Politics and Industrialization in Late Imperial China 9789814376570

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Politics and Industrializa tion in Late Imperial China

by

Wellington K. K. Chan

Occasional Paper No. 30 Institute of Southeast Asian Studies P r i ce:

S$4.00

FOREWORD

In discussing industrial development in Asia, it has been fairly common to compare the experiences of pre-World War II China and Japan as two classical case studies - one epitomizing success and the other an utter failure. The explanations for China's failure have tended to be along the lines of "some inherent weaknesses in the cultural outlook" of her people. Such views, Dr. ~·Jellington Chan, contends are ~only partial explanations for what is after all a very complex problem", and in the paper that follows, he, instead, attempts to demonstrate that "Chinese political values significantly and assuredly affected the way modern industry was promoted and developed" in the country. Let's hope his contention woul c stimulate further discussion of a most interesting but little understood phenomenon in Chinese history - the early phase of modernization. In wishing Dr. Chan and his paper all the best , it is .clearly understood that responsibility for facts and opinions expressed in the work that follows rests exclusively with Dr. Chan, and his interpretations do not necessarily reflect the views or policy of the Institute itself or its supporters .

5 May 1975

Kernial Singh Sandhu Director

Until the last twenty years or so, China's economic indexes registered no signs of progressive growth towards a modern economy. The Chinese economy remained traditional and agrarian . While statistical data for the nineteenth and the first half of the twentieth centuries are incomplete, we can use the year 1933 - a year for which comprehensive statistics afe available - as representative of this whole period . In th~t year, 75 percent of her work force tilled the land arid contributed to some 65 percent of the total net domestic product. By contrast, the comparable figures for Japan declined from 83 percent and 46 percent in 1879 to 46 percent and 20 percent in 1938 . In 1933, the Chinese modern sector, i.e., manufacturing, mining, banking and transport, accounted for only 2.8 percent of her net domestic product . ! The Japanese figures are particularly relevant because Japan and China are two of the very few nations which began industrialization a hundred years ago . However, whilst the Japanese succeeded so well the Chinese failed abysmally, so much so that we used to think that given the Western model to follow, the Japanese results were only to be expected . China, on the other hand, was an aberration which can only be explained by some inherent weakenesses in the cultural outlook and values of her people. Today, after so many other nations have tried economic development and achieved catastrophic or indifferent results, we might reverse our definition as to which of the two - Japan and Ch i na - is the norm and which is an aberration (or ftrniracle"), but we are still as likely as to argue that people and their ·values determines the outcome. Such a view, however, provides only partial explanations for what is after all a very complex problem - modernization, the full intricacies of which are still barely understood. In what follows, I hope to use the early phase of Chinese industrial efforts - as one aspect of modernization activities which the Chinese, for reasons I will make clear, actively pursued - to demonstrate that Chinese political values

1

See Ta-chung Liu and Kung- ch ia Yeh, The Economy of the Chinese

Mainland:

National Income and Economic Development l933-l959

(Pri nceton, 1965), pp . 66, 69; and Hou Chi-ming, "Economic Dualism: The Case of Ch i na, 1840-1937," Journal of Economic History~ 23 . 3(1965):277- 297 0

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significantly and assuredly affected the way modern industry was promoted and developed . But the way values influence development is, in turn, influenced by environmental factors. Both values and environment can change, and it is the i r interaction that determines some specific ideological content and thrust. Thus, values alone cannot explain why Chinese merchants i n Southeast Asia became such successful entrepreneurs, while those who remained at home, having presumably simi lar cultural endowments, did not . Or to take the narrower Confucian i nduced values, why d i d it serve late imperial China so poorly when its exported brand served late Tokugawa and Meiji Japan so well? Presumably the different sets of envi ronment under which Japanese, Ch i nese, and Southeast As i an Chinese operated contribubed to their varying resu l ts " In any case, the nature as well as the impact of Confucian values on traditional Chinese society are still a matter of much dispute . Preference for one's · rela,t~ ves, ·frilgali ty and economic self-sufficiency - to name just a few of these values - are not necessarily hindrances to economic growth . Myth Versus Reality Before we discuss how Chinese political values adversely influenced late nineteenth century China's industrial development, let us examine some of the myths about how or why China failed to ach i eve economic modernization. To begin with, it i s st i ll fashionable, from among dispensers of folk wi sdom to highly respected social sc i entists, to assume that the orthodox Confucian ideology throughout the dynast i es was unmitigatingly anti-mercanti l e, and that it subjected generations of Chinese merchants (ah ang-j en)2 to social disdain, excessive state control and

2

The generic word Bhang i n the Chinese terms like shang-jen and ah ing-shang~ etc . is much broader in meaning than t he Engl ish term "merchant" and its der i vat i ves . Shang-jen includes t raders, brokers, manufac turers, i ndustr i alis ts , banke rs, financiers and "Mere h ant, " ' d ustr i es . managers in the service an d transport 1n used here as the convenient equivalent i n the English language, often refers to all these collec tively .

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exploitation . The facts are far more complex. First, we must make a distinction between the actual social practices under which the traditional Chinese merchants operated and the Confucian social theory to which everyone subscribed. As far back as the second century B. C., official reports gave graphic accounts of wealthy merchants cavorting with the officials and exploiting the peasants. One senior official in the Han Dynasty, Ch'ao Ts ' o, complained helplessly to the Emperor in 178 B. C. that 11 [the merchants] have none of the hardships of the farmer, yet their gain is ten to a hundredfold. With the i r wealth they may consort with nobles, and the i r power exceeds the authority of government officials . They use their profits to overthrow others . Over a t housand miles they wander at ease, their caps and cart covers f i lling the roads , They ri de in fine carriages, dr i ve fat horses, tread in silken shoes and trail white s ilk beh i nd them .o • • At present, a l though the laws degrade the merchants, the merchants hav e become wealthy and hon oured, and although they honour the fa r mers, the farmers have grown poor and lowly . .. 3 Yet the Han Dynasty laws were the most severe in respect to mer c han t s. Definitely, by the Sung Dynasty (960-1275), c r edit facilities, trade and the handicraft industry had developed into a complex network of inter-regional activities by merchants and officials under cover of correct ideology . Second, the state did n ot control most of the domestic market and its factories . These existed in private hands and often with official collaborat i on . Under Ch'ing China, only salt, copper, silk and porcelain were monopolized by the state, while many other major items of trade and industry, such as tea, sugar, grain, cott on spinning and weaving, etc . , were almost completely privately owned and managed . Nor d i d the state supervise the monopolies effect i vely . The Japanese historian, Saeki Tomi, has estimated that half of the salt consumed during the entire Ch'ing Dynasty was so l d by smugglers.4 Yet salt was the most i mportant of these monopolies " Another explanati on for China's point to her negligible leve l of net 1949. It suggests that the Chinese, save, had no capital to invest e One has demonstrated how the traditional

