The Nature, Performance, and Reform Of the State-owned Enterprises |Unirule




The Nature, Performance, and Reform of the State-owned Enterprises

Second EditionG

By the Unirule Institute of Economics





The state-owned and state-holding industrial enterprises made a total profit of 12002.7 billion yuan from 2001 to 2013, with the total book profit of 2013 increased by 5.36 times over that of 2001. The total net profit amounted to 8608.6 billion yuan, with the total book net profit of 2013 increased by 6.12 times over that of 2001.

From 2001 to 2013, the average return on equity of state-owned and state-holding industrial enterprises was 9.08%, while that of industrial enterprises above designated size was 15.67%. 2013,that of the former is 8.73%, while that of the latter is 15.64%. Therefore, the nominal performance of state-owned and state-holding enterprises was not high enough.

Even the performance of state-owned enterprises is not their real performance, but one after enjoying various preferential policies and under such a management environment which is unfair to non-stated-owned enterprises. The unfairness is mainly embodied in fiscal subsidy by the government, financing cost, and land and resource rent, and so on.

If we compute the industrial land rent at 3% of the price of the industrial land, state-owned and state-holding industrial enterprises should pay a total rent of 6424.0 billion yuan from 2001 to 2013, accounting for 53.5% of the total nominal profits made by state-owned and state-holding enterprises. Only in 2013, the state-owned enterprises should pay 1240.9 billion yuan rent for the land if we add the land for commercial and service use into the whole amount.

The real interest rate for state-owned and state-holding enterprises is 1.6%, while that market interest rate is 4.68%. If we recount the interests which should paid by state-owned and state-holding industrial enterprises with the market interest rate, the total interest difference will be 5712.4 billion yuan from 2001 to 2013, accounting for 47.59% of the total nominal profits made by state-owned and state-holding enterprises.

The resource tax of oil is average only 26 yuan per ton. The resource compensation fee is merely 1% of sales revenue. Therefore, the real royalty of oil in China is less than 2% of its price, far below the ratio of 12.5% which is imposed on the capital venture in China. Even collection proportion for special oil gain levy below 40 dollars is too low to fully realize interests of resource owners. From 2001 to 2013, the state-owned and state-holding industrial enterprises lack to pay 560.3 billion yuan of the oil royalty. Together with those of coal and natural gas, the state-owned and state-holding industrial enterprises lack to pay 1113.8 billion yuan of royalty of resources..

From 1994 to 2006, the state fiscal subsidy for the losses of state-owned enterprises accumulated to 365.3 billion yuan. According to incomplete data, from 2007 to 2013, the state-owned and state-holding industrial enterprises received fiscal subsidy is about 274.1 billion yuan.

The real performance of state-owned enterprises can be estimated through deducting those costs without paid but should be paid and governmental subsidies, together achieving about 14975.4 billion yuans, from nominal profit of the state-owned enterprises. According to our estimation, the average real return on equity of state-owned and state-holding enterprises from 2001 to 2013 is-3.67%.

In 2013, the average staff wage of state-owned enterprises was 3% higher than that of other organizations, the average labor income of state-owned enterprises is 24% higher than that of private enterprises and 234% higher than that of non-state-owned enterprises. There is a big difference between the industries. 2008, the average income per year of employees in monopolistic industries reached 128.5 thousand yuan, which is about 7 times as that of the employees in the whole country. The ratio of the state-owned enterprises in 5 industries with highest income is highest, while that in 5 industries with lowest income is lowest.

According to regulations of existing housing provident fund system, the housing provident fund deposit ratio paid and deposited by staff themselves as well as that paid and deposited by units should be no less than 5% of the staff’s average monthly salary of the previous year, and no more than 12% in principle. A large number of state-owned enterprises and institutions of monopoly industries, however, raise this ratio to 20%. China Netcom Operations Limited once accrued 4.142 billion yuan at total amount as lump-sum cash housing allowance. State-owned enterprises also conduct residential building construction with raised funds on gratis land from free allocation by the state. In addition, some enterprises purchase commercial residential buildings and sell them to their own staff and workers at low price.

From 2007 to 2009, the average tax burden of 992 state-owned enterprises was 10%, while that of private enterprises was as high as 24%.

