the revenue generated by service organizations in the context of partial reform. This development has glued the party-state agencies and service organizations even closer together than before, a phenomenon contrary to the direction of reform.

The reform of service organizations in China necessarily bears characteristics of the overall strategy of reform in China in the post-Mao era, namely gradualism or incremental reform, or as the famous metaphor by Zhao Ziyang goes, crossing the river by feeling for the stones (Shirk, 1993). The reform of service organizations in China did not start with an overall plan. Nor did it …