failure has been to investment prior to being too poor to recent study, however, economy was able to

3

Cited in Wm . T. deBary, et al. ~ eds . (New York, 1960), pp . 231-232 ,

4

Saeki Tomi, Shindai ensei no kenkyu [A study of the salt administration of the Ch' :i.ng Dynas t y] (Kyoto , 1956), p . 205 .

SouN!es of Chinese Tradition

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keep pace with a manifold increase of population by means of opening up new land and improving grain yield.s Another study observes that our images of a crisis-soaked and poverty-stricken China "have been warped by the over-projection into the nineteenth century of the economic conditions prevailing between 1920 and 1949."6 Br i t i sh trave l lers who had covered large areas of China's i nterior before 1870 described a world bustling with e con omic a c t i v i ties and enjoying a level of wealth comparable if not superior to that of contemporary England. A third study argues that the total potential "surplus" was about 37 percent of China's net domestic pro duce.? Communist China's recent record of large capital formation without resorting to borrowing from other countrie.s represents a successful tapping of these surplus wealth. But if these factors - values, social practices, state control and potential capital - each by itself did n o t constitute insurmountable obstacles to economic modernization, the concatenation of these and other fac t ors apparently did . To take the case of the availability of potential capital, how does one explain that li ttle was invested into the national economy when Ch i na was trying to introduce modern industry? One might c i te the weight of tradition that encouraged even the not so well-to-do to engage in conspicuous consumption on fest i ve occasions. But to selectively single out this

5

Dwight H. Perkins, Agricultural Development in China~ lJ68-l968 (Chicago, 1969), p . 33; also see Yeh-chien Wang, Land Taxation i n Imperial China~ l?50-l9ll (Cambridge, 1973), pp . 6-7, for slight modifications of some of Perkins' grain yield figures .

6

Rhoads Murphey, The Treaty Ports and China's Modernization: What Went Wrong# Michigan Papers in Chinese Studies No . 7, (University of Michigan, 1970), p. 25 .

7

Cited in Dwight H. Perkins, "The Chinese Economy in Historical Perspective: Report on a Conference," in So cial Science Research Council's Items# 28 . 1(1974):8-10 .

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trait without reference to other values is meaningless since one could, with equal reason, have emphasized frugality to the exclusion of other values . We must go further and ask, inter alia~ was there any i ncent ive to save, did the government encourage it and why, what sort of banking and other credit institutions were there to help savings, and were there sufficient investment opportunities? The presence of incentive was apparent in the case of the railway's "Rights Recovery" movement when thousands of Chinese saw the need to raise capital among themselves in order to buy out foreign ownership and control. Here, nationalism and imperialism provided the incentive . The desire to build an economically powerful state in order to confront Western encroachment also forced the government to encourage private investments. It set up new organi~ zational frameworks under which joint-stock companies were founded to invite public subscriptions of capital. Credit facilities, however, remained traditional, while the state's tenacity in asserting control over most of these new enterprises caused private investors to feel resentment and distrust. The result was a vicious circle: as less private funds came in, the state had to turn to whatever public revenue it could find. This in turn led supervising officials to become even more insistent about the need of state control. On the other hand, because of the lack of an efficient tax system, the government could not generate any sizeable revenue surpluses to do the job well. Unlike the tax system of Meiji Japan, which successfully sklmmed off the surplus from the agrarian sector to pay for her initial industrializati on, late Ch'ing Dynasty's tax structure was full of informal regulations varying according to local differences. It had no systematic way of dealing with the increased income as the national economy grew. It is estimated that a mere 2.4 percent of the net national product (versus Japan's 12 percent or higher in around 1880) was all the Chinese Government received in taxes in 1908 . 8 8

Wang, Land Taxation in Imperial China~ p . 133 . The Japanese figure is from E. Sydney Crawcour, "The Tokugawa Heritage," in w.w. Lo kwood, ed . , The State and Economic Enterprise in Japan (f>rinceton, 1965), pp . 31-32 . Wang also observes that "as suggested by some economists, the share of the government se ct or in the gross national product at 12 percent may be taken as fairly typical of low-income countries . " (p , 151, n o4) .