State-owned enterprises did not turn over any profits from 1994 to 2007. In 2009, only 6% of state-owned enterprises’ profits were turned over, and the rest was all distributed within enterprises. In 2010, it decreases to 2.2%, and then increases to 5.36 in 2013. Moreover, dividend turnover by central enterprises mainly transfers within the central enterprise system. Their significance in benefiting the common people has not been embodied yet.

Structural “Guo Jin Min Tui” phenomenon currently exists in our country. In terms of capital, the proportion of state-owned enterprises in electric power, steam, and hot water production and supply industries rose from 85.8% in 2005 to 90.3% in 2012. In terms of gross industrial output value, the proportion of state-owned enterprises in electric power, steam, and hot water production and supply industries increased from 89.3% in 2005 to 93% in 2008. The proportion of state-owned enterprises in oil and gas industry increased from 90.5% in 2005 to 98.9% in 2006, it decreases to 92.1% in 2011.

The quantitive analysis with the term, market power, on the monopolistic levels of industries shows that colored metal smelting and pressing industry, tobacco industry, oil processing industry, coking industry, nuclear fuel industry, and electric machinery industry, and so on, the monopolistic level in 2007 is higher than that in 2002. These industries are overlapped very much with those with higher ratio of the state-owned enterprises.

A resume survey of officials of ministries and commissions under the State Council shows that among 183 officials above vice ministerial level of 19 ministries and commissions, 56 people have working experiences in state-owned enterprises, the proportion for which is as high as 30.6%. In addition, a resume survey of senior executives of 123 central enterprises shows that 115 senior administrators of 47 enterprises with information disclosure have government working background, that is, each enterprise has an average of 2.45 people with such background. Therefore, identity exchange exists between management staff of state-owned enterprises and government officials.

Enterprise senior executives enter the government for policies and resources, while governmental officials enter enterprises to materialize their economic profits earned while in the position.

 Administrative departments have rights to formulate regulations on the implementation of laws, instruction opinions, and departmental regulations, i.e. In other words, administrative legislation exists. Enterprise management needs to lobby the administrative departments instead of the legislature. In other words, there are “lobbying within the house.”

State-owned enterprises should have a rather clear boundary that they are suitable for production of public goods and quasi public goods in which market mechanism could not be brought into full play. Products which are purchased solely by governments or which should be stringently controlled during production progress should be supplied by state-owned enterprises, while other products should be supplied by private economy. The condition for existence of state-owned enterprises is when they supply public goods and the financing stage and can not be separated from the production stage.

The state-owned enterprise is a public organization different from ordinary governments or enterprises, whose aim is to realize public good of society rather than to make profits.

The nature of China’s current state-owned enterprise reform is capitalization of state-owned assets, that is, making profits through management of state-owned assets. Therefore, the government gradually turns into personalized or institutionalized capital when state-owned assets constantly show the attributes of capital.

As the main content of China’s market-oriented reform, the reform orientation choice of state-owned assets capitalization had both logical inevitability and historical progressiveness especially at the primary stage of China’s economic transition. However, with the establishment of market economy in our country, the historical mission of state-owned enterprise reform characterized by state-owned assets capitalization is about to come to an end.

 We should design the short-term reform plan for state-owned enterprises based on two major objectives, namely, breaking the administrative monopoly by state-owned enterprises, and regulating state-owned enterprises’ behaviors. The significance lies in that this will promote different economic main bodies to carry out adequate and fair economic competition, thus better realizing social justice and improving economic efficiency.

State-owned enterprise reform has two ultimate goals. The first goal is to change state-owned enterprises into non-profit public law enterprises, and the second one is to build up the constitutional governance framework for state-owned assets.

To realize the ultimate goal of reform, state-owned enterprises have to gradually retreat from the profit-making fields (rather than merely the competitive fields).


Table of Contents


Chapter 1 Theory and process of state-owned enterprises reform

  1. Reform of state-owned enterprises: “decentralizing powers and giving up profits” as the main feature;
  2. Reform of state-owned enterprises: “separating control from ownership” as the main feature;
  3. Reform of state-owned enterprises: “establishing modern enterprise system” as the main feature;
  4. Policies’ impulse in process of the reform

Chapter 2 Classification of state-owned assets and state-owned enterprises

  1. Classified by the nature of assets;
  2. Classified by the management division.

Chapter 3 Performance of state-owned enterprises: Efficiency

  1. Review of the research on the efficiency of state-owned enterprises;
  2. The approach of this report on efficiency;
  3. The nominal performance of the state-owned and state holding industrial enterprises;

4.Being real: costs without paid but should be paid and subsidies;

  1. Discussion on the “enterprise as society” and “the burden of retired workers”;
  2. The real performance of the state-owned and state holding industrial enterprises;
  3. Summary.

