Abstract
This article analyzes how China’s increasing engagement in the global market induced significant institution-building in China’s tobacco industry and enabled a power shift from the local authorities to the central authority in controlling this market. During this process of “getting onto the international track,” the central government reorganized the industrial tobacco system and broke up the “monopolies” set up by local governments in order to enhance the competitive capacities of China’s tobacco industry in the global market. Given such a concrete institutional change in China’s tobacco industry, I propose the theory of “global-market building as state building” to explain the interactions among the global market, the nation-states, and the domestic market-building projects. I suggest that nation-states strategically seek to engage themselves in the global market and that, under certain circumstances by taking advantage of their global market engagement, the nation-states can enhance their abilities to govern the domestic market.
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Notes
My project on China’s tobacco industry was supported by NSF Dissertation Improvement Grant (#0525833) during 2005-2006. I first collected rich archival data including the following three types: (1) Published official documents include Tobacco Yearbooks of China 1981-2001 edited by the Chinese State Tobacco Monopoly Administration (STMA) central bureau; National Tobacco History edited by the STMA central bureau; Tobacco Yearbooks of Yunnan Province 1981-1995 edited by the STMA Yunnan provincial bureau; Shanghai Tobacco History edited by the STMA Shanghai bureau; Tobacco Yearbooks of Qujing District 1979-2003 edited by the STMA Qujing city bureau; Tobacco Yearbooks of Yuxi District 1991-2004 edited by the STMA Yuxi city bureau; and Tobacco History of Yunnan Hongta Group edited by the STMA Yuxi city bureau. (2) Unpublished official documents include the annual working reports written by different levels of the STMA bureaus in the past two-and-a-half decades; the laws, policies, and regulations made and recorded by different levels of the STMA bureaus in the past two-and-a-half decades; and other unpublished official documents that I obtained from different levels of the STMA bureaus. (3) Articles and reports from newspapers and journals with regard to China’s tobacco sector. The major newspapers and journals that I referred to include People’s Daily, Chinese Industrial Review, Yunnan Daily, Yunnan Economic Review, and Chinese Tobacco Journal. During my three different research trips to China between 2003 and 2005, I lived in Beijing, Shanghai, five cities (Kunming, Qujing, Dali, Yuxi, and Chuxiong) and four counties (Fuyuan, Huize, Xuanwei, and Eryuan) of Yunnan province for up to eight months. I conducted 133 in-depth face-to-face interviews with 101 governmental officials and 32 entrepreneurs in the tobacco sector. Among 101 governmental officials, 64 were from different levels of the STMA bureau system including the central bureau, the provincial-level, city-level, and county-level bureaus and 37 were from different levels of local governments (i.e., provincial-level, city-level, and county-level governments).
According to Cai (1999), in 1984 China invested about US $134 million abroad and in the early years of China’s economic reform most of its investment projects were to a great extent motivated by political rather than commercial interests.
Hong Kong and Macau accounted for more than 60 percent of China’s total outward FDI from 1979 till the mid 1990s. North America accounted for 15 percent during this time period.
According to Lardy (2002), the depth of China’s WTO commitments compares favorably with those of other WTO nations. Both market access and rule-based commitments far surpass those made by founding members of the WTO and also go beyond those made by countries that have joined the WTO since 1995.
Perhaps the most significant commitment within the WTO agreement is that China has consented to accept the provisions of trade-related aspects of intellectual property rights (TRIPs), among the thorniest of issues in the US-China trade relations in the last decade.
Starting in the early 1990s, the government has made greater strides in creating a rational legal economic system based on which Chinese firms could “get onto the international track” [gen guoji jiegui] as quickly as possible. Among the important strides is the construction of numerous laws and regulations directly tied to the building of a rational economy such as the Joint Venture Law (1979), the Enterprise Bankruptcy Law (1986), the Company Law (1994), the Labor Law (1994) and the Securities Law (1998).
At 12 percent of the total, the United States is the world’s second largest producer. Other principal suppliers are Japan, Indonesia, Brazil, and Germany.
The Chinese Tobacco Monopoly Law was passed in 1991 by the National People’s Congress. Before 1991, the Chinese Tobacco Monopoly Rules formulated in September 1983 by China’s State Council provided legal grounds for China to impose a state monopoly in the tobacco industry.
These monopoly permits mainly include the following five types: (1) the tobacco production enterprises must have production permits from the central STMA bureau before they register; (2) the tobacco wholesale companies must obtain wholesale permits from the provincial STMA bureau and above; (3) the tobacco retail household enterprises (getihu) or individuals must apply for retail permits from the local STMA bureaus; (4) the tobacco commercial enterprises that import and sell foreign tobacco products must apply for special wholesale/retail permits from the provincial STMA bureau and above; and (5) no enterprise or individual can transport tobacco products unless it has a transportation permit from the STMA bureaus. Individuals can carry for their non-sale use no more than 10 cartons of cigarettes while they travel around according to the law.
Most of the lawsuits take place in US courts. Most of the defendants are the large US companies.
Between the 1950s and 1980s, the lawsuits involving the tobacco industry were mainly individual personal injury suits. Since 1994, states and other third-party payers of medical costs have begun to sue the tobacco companies. The vast majority of these cases have been dismissed. In very few cases the verdict has gone against the tobacco companies. When this does happen, however, it can be very costly.
Another benefit that this new market system brought about was more convenience for consumers to have access to various tobacco products.
According to the internationally applicable standard, the market concentration ratio is measured by the percentage of the market shares of the top four cigarette-manufacturers among the total market shares in a country or region.
The provincial-level bureaus are built in 31 provinces and municipalities of China and two other cities (Shenzhen and Dalian).
See Jiang Chengkang’s work report in the 2003 National Tobacco Meeting.
This information cannot be found in any official document. But most governmental officials from the STMA bureaus whom I interviewed in 2005 held a similar opinion.
See “He Zhiqiang’s Talk Regarding the Establishment of Yunnan Hongta Group in 1995,” in Yunnan’s Daily, 9/19/1995.
Chinese STMA Central Bureau, 2001, “Jiang Ming’s Talk Regarding the Establishment of Yunnan Hongta Group in 1995”, in Tobacco Yearbook of China 1981-2000, Beijing: P.R. China.
See “The Decision on Several Issues for Establishing a Socialist Market Economy System” passed in the Third Plenary Session of the Fourteenth National Congress of the CCP in 1993. By the mid-1990s, the government would formally define its role in the economy as “creat[ing] the conditions for all sectors of the economy to participate in the market competition on an equal basis, and guarantee enterprises from all sectors to be treated indiscriminately.” Firms were placed on independent budgetary systems [duli hesuan], many were cut off completely from the redistributive funds of central government coffers, and many were given full latitude to make decisions over how they would govern themselves in China’s emerging markets.
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Acknowledgments
This study is supported by NSF Dissertation Improvement Grant (#0525833) in 2005. In addition to Doug Guthrie, Steven Lukes, Neil Brenner, Michael Sobel, Jeff Goodwin, Huibo Shao, I would like to specially thank the Theory and Society Senior Editors and reviewers for their insightful comments and suggestions on an earlier version of this article. In addition, I thank Wang Jiayun and Liang Yueyou for supplying numerous official documents and helping me throughout the data-collecting process. I also appreciate all the interviewees for their insights and great generosity.
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Wang, J. Global-market building as state building: China’s entry into the WTO and market reforms of China’s tobacco industry. Theor Soc 38, 165–194 (2009). https://doi.org/10.1007/s11186-008-9077-x
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DOI: https://doi.org/10.1007/s11186-008-9077-x