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This illustrative synopsis does not tell the ful l It should, however, hint at the vast number of story. opportunities and constraints that historical and current environments offered to influence capital investment in late Ch'ing China . And what was true for capital formation was also true for the far larger i ssues of economic modernization, The Central Role of Politics What, then, were the cultural and environmental fa ctors that contributed to an ideology wh ich prope lled l ate imperial China to push for industrializatlon? Following ·a series of military defeats i nf licted by the West du r ing the 1840's and 1850'si late Ch'ing China's political and intellectual leaders c o ncluded that wh ile Ch i na st i l l retained cultural superiori ty 1 the Wes t had far stronger mili tary power and far g r eater materia l wealth. At first, they tried to mee t the ch a lle nge by i mporting mi litary technology, such as the b uildi ng of arsenals, shipyards, and the buying of g u ns and gLm.boats From t he ear l y 1870's, this narrow techno logical borrowing was e xt ended into a whole range of industrial efforts i n textiles, mining, iron and steel, sh i pp i ng and Under the slogan of "Wea lth and Powe r " r ailways . ( fu-ch' iang ) , cultural puri sts joi ned fo rc es with barbarian affairs experts to promote i nd ustri al iza t ion because al l were soon convinced that the secret of t he Wes t erners ' power and wealth lay in the ir superio r ec onomi c strength . Thus obsessed by the know e dge tha t wea l t .h begot . power, these early i ndu s trial pr omoL".ers did no t appreciate industrialization for i t s own sake ; they d id not understand that society and 1ts wh ole way that of life must make a decisive break with traditi o n; other sectors of the economy, such as c red it facil i t ie s, c ap i tal formation, tax system, marketing and f a r ming p racti ces, must make corresponding changes so t h at they could al l add up to form a modern economic infrastructure in wh i ch i ndustry was on l y one of seve ral i n tegral pa rt s o Instead, patriotic men saw the promot ion o f mo dern i ndus try as a means o f augmenting China ' s mil i~ ary strength; while less scrupulous offi cialssough t t o use it to increase the ir own po li t i cal power , This does not mean, however, that th e Ch ln ese elite we r e i n t el l ectually narrow or insensi tive f o r t ha t they were unwill i ng to come to terms with eco n omlc mo de rnization o

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They·held vigorous debates on many fronts; they raised new questions about the role and status of merchants i n Chinese society; they created ~ew economic i nst itutions and i mproved old ones in hopes of adapt i ng the Wes t e rn models into viable industrial organizations ~n Ch na , As a result, new patterns in official and merchant relationships emerged at both personal and institutional evels, wh il e an influx of official and gentry elements gradually a tered the merchant class composi~ion a nd soc al status. In contrast to the .picture of inst~tutlonal ossification painted by most social critics, late i mperial Ch na's economic and social institutions and the men who ran them demonstrated much flexibility and ingenuity for change . 9 YeL , because the motivations and incent ives wh1ch led to a re -appraisa of what should have been majo r ec onomic i ssues were politically inspired, any dec i sion affecting c hange o ften sacrificed economics at the expense of politics , Politicization of the industrial promot ion efforts became the s1ng l e most powerful factor affecting the Ch1nese patte rn o f development . It was so powerful precise l y because both the Chinese cultural values and the environment n th1s case, the foreign threat - demanded that p o itics take command . We will demonstrate this by examin1ng two pers1stent problems which plagued the Ch i nese industrial promoters . The first was the problem of conflict s and compet1t1ons between the central and provincia l governments over the control and direction of modern industry '!'he second was the participation of merchants and their prob l ems with official supervision .

9

Fo n example of the usual statement about Chinese r gtdt c ~ts , see Alexander Eckste n's "Ind vidua ism and the Ro e 0 t he Sta e i n Economic Growth," in Gayl D. Ness, ed , , The Socio logy of Economic Development (New York, 1970), p 42 0 , On t he vthe r hands Thomas A. Metzger's "The Organ zational Capab i i es f the Ch'ing State in the Field of Commerce: The Liang-huai Salt Monopoly, 1740-1840," in W. E. Willmott,. ed , , Economic Organi ati on in Chinese Soci ety (Stanfordt 972), pp . 9- 45. shows how the organizational flexib i lity of the liang-huai lt administration was matched by the mani p lative ,skills and non-conformist behavior of its administra tors .

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Peking Versus the Provinces The theme of regional power and provincial interest has a long and lively history i n China. Although the throne and bureaucracy claimed almost monopolistic power, the various dynasties ran a very light government where the prerogatives of central authorities were delicately ba lanced with the rights of local initiative . Beneath the facade that the Emperor was at the cosmic p i vot and ruled all th ngs, there was much de c entral i zation in the hands of the local gentry elite . Th i s was the secret of success of the Ch1nese i mperial system. Today, Communist Ch1na's retreat from the Russian style of central iz ation practised during the 1950's represents an inst n c tive effort to preserve that histor ic al balance . During th second half of the Ch'ing Dynastry (16441911), endemic peasant rebellions from the White Lotus to the Bo xers continually eroded that balance . The central government survived the mid-century Taiping chal enge on y after provincially based armies rallied to ts support. Thus, when the Chinese political elite sought 1ndustrialization to combat Western imperialism, the weakened centre issue d the call but"could not lead the campaign , Money, talent and i n1tiative went to the provinces as successive sen i or governor-generals such as Li Hung-chang, Chang Ch i h-tung and Yuan Shih-k'ai dominated the modern industry from their regional bases. Th~s between 1872 and 1882, Governor-General Li Hungchang ounded three major in dustr1es in steam shipping, co a l mi ning and text1le manufacturing from Shanghai to T1ents1n . W th the help of comprador merchants, he raised the unprecedentedly large 3 . 5 mil ion taels of capital and loans from private sour c es and provincial revenues . 1 0 As Li i ncreased the number of industrial enterprises under h1s ausp1ces along the coast, his pol1tical power grew w1~h them. There was no question t hat pol1tics and econom1cs were linked, .for his 1ndustrial empire provided lucrat1ve jobs w1th wh1ch to dispense patronage, as well as lots of money and profits with wh ich to bribe

10

The standa d monograph on Li's industrial efforts is still Albert Feuerwerker, China ' 8 Ear>~y Industrialization: Sheng Hsuan~huai ( ~844-l9l6) and Mandarin Enterprise ( Cambridge, Mass, 1958)