Chapter 4 Performance of state-owned enterprises: Distribution

  1. The influence of subsidies and costs without paid but should be paid on distribution from the perspective of national income;
  2. The monetary and non-monetary income of state-owned enterprises;
  3. Comparison of income of senior managers between state-owned enterprises and other types of enterprises;
  4. Comparison of the tax payment between state-owned enterprises and other types of enterprises;
  5. The profits payment and dividends of state-owned enterprises;
  6. Summary.

Chapter 5 “Guo Jin Min Tui” and its impact on market competition: The nature of “Guo Jin Min Tui” and relevant case studies

  1. Characters of “Guo Jin” of state-owned enterprises in recent years;
  2. Typical cases about “Guo Jin”;
  3. Analysis of the phenomenon “Guo Jin”

Chapter 6 The impact of state-owned enterprises on macro economy

  1. The integration of state assets and “economic fragility”;
  2. The impact of current performance of state-owned enterprises: real estate market;
  3. The impact of current performance of state-owned enterprises: finance market and take securities market as an example;
  4. The impact of current performance of state-owned enterprises: bulk stock; 

Chapter 7 The analysis of political economy on the performance of state-owned enterprises

  1. The historical starting point of current issues of state-owned enterprises;
  2. The institutional background of state-owned enterprises in early 1990s;
  3. The interest groups of management under the distorted institutional background of state-owned enterprises;
  4. The identity exchange of state-owned enterprise managers and government officials;
  5. The “lobbying within the house” of management in state-owned enterprises;
  6. The constitutional defects of China’s government: “department legislation”.

 Chapter 8 The nature of state-owned enterprises: the perspective of economics 

  1. The nature of enterprises;
  2. The nature of state;
  3. The nature of state-owned enterprises;
  4. The boundary of state-owned enterprises;
  5. The constitutional relationship between state-owned enterprises and government.

Chapter 9 The nature of state-owned enterprises: the perspective of law science

  1. The state-owned enterprises as a special public institution;
  2. The normative significance of the state-owned enterprises as a special public institution;
  3. The strategic significance of reaffirming the public nature of state-owned enterprises for China’s state-owned enterprises reform;

Chapter 10 Deepening the reform of state-owned enterprises

  1. The reflection and comments on the reform of state-owned enterprise;
  2. The short-term plans of state-owned enterprises reform;
  3. The ultimate goals of state-owned enterprises reform.



 Sub report 1: Comments on the mission of state-owned enterprises

Sub report 2: The authority and role conflict of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC)

 Sub report 3: The rent loss of China’s industrial land and commercial land

 Sub report 4: The evolution of policies towards state-owned enterprises by government


Wanting to Maintain Stability? Protecting Property Rights First!


Sheng Hong

“Stability maintaining” and “rights protecting” are two keywords of vital importance in current Chinese society. The former is rather new. The latter, however, has existed since ancient times. Mencius said, “The first thing towards a benevolent government must be to lay down the boundaries.” “Lay down the boundaries” here refers to delimitation of property rights, and “rights protecting” is undoubtedly its essential meaning. More importantly, Mencius then discussed the relationship between “rights protecting” and “stability.” He said, “If the boundaries be not defined correctly, the division of the land into squares will not be equal, and the produce available for salaries will not be evenly distributed. On this account, oppressive rulers and impure ministers are sure to neglect this defining of the boundaries. ” This means, those inclined to abuse public power will seize the opportunity whenever delimitation of property rights is not clear even in the slightest degree, and that’s why society would not be stabilized. He continued to say that, “When the boundaries have been defined correctly, the distribution of farming land and of revenue produced by the land is fair, , the society would be settled when the ruler is sitting.” This means, when property rights are well defined and protected, we can sit at ease to play bridge.

