Friends with Benefits: Patronage Networks and Distributive Politics in China

Junyan Jiang (The Chinese University of Hong Kong)
Muyang Zhang (Shanghai University of Finance and Economics)

Abstract : Existing research on distributive politics mainly focuses on the influence of electoral competition between political parties, but less is known about non-electoral mechanisms of resource allocation inside a dominant party. This study examines how informal patron–client networks within the ruling Communist Party shape the distribution of intergovernmental transfers in China, a major one-party regime. Using a new dataset on city-level fiscal transfers and a novel method to infer informal political connections through past promotions, we show that provincial leaders allocate significantly more transfers to localities governed by officials who are part of their networks. This bias persists even when we use a specification that only exploits variations in connection caused by exogenous turnovers of higher level leadership. We evaluate two plausible motivations behind this bias: collective corruption and network-based policy coordination. We find that favoritism does not increase with any measure of individual- or regional-level corruption. However, consistent with the second mechanism, transfers yield better economic performance and a higher degree of policy alignment when given to clients rather than non-clients. These findings underscore the role of private networks as an important, albeit costly, tool of mobilization in one-party systems.

Dual-track Power-sharing and Authoritarian Compensation: a Synthetic Comparative Case Study of China's 2001 Government Restructuring


Abstract : This paper investigates empirically how dictators compensate losers of reform among their constituents by conducting a synthetic comparative study on China's government restructuring in 2001. Students of dictatorships have long noticed the importance of power-sharing arrangements or patronage distribution in authoritarian politics. From this perspective, when dictators implement the reforms that alter the initial power-sharing relationship between them and their supporters, the authoritarian stability will also be disrupted. As the voluminous literature on political economy of reforms has shown, we see various kinds of dual-track solutions where, in addition to the track where reforms are implemented, a non-reform one is created at the same time for (potential) losers of them to be compensated. Drawing upon an important conceptual distinction between office- and rent-seeking politicians in the political economy literature (Persson and Tabellini, 2000), I argue that, these two sets of motivation---i.e., offices and rents---can actually be alternatively interpreted as two different "powers" in the context of full authoritarianism where both are centrally controlled by dictators. Through a comparative case study on China's 2001 government restructuring, I show empirically that dictators can not only share the power-as-offices with a certain number of elites to solicit their cooperation in policy, but also compensate the remaining losers of the competition for offices with the power-as-rents. As for the empirical design, this study leverages the fact that, during the restructuring, the bifurcated development among the pillar industries forms a clean distinction between treated and untreated sectors when the government reform is viewed as a treatment. I not only employed a synthetic control method for estimating the effect of the treatment, but also conducted a placebo test to make sure that the findings were robust.

The Party's Tightening Grip over the State Sector: Evidence from Charter Amendments

Angela Zhang (University of Hong Kong)
Zhuang Liu (Chinese University of Hong Kong)

Abstract : The latest debate about Chinese state owned enterprises (SOEs) revolves around whether there is a positive association between ownership and control, or whether all firms in China are similarly captured by the government. The recent Chinese Communist Party (Party)’s policy mandating all SOEs to amend their corporate charters to enhance the Party’s control has provided us with a rare opportunity to empirically investigate this question. We find that the state’s equity interest is positively correlated with an SOE’s responsiveness to the Party’s mandate, while the concentration level of nonstate owners and overseas listing are inversely related. These results show that ownership is important for the Party to exercise control over SOEs, but the Party also faces external constraints from other nonstate owners and overseas regulators and investors.