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senior rnLnisters in Peking. When Li's political fortune declined following China's defeat by Japan in 1895, Li's e co nomic power, too, suffered serious setbacks . His official managers were left to fend for themselves . Shen.g Hsuan-huai, his most important industrial li eutenant, sought out Chang Chih-tung, Governor-General of Hunan and Hupei, for political protection and additional patronage. Chang "was just beginning to promote an industrial complex rivaling Li 's in railways, text1les, iron and coal, in his own region of power in the midYangtze Valley . Pek1ng's attempts to control these developments were weak at first . Since the Taiping rebellion, the central government had been losing control over the burgeoning of local taxes such as the likin - a kind of toll collected on domestic goods passing through customs stations along roads and waterways ~ In theory, the Ministry of Revenue 1n Peking approved all categories of revenue collected 1n the provinces and the manner by which they were spent or distr1buted . But in the fiscal jungle that was late Ch'1ng Ch1na, the central government was able to make use o only those revenue for which traditional quotas had been set. Whatever revenue surplus which could be d1verted to industrial projects came out from the newly regular1zed local taxes or surtaxes . Official promoters o f 1ndustry like Li Hung-chang and Chang Ch i h-tung would subm t to Peking project proposals and suggest wh ich of these latter funds under their jurisdiction might be used . Once these requests were approved, the actual d1sbursement and all the patronage that went with it was made by t~e men who had direct control over the provincial treasuries . Consequently these modern enterprises came to be managed and supervised by provi ncial officials . After 1900 , as part of the national government's drive for general reforms, there emerged a nat ional pol1cy of commerce and industry . Commercial and industrial affa1rs were delegated to a new min istry; soon thereafter ra1lways and other types of communication which invol ved huge amounts of for eign loans were singled out to be administered by another new minist ry. At the local and provincial levels, the central government established a national network of industrial and commercial promotion bureaus, authorized commercial schools and tecnical workshops, and encouraged merchant leaders to set up chambers of commerce accord i ng to uniform rules which t had drawn up . Peking hoped that these new institutions would provide it with direct access to the local communities

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and serve as counter-weights to check the domination by provincial authorities . 11 Other reform measures included the codification of commercial laws, the registration of companies and corporations, and the promulgation of a system of awards by official r anks and even nobility titles for economic promotion and achievements _ These institutional reforms must be seen as a part of the central government's response to counter the predomi nance of the provincial authorities . The overhaul of the various m1nistries at the central government was particularly radical in nature . Since the T'ang Dynasty (618-90 7) , the "Six Ministries" (Liu-pu) model formed the unchang i ng core of China's much vaunted bureaucracy" Now this was dismantled to make way for a different bureaucratic system . The old six ministries - in rites, civil service, war, revenue, public works and law - aoordinated state po l icies, for their direction and initiative were the prerogatives of emperors, governor-generals and governors. In the past, the system had functioned adequately because the central and the provincial bureaucracies normally has a suff i c i ently large area of mutual acceptance of each other's rights and responsibilities. The new ministries for industry and transport, on the other hand, were mandated to direat the state's economic activities, and to affirm the authority of command for the central government . Implicit, to~ was a general sh i ft away from the traditional ideal that the state ruled in order to maintain peace and order, and to co llect taxes . The new bureaucracy sought to play an active managerial role by centralizing control . It looked to the new and expanded ministries and their subordinate bureaus in the provinces to provide a more efficient i nstitutional means for achieving this new goal . These potentially revolutionary developments, however, were taking place at a time when the central government had no powerful personality to make them work . The Empress Dowager, even at the height of her power, was able to remain on top only through skilfully manipulating the

11

The central government's efforts and ai.ms are argued in Part 3 of "Mer chants. Mandarins and Modern Enterprise in Late Ch'ing China (1872-1911)," unpublished Ph . D. thesis, Harvard University, 1972 .

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.various factions at court and seni6r men in the provinces a In the post-Boxe r era of the 1900's, she was an old and less self-assu red leader . In any event, she died in 1908 and left no figure of comparab le talent or stature to succeed her. The implicati ons of these activitie s from Peking were not lost on the provincia l authoriti es. Since the central governme nt was already weak vis-~-vis the provinces , compet ng interests meant that Peking's minister ial direct ves would not be enforced in the provinces , At best, they received only token complianc e . Ih the end, the national governmen t failed to take command of China's industria l policies. Yet f i ndustr ializ ation were to succeed, the nation must agree on pulling all its resources in one common effort. Only a strong central governme nt was able to make efficient allocatio n of its scarCE capital and other resources , to formulate an un form set of administ rative rules, and to determine an int ergrated plan as to which industry should ha e fi st priority so that successiv e industrie s could effective ly build on those that carne before. China by 1911 had several modern industrie s· - in textile, mining, iron foundries , shipping and railways . But they were w dely scattered , functiona lly unintegra ted and controlle d by competing regional leaders . After 1916, as China slid ~nto ci~il str fe and warlordis m, these centrifug al Moreover, the warlords who replaced tendencie s 1n~en s fied mandar i ns had only epherrner al power and were by and large far less scrupulou s. On the other hand, industria l developm ent requires political stability and benevolen ce a Provincia lly supported ~ndustry suffered from one other l m~tation . The provincia l patrons during the late Ch 1 ng Dynasty had no guarantee that they would stay ~n the same officia posts indefi nitely . Except for a few majo f~gures uch as Li Hung-chan g and Chang Chih-tung , moved about from post to post quite often . And when a they d~d, their ~ndustrial projects were often repudiate d Many who would have invested in these by the i r successor s they realized su~h dangers . because not id d ses enterpr As one merchant -investor observed, "Even if one accepts the fact that Li Hung-chan g i s very enlighten ed and will not overtax private enterpr~ses, the fact remains that Li cannot be the superinte ndent of trade for the northern

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ports forever . n1 2 In sharp contrast to these Chinese cultural and environmenta l forces were those which affected the Japanese effort.s during a comparable stage of deve l opment . The re , several h~n governments had established modern i ndustrial enterprises dur1ng the late Tokugawa period . But after the 1868 Restorat i on, the Meiji leaders very quickly succeeded i n overcomi ng former han loyalties so that the central government not only became heir to these earlier effo rts, but also led the nation uncontested to new centralized economic direction and program . l3 One other maj or historical factor favoured the Japanese development: there was political stability from the 8 70's to at least the 1930's . Merchants Versus Mandarins Competition and conflict also characterized the relations between Ch i nese off ic ials and merchants as Ch na sought to promote mo dern industry . The connection between political power and economic power was understood in Ch1na since very early times . Third and even fourth century B.C . Legalist t h i nkers already declared that "wealth and power" were the primary concern of the state o Although this view was challenged by orthodox Confucianists who idealized the frugal, benevolent government, and a self-regulating and self-sufficient economy (wu-wei), the Legalists' act1v1tis t ic and i nterventionalistic thinking yu-we i g eatly i nf luence d strong-minded "Confucian" emp~ors throughout the dynasties . Thus, after the Han Emperor, Wu-ti r.l40-87 B . C . ), decided that all major commerci al and industri al a cti vit i es should be controlled or monopo l zed by the state, recurrent debates henceforth on the state' economic policy often dealt with the

12

3

Cheng Kuan- 1ng Sheng-shih We i -yen hou-pien [Wa rnings ~o a seemingly prosperous age, se ond part], 1st ed . 1910 reprinted (Taipei , 969), ahuan 8:4 3-44 . Thomas

c.