Obviously, in the opinion of the mainstream Confucian tradition, maintenance of property right system is the foundation of social stability. This is actually the great wisdom widely accepted at all times and in all countries. In fact, property rights equal to the right of existence for the immense majority in every society, which is also well elaborated in John Locke’s theory. The property rights advocated by him are the rights derived from people’s rights of survival, namely, the property rights defined by mankind’s natural consumption ability and production capability. This sort of property rights is usually of a small scale. That’s why this definition was taunted by the later generations as peasant-style property right. However, no matter how “advanced” the later property rights theories are, the Locke-style property rights remain the most common form of property rights in every society. In other words, the property rights of most people are solely used to maintain their survival.

In addition, property rights of larger scale are actually a logical result of the Locke-style property rights. Among peasant-style property rights owners, some work harder, or are smarter or luckier. As a result, their assets accumulate and expand in market transaction circulation. To protect these property rights of larger scale is to protect principles of Locke-style property rights. This is because to infringe this sort of large-scale property rights is to negate the foundation which all property rights base on. In other words, “Labor is the most important factor in changing natural resources shared by all human beings into properties owned by certain specific individuals.” Infringement of this sort of property rights not only encroaches on people’s fruits of labor and their accumulation but also subverts the widely accepted principle of fairness. No matter how much criticism there is about larger-scale property rights, it is still much fairer than infringement of property rights.

As long as the property rights system of a society is reliable and its people could expect their property rights to be soundly preserved, the people will lead a well-off life and their survival will be guaranteed. Moreover, they can safely increase their investment in their own assets, such as, land, etc., to improve productivity; they can bring their products produced by using their own assets to market for sale; they can sell their assets directly; they can also purchase assets with accumulation of their labor. The people wish for a stabilized society and a market with order. They wish for stability. However, infringement of the Locke-style property rights will be no less than misfortune dropped from Heaven for property rights owners as their survival will be directly threatened. “Survival” here not only means “having enough to eat,” but also includes “residential space.” Thus, property rights in the form of small-scale landownership and property ownership will directly be the living shell of families. Once their existence could hardly be guaranteed, their immense energy of resistance will burst, as they have no reason to continue their tolerance any more.

By contrast, we will find current instability is mainly caused by infringement of the Locke-style property rights, which is commonly reflected in forced expropriation of farmers’ land by local governments for city expansion. This sort of action is rather common, mainly because the constitutional defect existing in China’s legislation process results in land-related legal framework reflecting merely the wishes of administrative departments without having the farmers’ consent. Land Administration Law of the PRC stipulates that any unit or individual that need land for construction purposes shall apply for the use of land owned by the State. By making use of this point, some administrative departments and local governments went on to regulate that land owned by farmer collectives could be changed into land owned by the State through governmental land expropriation. However, according to the Land Administration Law, the compensation standard is six to ten times that of the average yield of the previous three years, which is only 24% to 40% that of the value for agricultural purposes calculated by discounted future earnings method. When local governments acts according to this sort of law, land expropriation then becomes infringement of farmers’ property rights.

More importantly, the relationship between local governments and land-expropriated farmers is by no way equal. One party is in absolute strong position, while the other in absolute inferior position. Moreover, the smaller the property rights are, the less strength they have to resist local governments. Even if the farmers are dissatisfied with the “compensation” by local governments, they have no means to change the situation. Even the door to judicature is locked towards them as disputes related to land expropriation will be dismissed by courts.

Therefore, farmers have only two ways to deal with infringement of their property rights. The first is to appeal to higher authorities for help, which is called “shangfang” or “xinfang” (letter and visit petition); the other is to protest with their bodies. Both actions are considered as “instability” by relevant administrative departments, and the so-called “stability maintenance” is directly aimed at the above-mentioned two actions. Though letter and visit petition is a system for common people to complain about local governments’ problems in China, it is quite a prevalent unwritten rule for governments to secretly hector the common people out of petition, to stop petition, to beat petitioners, and to hijack petitioners back to their residence. In the incident of “Mistaken Beat Gate” in Hubei which happened a few days ago, a senior official’s wife was mistaken as a petitioner and beaten badly by police. This hideous incident shows clearly that the so-called “stability maintaining” by relevant administrative departments is nothing more than violent repression of the petitioners coming to provincial governments for petition. Those plain-clothes policemen beating the petitioners are paid the salary under the name of “stability maintaining expense.” I heard a story written by a researcher several years ago. In order to study the problem of petition, the researcher dressed himself as a petitioner and came to the gate of the Office of Letters and Calls in Beijing. He was “welcomed” by people lining the street with violence almost in time. In addition, such a violent action was not stopped by any policeman.

