1. (Cambridge, Mass.: Harvard University Press, 1957).

2. Berliner's findings were corroborated independently in Janos Kornai's doctoral dissertation, published in the U.K. as Over-Centralization in Economic Administration: A Critical Analysis Based on Experience in Hungarian Light Industry. Trans, by Knapp, John (London: Oxford University Press, 1959). Kornai's better-known theoretical work since that time has sought to identify the systemic features of central planning that give rise to these and related behaviours.Google Scholar

3. See Berliner's reflections on the transcripts of recent interviews with emigré Soviet managers: “Soviet management from Stalin to Gorbachev: a comparison of the Harvard Project and SIP interviews.” Working Paper No. 43, Soviet Interview Project, University of Illinois, March 1988.

4. See Walder, Andrew G., “Industrial reform in China: the human dimension,” in Morse, Ronald (ed.), Limits of Reform in China (Boulder, Colorado: Westview, 1983), pp. 39–63.Google Scholar

5. There were some important differences: plans were less taut than in the Soviet Union, and “storming” at the end of the month much less common, especially by the 1970s. Factory directors did not receive large bonuses tied to quota fulfilment, which Berliner saw as a primary motivation for the behaviour he described. Moreover, after the mid 1960s China's factories had smaller percentages of their inputs provided within plans, and therefore cultivated more stable ties with other suppliers on their own.

6. See Xiaoxun, Xia and Jun, Li, “Consumption expansion: a grave challenge to reform and development,” in Reynolds, Bruce L. (ed.), Reform in China: Challenges and Choices (Armonk, New York: M.E. Sharpe, 1987), p. 89. The data are from a survey of 429 enterprises in 27 cities, conducted by the State Council's Research Institute on the Reform of the Economic Structure.Google Scholar

7. Zhang Shaojie and Zhang Amei, “The present management environment in China's industrial enterprises,” in Reynolds, Reform in China, p. 48.

8. See Walder, Andrew G., “Wage reform and the web of factory interests,” The China Quarterly (CQ), No. 109 (March 1987), pp. 22–41; and Reynolds, Reform in China, Chs. 1, 6 and 7.CrossRefGoogle Scholar

9. Xia Xiaoxun and Li Jun, “Consumption expansion,” p. 94.

10. Ibid. pp. 91–92.

11. Reynolds, Reform in China, p. 12.

12. Ibid. p. 13.

13. This article is based on 56 interviews conducted in state-owned enterprises and municipal-level bureaus, commissions and banks in seven Chinese cities-Beijing, Shenyang, Dalian, Tianjin, Shanghai, Chengdu, and Chongqing - between 1984 and 1986; and eight longer interviews conducted with émigré managers, workers and engineers at the Universities Service Centre in Hong Kong in 1984.

14. As is true anywhere: March, James, “The business firm as a political coalition,” Journal of Politics, No. 24 (November 1962), pp. 662–78, 644–48.CrossRefGoogle Scholar

15. See the general statement in Kornai, Janos, The Economics of Shortage (Amsterdam: North-Holland, 1980), pp. 306–309.Google Scholar

16. See Chamberlain, Heath B., “Party-management relations in Chinese industries: some political dimensions of economic reform,” CQ, No. 112 (December 1987), pp. 631–61.CrossRefGoogle Scholar

17. The drop in age has been accompanied by a rapid increase in average educational levels. See Ibid. p. 650.

18. The same disagreement was prominent as early as the 1950s in the debates ove one-man management and collective leadership. See Schurmann, Franz, Ideology and Organization in Communist China (Berkeley: University of California Press, 1968), pp. 285–96;Google ScholarBrugger, William, Democracy and Organisation in the Chinese Industria Enterprise, 1948–1953 (Cambridge: Cambridge University Press, 1976),Google Scholarpassim; and Walder, Andrew G., Communist Neo-Traditionalism: Work and Authority in Chinese Industry (Berkeley: University of California Press, 1986), pp. 118–20.Google Scholar

19. See Chamberlain, “Party-management relations,” pp. 651–52.

20. Ibid. pp. 652–53. Even in the factory director responsibility system, the Party committee continues to appoint officials in the propaganda, personnel and security departments, and to the staff of the youth league, union and its own organization.