Smith, Political Change and Industrial Deve lopment Government Enterpri e ~ t868-l880 (St anford, 196 5), but espe ially Chapter l o

i n Japan: passim~

- 13 extent and the nature of state control, and seldom with the need of state control itself. Vi ewed from this historical perspective, the late nineteenth century re-emphasis of "wealth and power" for the state d id not constitute a radical departure from traditional values and goals. What gave the issue new and pressing f orce, however, was the realization that the nation's survival depended on it. Thus, past ingrained not i ons of the state's rights, coupled with a sense of urgency, led officials to believe that modern industry was too important a business to be promot·e d and run by merchants. Yet as Governor-General Li Hung-chang realized from the beginning, the state did not have sufficient revenue to provide the required capital for the wide range of industry needed by China. In 1872, when Li became the first senior official to openly solicit merchant participation in modern enterprise, he therefore enticed them by promising merchant management ahd profitable returns in exchange for overall official supervision. And a new organizational framework, called kuan-tu shangpan (government supervised merchant management) was set up. With a few exceptions, the more traditional merchants were unresponsive, while the comprado~s, with their acquaintance of Western commercial - though not industrial - management, responded enthusiastically. The latter provided both money and expertise, and helped launch several major modern i ndustrial companies. But during the 1880's, the official supervis ors and sponsors went beyond Li ., s origi nal vision of general supervision and protection. They began to inter fere with the bus iness decisions and to allow others to make increasing demands for all kinds of official exactions (pao-hs iao) on these enterprises. That there woula be some amount of state control and official exactions was assumed and accepted by everyone. Indeed, "pa o -hsiao" - literally "exerting ·oneself to return [the mperial grace]" -was " seen as a form of franchise payments to prevent corrupt off1c1al~ from making unreasonable squeeze wh1ch regularly befell those companies without official sponsors. Increases 1n official exactions and control, therefore, made state or official sponsorships less meaningful to the private investors. And as official superv1sors became official managers, the companies acquired bureaucr~tic practices and frightened off new merchant investments. These developments led to a greater

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dependen c e on t he limited amounts of state revenues as we ll a s t he officials' own personal wealth . Consequently, there we re greater offic al invo l vements, and better JUStifica ' ons for official control and management Q At the same t i me, some offic i al promoters tried to reverse t he t end of dw i ndling private participations by prom1ses of mo r e equitable partnerships under the slogan of kuan-sh ang ho -pan officials and merchants' joint management Governor-General Chang Chih-tung, the most prom1nent promoter of this policy, organized several text1le cornpan1es duri ng the 1890's and 1900's under such a form t . Ch ang promised the sharing of responsibilities and righ s with h1s pr i v4te partners, but he failed to carry out his prorn~ se i n practice . Change was basically very d1strustful of h i s managers, regardless of whether they were appo1nted off1 c i a l s or merchant partners . In 893 , when he organiz ed his iron factory, he built it near h1s office even though the city was close to neither coal or iron o e. He c hose the site so that he could maintain a close watch over the factory, for he feared that even h s own men might use 1t for their private gain . Confided Chang the off1c1 al. supervisor: "Th i s is the Chinese way; t s not the Western way . In Ch1na th1s sort of evil prac 1 c e and abus e have traditionally been present, and o ne m s 9 ard oneself against them . That is why I ma1nta1n Lstate cont ra] the Ch i nese way."l4 Chang's use of the kuan -a h ang ho-pan slogan also became more than a mere cosmetic devise to gloss over o g n1zat1ona structure and management procedur es that were no d1fferent from the bureaucratized kuan-tu shang-pan operat1ons. Because the central government seemed more eady t o sanct1on those i ndustr1a l proJects which prom1sed to attrac t pr1vate part1cipations and so require l ess of f1c1a funds, prov1n c 1a officia s turned to the ho-pan gan to emphas1ze th e J01nt venture aspect o f their pr posa s . It does not mat te r if the merchants d i d not bel eve t , fo the off1c1al spons ors were more 1nterested 1n mak1ng a favo rabl e 1mpression on Pek1ng, and knew that o n c e the pr Ject was approved, some amoun t of off1cial

14

C1 ted l.n ChI uan Han-yan g "Ch 1 l.ng mo Han- ang t 'ieh- hang" [The Han~yang Iro nworks during the la te Ch'ing], i n She-hui k~o-haUe.h ~un-ta 'ung [Col lecte d studies o n t he soc ial s 1.ences], l 1 9 50) :18-21..