Since the judicial channel is blocked and petition costs too much, a more common form of resistance is taken, that is, body protest. Body protest can be divided into two types. One is so-called mass conflict, and the other is individual protest, including protest in the form of self-mutilation. According to estimation by Prof. Yu Jianrong, chairman of the Social Issues Research Center of the Rural Development Institute of the China Academy of Social Sciences, over 60% of the eighty to ninety thousand mass conflicts incidents happening each year is caused by land expropriation. One of the most important reasons is that local governments use public power resources to demolish houses of residents or to drive land owners away from their land coercively, which inevitably results in violent resistance and even vicious incidents like casualties. In addition, the occurrence of vicious incidents will cause very abominable social influence. Individual self-immolation incidents are rare. However, once it happens, it will exert significant social influence. For example, Tang Fuzhen, who set herself on fire to protest against forced demolitions in Chengdu, Sichuan Province, has now become a “God” worshipped by thousands of householders whose houses are demolished by force.

Surely, more tort actions succeed by relying on force of administrative departments. Most of the weak submit meekly to humiliation and swallow the insults. However, they hide their anger in their minds. This sort of “instability,” though could hardly be found out outwardly, will burst at a certain moment.

However, our present relevant administrative departments totally ignore the fact that tort is the major reason for instability. Instead, they view the consequent social conflicts as instability, and deals with rights protecting actions, which mean to bring settlement of conflicts into the judicial track, as actions undermining stability. This is an extremely erroneous opinion.

Firstly, the prevalent infringement of peasant-style property rights destroys the basic safeguard which most farmers depend on for existence, and ultimately disrupts social balance completely. Secondly, infringement of small-scale property rights by local governments in collusion with powerful commercial interest groups not only disrupts social order of fairness, but also shakes people’s faith in social fairness. Thirdly, the prevalent infringement of property rights and abuse of public force resources results in vicious incidents of casualties; repression of petitions and judicial rights protecting actions, as well official corruptions after infringement, will only nibble away at the political reputation of the ruling party accumulated since the reform and opening-up. Last but not the least, creating the superficial “harmonious” situation by covering numerous problems through “stability maintenance” will then promote relevant administrative departments to carry out tort actions even more recklessly, thus causing a new round of social damage, which is of even larger scale. Therefore, to crack down “rights protecting” by “stability maintaining” is actually to create more fundamental instability.

In fact, real “stability maintaining” and “rights protecting” are national public goods over current benefits. Though specific property rights involve specific individuals, the property rights system is a public good in its fundamental meaning. “Stability,” however, exceeds the scope of a specific place. If the farmers’ land is encroached on in a certain place, these landless farmers might move to other places. Therefore, in terms of “stability maintaining” and “rights protecting,” the orientation of local governments is distinctly different from that of the central government and the ruling party. Local governments look more favorably upon the gained “land finance” through infringement of farmers’ property rights. As a result, they dare to destroy the property rights system which is the base for social stability; they are more willing to mislead the public into believing that “rights protecting” harms stability; they wish more to attribute conflicts caused by property rights infringement to resistance of the victims. The central government and the ruling party, however, should view this issue from the overall situation and the long-term perspective, and see clearly that the costs of infringement by local governments will finally be shouldered by the central government, and that damage to social fairness caused by tort is actually exhausting the ruling party’s political legitimacy.

The reason for confusing or even reversing the importance order of “rights protecting” and “stability maintaining” also lies in the fact that the lack of sober constitutional consciousness in our society and governments results in people mixing up lower-level public goals with constitution principles and believing they can violate the Constitution for technical excuses. In terms of local governments, this means that they believe they can destroy the property rights system and social principle of fairness for the purpose of promoting urbanization. In reality, urbanization can go on more healthily under a mature property rights system, in which the government raises public resources for municipal infrastructure investment through collecting land value-added taxes and property taxes rather than expropriating land with low compensations, and land prices formed through bargaining between developers and land owners will reflect the real scarcity of land, thus guiding the governments and enterprises to make use of and allocate land more efficiently.