21. The Party may only raise “opinions for reference” on these matters, according to a particularly clear discussion in ‘“Dang guan ganbu’ bu dengyu dangwei renming xingzheng ganbu” (‘“Party management of cadres’ does not mean that Party committees appoint administrative cadres”), Beijing ribao (Beijing Daily), 25 June 1986, p. 3.

22. Interview, No.91, Beijing, May 1986. This was the only executive that I was able to interview privately in China, and as a result he made direct statements on matters that others would approach at best indirectly in public and formal interviews. This was the only interview I had had in China that equalled the candour one often finds among emigres in Hong Kong.

23. “ ‘Party management of cadres,’ “ p. 3.

24. At a Guangzhou meeting of factory directors, one complained that reform was a “battle on two fronts”: to push forward reforms, and to fend off “backstabbing” attacks from the rear. Investigations can be touched off by a few well-placed letters of accusation: “hua sifen qian, cha ban nian” (spend four cents [the price of a postage stamp], investigate half a year). Renmin ribao (People's Daily), 25 June 1986, p. 2. The Beijing press publicized many cases of factory directors who had been framed by false accusations while I was conducting my research there in May and June 1986.

25. Interview, No. 93, Beijing, May 1986.

26. Interview, No. 78, Hong Kong (referring to Kunming), June 1984, and Interview, No. 136, Chongqing, August 1986. In the latter case the secretary had long been the protégé of the director, from the time when they both worked in the technical department of the factory. In this case the secretary was clearly subordinate and deferential to the director.

27. Interview, No. 91, Beijing, May 1986.

28. Hungarian authors have analysed the same social processes at work in their own country: Laky, T., “Attachment to the enterprise in Hungary: societal determination of enterprise interest in development,” Ada Oeconomica, Vol. 17, Nos. 3–4 (1976), pp. 269–84. But they use the concept of attachment to explain managers’ keen interest in capital investment, not the managerial commitment to the prosperity of employees that has become so prominent and problematic in China in the 1980s.Google Scholar

29. Interview, No. 91, Beijing, May 1986. Some directors reportedly shift enterprise funds into employee bonuses and benefits immediately before their tenure of office has expired in order to enhance their reputation and “legacy” to the enterprise: “Wo guo qiye xingwei zhong de bu zhengchang xingwei (2)” (“Irregularities in the behaviour of our country's enterprises”), Jingji cankao (Economic Reference), 4 January 1986, p. 6.

30. Naughton, Barry, “Finance and planning reforms in industry,” in The Chinese Economy Looks Toward the Year 2000, Vol. 1. The Four Modernizations, Selected Papers presented to the Joint Economic Committee, Congress of the United States (Washington, D.C.: U.S. Government Printing Office, 1986), pp. 604–629. The manager's preference for funding expansion through loans is described in the next section.Google Scholar

31. Some Chinese analysts complain that managers are still motivated primarily by promotion in the state cadre system, and the privileges and status this entails. See “Wo guo qiye xingwei zhong de bu zhengchang xingwei (1),” Jingji cankao, 3 January 1986, p. 6.

32. Ibid.

33. Interview, No. 91, Beijing, May 1986.

34. See Xiaoxun and Li Jun, “Consumption expansion,” pp. 91–92. These authors discovered 40–50 different strategies to circumvent state regulations and expand the funds available for community consumption. They estimated a “leakage” of 20 billion yuan nationwide in 1985, and discovered that actual bank expenditures on wages were some 42% higher than the official figures reported by the State Statistical Bureau, based on enterprise reports to their superiors.

35. A 1985 survey of 900 enterprises found that 80% of employees believe that the manager represents the interests of the factory or its workers; 8% believed the manager represents the interests of the state. See Yang Guansan et al., “Enterprise cadres and reform,” in Reynolds, Reform in China, p. 83. See also a report based on field work in a collectively-owned Beijing factory: Mayfair Mei-hui Yang, “Between state and society: the construction of corporateness in a Chinese socialist factory.” Presented at the Annual Meetings of the Association for Asian Studies, Boston, April 1987.

36. Interview, No. 91, Beijing, May 1986. The same fear of workplace public opinion was attributed to managers in Beijing ribao, 3 June 1986, p. 1, and Jingji cankao, 3 January 1986, p. 6. Sometimes the resentments find more direct expression. One manager told me that housing was a major source of contention in his factory, and a “big source of pressure” on him. He avoided the canteen for fear of running into habitual supplicants, and one disgruntled worker had even piled up the family's furniture at his office door to dramatize their plight. Interview, No. 125, Dalian, August 1986.