- 15 -

funds from local sources could always be found o Mos.t of the modern industry which fell into official control became business failures. Some, however, became highly successful enterprises, for the influx of individual officials' wealth and management talents into the modern industry brought about subtle yet drastic changes in the attitudes and values among the officials involved . On the whole, the early groups of officials did not complete the metamorphsis from supervisors to ent~epreneurs . Sheng Hsuan-huai, for example, continued to regard his industrial management as subsidiary to his official world and success in it o Whenever he visited one of his many industrial factories, he was greeted by his staff, all dressed in formal clothes and lined up by the gate, as a bureaucrat-potentate. Sheng remained an official-manager, who favoured bureaucratic manipulations at the expense of sound entrepreneurial judgements o He was successful in those enterprises where he clearly enjoyed a monpoly or massive state subsidies; he often failed i n others where there was competition. But several other official supervisors who began their management careers a generation later, around 1900, completed the transformation process into managers and entrepreneurs . They did not view their industrial and commercial activities strictly as support for their political goals o Since much of the capital under their control were their own, it became easier for them to distinguish between their bureaucratic and entrepreneurial roles. Consequently they turned out better and more efficient business organizations . Undoubtedly they were concerned with maintaining their political influence and backing. But this was thought of almost as a means to insure the continued control of their enterprises . They had therefore reversed the priority, in terms of both values and fun c tions, of economic power and political success as personal life goals . Presumably the political upheaval after 1900 as well as the problem of political legitimacy following the 1911 Revolution made the world of officialdom less attractive to these men. In any event, these official-entrepreneurs produced a number of industries which grew rapidly during the last years of the Ch'ing Dynasty. To a large extent these men owed their success to their ability to eschew formal government sponsorship when organizing their companies . As "shang-pan" (privately or "merchant" managed} enterprises, th~y enjoyed full state protection with a minimum of state control, for they often

- 16 -

belonged to the very of fi cials who made government po licies on commerce and .i ndustry . But there was no major expansion of th i s kind of successful industry because they continued to rely on government loans and the personal wealth of a sma ll coterie of officia l and gentry members . As a group, thes,e "merchant " companies had fairly efficient managements, overcame the problem of stultifying state control, but were still restricted by a limited source of capital . Chou Hsueh-hsi's cement company founded in ~906 is representative of this group.13 One type of shang-pan industrial enterprise which emerged at this time offered promise of drawing upon the capital resources of a large segment of the population yet challeng1ng the state's rights of supervision . This was the provincial railway companies . In 1905 and 1906, a virtual ground swell of patriotic sentiments erupted in Kwangtung, demanding that the railway construction rights which the government had given to American and Belgian companies be returned . Led by Canton gentry and merchant eade s, this "Rights Recovery" movement appealed to the common man to subscribed capital in order to build and run their own railways without foreign or state interference . In 1907, a similar movement took place in Chek i ang and Kiangsu. Thus transformed into political undertakings, these campaigns to found shang-pan railway companies won immediate and massive support - from profit-seeking merchants to civic-minded students and labourers. In Canton, within a period of several weeks in 1906, one governor-general was forced out of office, while six million taels were raised from literally tens of thousands of subscribers . But these companies, which began with so much prom ise, fa1Iec 1n the~nd . As the campaigns gained force and power, pro vinc1al gentry and local officials manipulated the issues to further their own cause in the continuing struggle between regional and central authorities for political and

15

See Ch ' i -hsi n yang-hui kung-ssu shih- liao [Historica l ma t e ri a ls on the Chee Hs in Cement Company] (Pek i ng, 1963 ); and Albert Feuerwe rker, "Indust r ial Ente rpri se in Twentieth-Century Ch i na: The Chee Hs i n Cement Company," in A. Feuerwerker, et ale , eds . , Approaches to Modern Chinese History (Berkeley and Los Angeles, 1967 0

- 17 -

economic domination . Hence, after the construction rights had been recovered from the Western powers, debates and fac ti onal f i ghting continued and spilled over into new i ssues such as shareholders' rights and off i cers' duties i n the new companies . The result was confusion and leaderless management, followed by renewed state i ntervention and an abrupt end of public support, bot h mora l and financial . Thus on this issue of state and private participation in modern i ndustry, the Chinese record is again marred by overriding political considerations . Officials, representing either the state or personal interests, persisted in asserting c l aims of control over all industrial developments even though the i r claims often diminished or nullified opportunit i es for growth. Here, too, the Chinese efforts contrast sharply wi th Japan's. The Meiji political leaders had financed a number of key factories from tax revenues and ass i gned bureaucrats to run them. But by the early 1880's, they so l d them out cheaply to entrepreneurs and wi se l y rel i nqui shed control . l6 In Japan, politics agreed to p l ay second fiddle to economics the better to advance the cause of industrialization . Polit ical c o nsiderati ons cont1nued to dominate the industri a l efforts throughout the warlord and Kuomintang periods . Today, under the leadership of the Chinese Commun i st Party, China reaffirms the centrality of politics. Although for different reasons, industrial growth and devel opment are as before not regarded as an end in and of itse lf, but rather as means to higher political goals . Modern i ndustry, however, is making great progress, for other c u lt ura l and envi ronmental factors are now at work t o al l ow vast l y dif f erent ideological thrusts and d i rections to emerge . To li st some of these fa c tors, contemporary Ch i na has an international standing totally un li ke wha t she has had in recent past . Through political r eun i ficat 1on , the o l d c onflicts between the centre and the provi n c es have now resolv ed into a delicate balance, wh i le c ompet i tions between state and private groups for contro l and management of i ndustry have been replaced by a c omplete v i ctory fo r the former .

16

Smith, Politiaal Change and 7 and 8 .

Indust~aZ Development~

Chapters

- 18 -

Socialist ideals and goals also bring forth new values . More signi ficantly, they re-emphasize old ones. Voluntari sm, serv~ ce · to one's fellow men, the abandonment of personal g ains i n f a v our of the national collectivity, the suprema cy of c o l lacti v e p roperty rights over personal claims - these are j us t some o f the old that are being re j uvenated in the new s ociety ' s efforts at economic transformation. And in th e mi ds t of a ll these, pol i t i cs and political education hold t he key to ch ange them from deep-seated cultural ideals into everyday practice . I t is still too early to say whethe r Chin a wi ll succeed in creating the new Maoist man. What can be said is the persistence of politics and its ability to deliver different results in China's promotion of modern industry . Such a proposition on the centrality of politics in economic development may sound trite and commonplace . But when pl ace d in the con text of the Chinese experience, now and i n the recent past, it highlights one crucial feature in economic developme nt histories which is often not recognize d - that p o l i tics affects the national economy of the develop ing nat ions far more than it does in the case of the hi ghl y i ndust r i alized nations of the West. In a recent speech, Dr. Goh Keng Swee, Singapore's Deputy Pr i me Minister , makes a s imilar observation when he avers that "the most i mportant single factor in determining the rate of economic ~'ogress in a lesser developed country is the government." In t hi s sense, an understanding of the industrialization efforts of late imperial Chi n a a nd why they failed are relevant for other nations which have, in more recent times, e mbarked upon the difficult task of planned economic growth . It may be that no nation can successfully pattern its own development by following o r avoiding the step-bystep developmentaj proce sses of an other which has succeeded or failed . l8 Certainly the Chi n es e record does not provi de

17

Add ress at the conference on "The Eme rg i ng Era of the Pacific - Economic Developmen t , Stability and Ri va lry ," held at t he Kahala Hi lton Hotel in Honolulu, Feb ruary 4-7, 1975 . Cited from ·The 'Sunday Times (Singapore) , Feb r uary 23 , 1975, p. 10.