Therefore, it’s of great significance for the Central Government and the ruling party to understand the underlying causes of stability from the institutional structure level, to understand the institutional structure from the constitutional level, and to be with sober political consciousness and sharp eyesight seeing through lies. According to the Analects of Confucius, Ji Kang, the administrative leader in Lu which was a state in the period of the Spring and Autumn in China, was distressed about the number of thieves in the state, and inquired of Confucius how to do away with them. Confucius said, “If you, sir, were not covetous, although you should reward them to do it, they would not steal.” The ancient wisdom of over two thousand years ago is actually already enough in judging current “stability maintaining.” As long as we safeguard people’s legal rights, we can easily save the stability maintaining expense of 500 to 600 billion RMB each year.

In Study of Fivewoods on August 20th, 2010

Unirule Institute of Economics As a Non-governmental think tank

Sheng Hong, Director of Unirule Institute of Economics gave an interview to China News Service

Interviewer: Su Jinsong, Reporter from the Overseas Center of China News Service
Interviewee: Professor Sheng Hong, Director of Unirule Institute of Economics
Date: 2:00 pm to 3:00 pm, June 29th, 2009

Question 1: As a private non-profit organization, Unirule Institute underwent a significant restructure several years after its establishment, separating its academic research from consulting business. Is this restructure initially aimed at separating its research from profit-making, thus maintaining academic independence and freedom? Did Unirule Institute achieve the aim of academic independence after that? Unirule Institute has to face the problem of survival even as a non-profit organization. Then, how do you finance yourself? Are you supporting your academic research through consulting business?

Prof. Sheng:
Unirule Institute underwent a significant restructure in year 1999, and was split into two bodies. One is Unirule Institute of Economics, a non-profit organization. The other is Unirule Consulting Firm (UCF), which was defined by us as a commercial organization.
Firstly, a very important feature of being a non-profit organization like Unirule Institute is having no shareholders and thus no dividends. Such organizations have surplus at the end of a year, but this surplus is not called profit as they are not profit-making organizations.
At the beginning of our establishment, with State Science and Technology Commission system as our governing unit, we were called “Private High-tech Enterprise” and registered as a non-profit institute. As we know, if a donation is used for non-profit purposes, then you don’t need to pay tax for the donation. Since we had no shareholders and didn’t need to hand in profits or pay dividends, we had no such pressure. As a director, my responsibility is to operate such an organization to attain our ultimate goal of contributing to academic progress and influencing our society. Therefore, my target is “Influence Maximization” rather than “Profit Maximization”.
Secondly, our finance mainly comes from the following two channels: one source is foundations at home and abroad. They have been in operation for many years and developed a very mature mechanism. They need to keep themselves as neutral as possible, because foundations are by nature non-profit organizations with no specific commercial objectives. The reason why they help us to do things is because they can not do such things themselves and they expect us to do things in a neutral, detached, and impartial way. So foundations will not give us any pressure or urge us to do a specific thing or things favorable to themselves.
The other source is to provide consulting services, with governmental departments and industrial associations as our major clients. When we provide consulting services to these organizations, we have some principles which we call “Neutral Term”. We are worried that these departments might have certain tendencies. Even governmental departments may have certain tendencies, such as departmental interests, and they might request us to add something in favor of their department in our report conclusion. That’s why “Neutral Term” is included in our contracts to emphasize that our conclusion will not be influenced by the entrusting party.
We are very frank in this point in negotiation. In fact, many of our clients are also very supportive as they have no intention of pursuing departmental or sectional interests. Of course, some enterprises have some special requirements when entrusting us to do researches. If their requests involve their own business only and will exert no negative influence on society, the public or government’s authority, we will tailor our consulting service in accordance with their commercial regulations; if their commission involves public interests or government’s authority, we will evade such commissions by the “Neutral Term”.
It could be imagined that it would be totally impossible if an enterprise entrusts us to do consulting research while intending to pack some private interests in our reports. Surely, the “Neutral Term” does not exclude our communication with our clients, and we would take clients’ interests into consideration if their interests do not contradict social interests. But we would be sober-minded if there are conflicts. Sometimes, in order to defend this principle, we have to decline some commissions whose objectives contradict Unirule’s principle.
The last issue involving neutral term is the so-called international relationship issue. As we know, some of the well-organized foreign foundations will stick to the principle of being neutral at least outwardly, and they support similar organizations in China to do lots of researches, which is beneficial to China in general. Surely there are circumstances when some foreign foundations pursue interests of their own country. This is actually unavoidable and quite understandable. If their interests are in accordance with our national interests, why don’t we accept their assistance and do our own research? But if their interests contradict the long-run interests of our nation and the international justice, we definitely will be well alert. For example, if our client requests us to do a research whose conclusion will be clearly unfavorable to our country and international justice, we definitely will decline this commission. We even have strict requirements on our foreign partners, and would terminate our cooperation once we find they have obvious intention of harming our national interests.
Our independence is reflected in the following three aspects: independent of the government, independent of enterprises (which means commercial interests), and independent of so-called foreign forces. In view of this, Unirule Institute has been very careful in dealing with relevant issues. We have a clear boundary, and the bottom line of our boundary is that we will never trade Unirule’s reputation for a consulting commission, as we consider our reputation much more valuable than our businesses. We are also very clear that Unirule will not be Unirule any more if we speak for whoever gives us money.

