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    Why China’s Bureaucrats Are Plunging Into the Private Sector

    Over the past four decades, the country has seen three major waves of official exodus.

    This article is part of Sixth Tone’s ongoing coverage of the 40th anniversary of China's ‘reform and opening-up.’ The other articles in the series can be found here.

    For centuries, a position within China’s bureaucracy was a kind of golden ticket: a so-called iron rice bowl that could feed a person for life. The status and powers conferred by official rank allowed civil servants to wield immense influence over their domains — and competition for such spots was fierce. The cultural norms that placed bureaucratic officers atop the social ladder were so ubiquitous there was even a dedicated term for them: guanbenwei.

    These values did not go away after the 1949 Communist victory in China’s civil war. If anything, the state’s tight control over the nation’s resources only further enhanced the appeal of government work. After four decades of market reforms, however, a job within the bureaucracy finally appears to have lost some of its luster. Over the past 40 years, many officials have abandoned their posts for the private sector, a practice known colloquially as xiahai — plunging into the sea. This exodus, which can be broken up into three distinct waves, is having a profound impact on the relationship between state and society in contemporary China.

    The first wave of xiahai took place during the mid- to late-1980s. Early in the reform and opening-up period, China’s leadership decided that the country’s bloated bureaucracy needed streamlining. To address the issue, in 1982 and again in 1988, it instituted a series of new reforms designed to nudge civil servants off the government rolls.

    That officials proved willing to give up their cushy government jobs wasn’t so much because they believed in the need for civil service reform, but because of the easily-exploitable inefficiencies caused by China’s nascent marketization efforts. For decades, the country’s economy had operated according to a central plan, with production dictated by government quotas. Throughout the ’80s, however, halting steps were taken to allow factories to sell excess production on the market. Crucially, the excess could be sold according to market prices, as opposed to ones set by the government.

    Many government organs and institutions eventually set up subsidiary enterprises, the management of which was then contracted to officials on temporary leave from their posts. These officials did not receive a government salary but retained their titles — and their influential friends inside the system. At the time, a widespread shortage of goods caused market prices to skyrocket beyond the government-set ones, and officials were able to requisition goods at the government price and then resell them at market prices through these affiliated companies, making a tidy bundle in the process.

    The incestuous relationship between business and officialdom, together with the rapidly expanding ways power could be leveraged for monetary gain, created a culture of official corruption that has plagued China all the way to the present day. Officials-cum-businessmen occupied vast swathes of the economy and held onto their influence, even after the dual-pricing system was gradually eliminated.

    The second wave of officials to xiahai did so in the wake of another series of reforms — this time in 1992.

    The development of what leaders in the CPC termed the “socialist market economy” created a new class of wealthy businessmen; over time, much of the glamor of a position in one of the country’s state-owned enterprises or public institutions began to fade. Many came to see official posts as stable, but highly bureaucratic and unprofitable — at least relative to similar jobs in the private sector. Seemingly overnight, a wave of officials from China’s interior flooded the country’s coastal provinces, where business was booming. Their numbers swelled when, in 1993, China carried out yet another series of institutional reforms aimed at draining bloated government departments.

    One of the goals of this reform was to finally strike a balance between the public and private sectors. The concept of guanbenwei — which privileged officials over society — was, at least in theory, to be set aside, and businesspeople and civil servants were to be treated as equally important to national reconstruction. The impact of this perception shift cannot be overstated. For millennia, millions of Chinese subscribed to a worldview that placed members of the bureaucracy at the top of the social pyramid, and merchants — although often prominent and powerful in practice — on the bottom. Anti-capitalist rhetoric had been a fixture in the ’50s, ’60s, and ’70s.

    Yet, like earlier efforts, these reforms introduced problems of their own. Once again, government policies allowing officials to retain their posts on an unpaid basis while they worked in the private sector — meant to encourage officials to test the waters of entrepreneurship — were criticized for fostering improperly close ties between officialdom and business. Over time, many ordinary Chinese came to believe that the two groups were colluding to distort the market for their own gains.

    In addition, the problem of so-called passive corruption — which involved dining, drinking, and gift-giving on the public dime; the handing out of outsize bonuses; and extravagant, state-funded tours abroad — was becoming increasingly difficult to ignore. In 2012, concerned about the impact of these trends on public faith in the country’s institutions, the CPC launched a massive, highly publicized anti-corruption campaign — one that has recast the role of civil servants in Chinese society and pushed a third wave of officials to xiahai.

    One of the long-term aims of the campaign is to change the way society views civil servants. Recent government slogans have sought to deter people from entering civil service to get rich. And in place of traditional guanbenwei values, today’s private sector is beginning to assert itself. At least on paper, officials are now expected to respond to the needs of businesses, rather than the other way around.

    For many Chinese officials, the anti-corruption campaign has also significantly reduced the allure of their positions. Where they could once compensate for their low official salaries through access to exclusive perks and privileges, the recent crackdown has pushed many civil servants to look for work in other sectors.

    This third, current wave of xiahai officials is unique for three reasons. First, it’s officials in China’s wealthy coastal provinces this time, rather than those in the interior, who are leaving their posts. Second, the average age of those leaving is higher, and many have highly specialized skills or experience in fields like technology, finance, and policymaking. Third, it’s become common for the current generation of xiahai officials to join information-technology companies or other service industries, rather than manufacturing firms.

    The outflow of experienced and skilled officials is a loss for both Party and government organizations, but it’s been a boon for businesses, providing them with qualified staff while also helping them strengthen their government ties. That’s not to say civil service has completely lost its appeal. Although the country’s market reforms have opened new career paths for those outside the traditional halls of power, the bureaucracy remains a popular choice: This year in the national civil service exam, an average of 63 people applied for each open position. What’s changed is that young officials no longer necessarily view government work as their end goal: Many now plan to one day xiahai themselves.

    Looking back at the different contexts and features of these three xiahai waves, a trend emerges: As procedural and institutional checks on the power of public sector officials have increased, and the prospects of the private sector improved, the influence of guanbenwei culture has faded. The civil servant exodus over the past four decades is reflective of new limits on official power and the ways China’s private sector’s own influence has grown.

    Yet guanbenwei has deep roots in China, and there is still plenty of room for concern over the continued existence of transactional relationships and collusion between officials and businesspeople. Only by installing checks on official power can equality between public servants and other professions be guaranteed, and the health of markets and society be assured. In short, if China wants to develop its market economy, it must continue to improve its mechanisms for supervising and limiting public power.

    Translator: Matt Turner; editors: Lu Hua and Kilian O’Donnell; portrait artist: Zhang Zeqin.

    (Header image: A man talks on his mobile phone while walking down Nanjing Road in Shanghai, Oct. 1, 1995. Gerhard Joren/LightRocket/VCG)