18

See R.P . Dore, Japanese Industrialisation and the Developing Countvies : Model~ Warn i ng or Sourae of Heal t hy Doubts? Institute of Southeast Asian Studies, Occasiona l Pape r No . 8, (Singapore , 1971).

-

~

-

such a model " But the broad patterns of a nation's experience - such as the roles politics plays in industrialization and the environmental constraints and opportunities under which such roles are played - can be instructive and profitable. This is the distinction between lessons and models. And if we are now taught to debunk economic models, we ought not also be taught to debunk history .

INSTITUTE OF SOUTHEAST ASIAN STUDIES

SINGAPORE

LIST OF PUiliCATIONS

Occasional Papers 1

Harry J. Benda , Resea~oh in Southeast Asian Studies i n Si n gapo ~ e J 1970. lOpp. Gratis (Out-of- p r int)

2

P . Li m Pu i Huen , News p a pe~s published in the Malaysian Ar ea: With a urtiort list of locaL holdingsJ 1970. 42pp . Gratis (Out-of-print).

3

Ch a n He n g Chee, Nation-Building in Southeast Asia: The Singapore CaseJ 1971. 19pp. S$2.00 (Out-of-print).

4

Eva Horako v a, Problems of Filipino SettlersJ 1971. 2 4pp. S $2 .00 (Out- o f-print) .

5

Mochtar Nairn , Merantau: Causes and Effects of Minan gkabau Voluntary Nig~ationJ 1971. 19pp. S$2.00 (Ou t- o f-print).

6

Paul Pederse n, c omp., Youth in Southeast Asia: A Bibliog~aphy . Modified and Expanded by Joseph B. Tamney an d others, 1971. 69pp. S$4.00. (out-of print)

7

J.L . S . Girli n g , Cambodia and the Sihanouk MythsJ 1971. 26pp. S $2.00 (Out-of-print).

8

R.P. Do r e , Japanese Industzoialization and the Developing Count ~ies: Mo del , Warning or Source of Health Doubts? 1971. 18pp. S$3.00.

9

Michael Stenson , The l948 Communist Revolt in Malaya: A Note of H i st o~ical Souzoces and Interpretation and A Reply by Gerald de Cruz, 197 1. 30p p. S $ 3.00 (Out-of-print) .

10

Riaz Hassan, Social Status and Bureaucratic Contacts Among the Public Housing Tenants in Singap o reJ 1971. 16pp. S$2.00 (Out-of-pri n t).

11

Youth in Southeast Asia : Edited Proceedings of the Seminar of 5th - 7th March l9 7 l. Ed ited by Joseph B. Tamney, 1q72. 75pp. S $4 .00 (Out-of-print ) .

12

A.W. Stargardt, Problems of Neutrality in South East Asia: The Relevance of the European ExperienceJ 1972. 29pp. S $ 3.00.

13

William R. Roff , Autobiograph~ & Bio graphy in Mala y Historical StudiesJ 1972. 2lpp. S $2. 00 (Ou t-o f - print) .

14

Lau Teik Soon, Indonesia and Regional Security: Djakarta Conference on Cambodia, 1972. 20pp. S$3.00

15

Syed Hussein Alatas, The Second Malaysia PLan 197119 75: A Critique, 1972. 16pp. S$3. 00

16

Harold E. Wilson, Educational PoLicy and Performance in SingaporeJ 1942 - 1945, 1973. 28pp. S$3.00

17

Richard L. Schwenk, The Potential for Rural Development in the New Seventh Division of Sara'wak: A PreLiminary Background Report, 1973. 39pp. S$4.00

18

Kunio Yoshihara, Japanese Direct Investments in Southeast Asia, 1973. 18pp. S$4.00

19

Richard Stubbs, Counter-insu rgency and the Economic Factor: The Impact of the Korean War Prices Boom on the Malayan Emergency, 1974. 54pp. S$5.00

20

John Wong, The Political Economy of MaLaysia's Trade Relations with China, 1974. 3lpp. S$3.00

21

Riaz Hassan, Interethnic Marriage in Singapore: A Study of Interethnic Relations, 1974. 8Spp. S$6.00

22

Tatsumi Okabe, Revival of Japanese Militarism? 1974. 26pp. S$3.00

23

Chin Kin Wah, The Five Power Defence Arrangements and AMDA: Some Observations on the Nature of an Evolving Partnership~ 1974. 21pp. S$3.00

24

Peter Carey ,The Cultural Ecology of Early Nineteenth Centu ry Java: Pangeran DipanagaraJ a Case StudyJ 19 7 4 • 5 6 p p • s $ 4 • 00

25

Chandrasekar an Pillay, The 1974 General Elections Ma lay s i a : A Po s t -Mort em J 19 7 4 . 2 Op p • S $ 3 • 00

26

I.W. Mabbett, Displaced Intellectual s in Twentieth Century ChinaJ 1975. 45pp. S$4 .00