37. One such way is to try to exchange your factory's products, or spare materials, for scarce, high-quality consumer items - illegal according to recent directives. One official told me of a steel plant for which he had arranged a trade with a joint-venture producer of Japanese-brand colour televisions. Interview, No. 120, Shenyang, July 1986.

38. Walder, Communist Neo-Traditionalism.

39. This interpretation was suggested to me by Cui Zhiyuan and Jon Elster.

40. Lack of labour mobility is also cited as the major cause of managerial inability to resist worker demands in Xia Xiaoxun and Li Jun, “Consumption expansion,” pp. 89–107.

41. See Tyson, Laura D'Andrea, “Investment allocation: a comparison of the reform experiences of Hungary and Yugoslavia,” Journal of Comparative Economics, No. 7 (September 1983), pp. 288–303, 300.CrossRefGoogle Scholar

42. See Comisso, Ellen Turkish, Workers’ Control Under Plan and Market (New Haven: Yale University Press, 1979).Google Scholar

43. See Zhang Shaojie et al., “Investment: initial changes in the mechanism,” in Reynolds, Reform in China, pp. 108–129.

44. See Naughton, “Financial and planning reforms,” p. 629. In Beijing in 1986 I was told by officials in the city's Construction Bank that the figure was around 20%. Interview, No. 107, Beijing, July 1986. It is my impression that branches of the Industrial-Commercial Bank generally make higher percentages of their loans out of their deposits, but their loans are smaller and are overwhelmingly for equipment purchases and related costs, not capital construction. Generally speaking, the larger the loan, the more likely it comes from financial system funds.

45. Each loan repayment contract includes a provision regarding the amount of the loan that may be “repaid before taxes” each year. That is, of the scheduled annual debt repayment, the factory may exclude a variable percentage of the debt owed from taxable profits. The resulting subsidy therefore equals the percentage of the loan repaid before taxes times the total tax burden of the enterprise in percentage terms (55% for the profits tax, usually 5–20% for the adjustment tax, and various local taxes). Based on my interviews, the amount of loans repaid before taxes is commonly 40 to 60%, but may be higher or lower depending on average profit rates in the industry and the financial situation of the enterprise.

46. Jingji cankao, 4 January 1986, p. 6.

47. In 1988 factory directors began to sign contracts of several years’ duration, with targets for profits and taxes that increased by a set amount each year.

48. Interview, No. 100, Beijing, June 1986.

49. See Jingji cankao, 4 January 1986, p. 6.

50. See Christine Wong, “Material allocation and decentralization: impact of the local sector on industrial reform,” in Elizabeth Perry, J. and Wong, Christine, The Political Economy of Reform in Post-Mao China. Harvard Contemporary China Series, No. 2. (Cambridge, Mass.: Council on East Asian Studies, Harvard University, 1985); and Barry Naughton, “Economic reforms and decentralization: China's problematic materials allocation system,” paper presented to the Regional Seminar in Chinese Studies, University of California, Berkeley, 6 April 1984.CrossRefGoogle Scholar

51. This process has also been noted by Dorothy Solinger, in her research on Wuhan: “Chinese urban reform and relational contracting: an interpretation of the transition from plan to market,” unpub. paper, 1988.

52. See the general statement in Kornai, Economics of Shortage, pp. 109–125.

53. In fact, an important new source of business disputes is subsequent revision of these “understandings” by one of the parties involved, usually the raising of additional demands by the supplier. Some Chinese analysts have suggested that this is an area where legal advisers and contracts may be useful.

54. Such inter-firm commercial credits equalled 35% of loans from revolving bank funds in 1984, and reached 42% in 1985. See Reynolds, Reform in China, pp. 23–24.

55. See Zhang Shaojie el at., “Investment: initial changes,” pp. 125–29.

56. See, e.g., “Liuge diqu shixian dang zuzhi shudi guanli” (“Six districts implement the management of Party organizations by districts”), Heilongjiang ribao (Heilongjiang Daily), 7 November 1987, p. 2.

57. See the forceful argument of Xia Xiaoxun and Li Jun, “Consumption expansion,” pp. 106–107.