27

J. Stephen Hoadley, The Future of Portuguese Timor: Dilemmas and Opport un ities , 1975. 28pp. S$4.00

28

M. Ladd Thomas, Political VioLence in the MusLim Provinces of Southern Thailand, 1975. 27pp. S$4.00

The

~n

29

Joseph Camilleri, Southeast Asia in China's Foreign Policy~ 1975. 37pp. S$5.00

30

Wellington K.K. Chan, Politics and Industrialization in Late Imperi ·a l China~ 1975. 18pp. S$4.00

Library Bulletins 1

Rosalind Quah, Library Resources in Singapore on Contemporary Mainland China~ 1971. llpp. S$2.00

2

Quah Swee Lan, comp., Oil Discovery and Technica~ Change in Southeast Asia: A Preliminary Bibliography~ 1971. 23pp. S$2.00 (See No. 6)

3

P. Li m Pui Huen, comp., Directory of Microfilm Facilities in So u t he as t As i a~ 19 7 2 . 2 4p p . S $ 2 . 00 (See No . 7 )

4

Checklist of Current Serials in the 30pp . S$3.00

5

Tan Sok Joo, The Library Resources on Burma Singapore~ 1972. 42pp. S$3.00

6

Quah Swee Lan, comp., OiZ Discovery and Technical Chang e i n Southeast Asia: A Bibliography~ 1973. 32pp . S$ 3 .00 (0ut-of-print)

7

P. Lim Pui Huen, comp., Directory of Microfilm Facilities in Southeast Asia~ 2d Edition, 1973. 32pp. S$4.00

8

Ng Shui Meng, comp.,Demographic Materials on the Khmer Republic~ Laos and Vietnam~ 1974. 54pp. S$5.00

9

Saengthong M. Ismail, Library Resources on Thailand in Singapore~ 1974. 130pp. S$7.00

Library~

1972. ~n

Southeast Asian Perspectives 1

U. Kh in Mg. Kyi and Daw Tin Tin, Administrative Patterns in Historical Burma~ 1973. 67pp. S$3.00

2

Harsja W. Bachtiar, The Indonesian Nation: Some Problems of Integration and ~isintegration~ 1974. 62pp. S$5.00

Trends in Southeast Asia 1

T~ends

1971. 2

T~ends

3

T~ends

4

T~ends

5

T~ends

6

T~ends

7

T~ends

in Indonesia: Proceedings and Background Paper, 58pp. S$3.00 (Out-of-print)

in Malaysia: P~oceedings and Background Paper, Edited by Patrick Low, 1971. 120pp. S$5.00 (Out-of-print) in the Philippines, Edited by Lim Yoon Lin. (Singapore University Press), 1972. 140pp. S$7.00

i n Indonesia. Edited by Yong Mun Cheong. (Singapore University Press), 1972. 140pp. S$7.00

in Thailand. Edited by M. Rajaretnam and Lim So Jean. (Singapore University Press), 1973. 142pp. S$10.00 in Malaysia II. Edited by Yong Mun Cheong. (Singapore University Press), 1974. 154pp. S$10.00

in Singapore. Edited by Seah Chee Meow. (Singapore University Press), 1975. S$10.00

Field Report Series 1

Yong Mun Cheong, Conflicts within the Prijaji World of the Parah y angan in West Java, 1914 - 1927, 1973. 42pp. S$3.00

2

Patrick Low and Yeung Yue-man, The Proposed Kra Canal: A C~ i tical Evaluation and Its Impact on Singapore, 1973. 39pp. S$3.00 (Out-of-print)

3

Robert Fabrikant, Legal Aspects of Production Sharing Contracts in the Indonesian Petroleum Industry, 2d Edition. 1973. 235pp. S$25.00

4

The Indones i an Petroleum In d us t ry: Miscellaneous Source Materials. Collected by Robert Fabrikant. 19 7 3 . 5 16 p p . S $ 2 5 . 00 (0 u t-o f- print )

5

C.V. Das and V.P. Pradhan, Some Inte~national Law Problems Re ga r di ng t he S traits of Malacca, 1973 . 95pp. S$10.00 (Out-of-print)

6

M. Rajaretnam, Politics of Oil in the Philippines, 1973. 8lpp. S$5.00

7

Ng Shui Meng, The Population of Indochina: P~eliminary Observations, 1974. l26pp.

Some S$7.00

8

Ng Shui Meng, The Oil System in Southeast Asia: A Proeliminar>y Surovey, 1974. 93pp. S$10.00

9

Wong Saik Chin, Public Reaction to the Oil Croisis: The Singaporoe Case, 1975. 87pp. S$6.00

10

Kawin Wilairat, Singaporoe's For>eign Policy: Firost De cade, 1975. l06pp. S$10.00

The

Current Issues Seminar Series 1

Multina tional Co roporoations and their> Implications foro Southeast Asia. Edited by Eileen Lim Poh Tin, 1973. 140pp. S$12.00

2

Economic and Political Troends in Southeast Asia, 1973. 66pp. S$6.00

3

Southeast Asia Today: Prooblems and Proospects, 1973. llOpp. S$LO.OO

4

Japan as an Economic Power> and Its Implications foro Sou thea st Asia. Edited by Kernial S. Sandhu and Eileen P.T. Tang. (Singapore University Press), 1974. 147pp. S$20.00

Oral History Programme Series 1

Philip Hoalim, Senior, The Malayan Democroatic Union: Singaporo e 's Firost Democroatic Political Paroty, 1973. 26pp. S$3.00

2

Andrew Gilmour, My Role in the Rehabilitation of Singapo roe: 1946- 1953, 1973. lOOpp. S$6.00

3

Mamoru Shinozaki, My Warotime Experoiences in Singaporoe, 1973. 124pp. S$6.00 (Out-of-print)

Monographs 1

Sartono Kartodirdjo, Pr>otest Movements in Ruroal Java, (Oxford University Press), 1973. 229pp. S$18.00

2

Moderonization in Southeast Asia. Edited by HansDieter Evers (Oxford University Press), 1973. 249pp. S$18.00

THE AUTHOR Dr. Wellington K. K. Chan is an Assistant Professor of History at the Occidental College of Los Angeles, U.S.A., and until recently was a V~siting Fellow at the Institute of Southeast Asian Studies, Singapore.