Question 2: The State Administration for Industry and Commerce launched a standardization campaign of corporation names in year 2005, and all non-profit organizations were required to register as enterprises and find themselves governing unites. Is this true? Once you registered as an enterprise, then you’re involved in such issues as government policies, taxes, finance, etc. Did the governmental policies give any preferential treatment to non-profit organizations like Unirule Institute? Do you have to shoulder same abundance as profit-making enterprises? Isn’t this very unfair for Unirule Institute?

Prof. Sheng:
Unirule Institute once had a body of non-profit organization, called private high-tech enterprise, which was revoked in 2005. This exerted certain negative influence on us. By then, the State Science and Technology Commission stopped acting as the governing unit for all the private high-tech enterprises, and it became very hard for us to find a governing unit. We tried to find but we failed, as actually no organizations would like to be governing units. Then we tried to register as a so-called private non-enterprise, a non-profit organization concept in China. However, we were also required to find a governmental governing unit. So actually we were no qualified or had no ways to apply for registration as a “Private Non-enterprise”.
Therefore, the latter Unirule Institute of Economics actually exists as the subsidiary division of Unirule Consulting Firm (UCF), which is a fully commercial legal identity. After our identity of private high-tech enterprise was revoked, we found no way to apply for registration as a private non-enterprise despite all our efforts, and by now we have given up and stopped trying. So strictly speaking, Unirule Institute of Economics is a subsidiary organization with no independent legal person rights, but it still can exist.
Afterwards, the State Administration for Industry and Commerce launched a so-called “Standardization Campaign” of corporation names. In my opinion, the aim of such an action is, with no doubts, to repress private research institutes, thus wiping out the existence of such names as social science and humanities institute or research center.
As for the name of Unirule, we were even told that we could not register with “Unirule” any more when we went for another registration later. We once appealed to the State Administration for Industry and Commerce, asking why we could not register with “Unirule” any more since we could register with this name before. Their answer was simply that there were certain law amendments, but they failed to inform us what the specific law amendments actually were. We kept a record of this issue.
For one thing, the policy of tightening the registration of social sciences and humanities organizations is aimed at repressing and exterminating private research organizations. For another, this is a special policy directly targeting Unirule Institute. This action is really very stupid, as it equals to destroying the society’s own think tanks. We have intelligence and knowledge resources to contribute to our society, to provide the government with free decision-making consultancy and reference, which should be win-win cooperation in many ways. We can not help feeling puzzled why non-governmental think tanks have to face so much malicious extermination.
Without the legal identity of non-profit organization, we have to pay tax for all our income. We have to make certain compromise. Under such condition, we already feel rather satisfied that we are still able to survive. There’s no doubt that the government never gave us any support. On the contrary, our surviving environment is even harsher than normal organizations.
Strictly speaking, current situation in China is not good for non-governmental think tanks’ development. This unfavorable situation results from active repression efforts, rather than passive and unconscious factors. It is not that the so-called institutional environment, such as donation tax exemption system, does not exist, but that it depends on whom you are donating. For example, charity donations can only be given to Red Cross Society, China Charity Federation, etc. Large amount of donations during the Wenchuan Earthquake are not exempt from tax, not to mention donations to non-governmental think tanks. This indeed is a big problem.
Moreover, many entrepreneurs have worries when they give donation to us, being afraid that this action might results in unfavorable consequences to themselves. Their worries make sense to most of us.

Question 3: If we compare Unirule Institute with research organizations within the governmental system, which one do you think have more advantages? Does competition exist between you and them?

Prof. Sheng:
It is true that research organizations within the governmental system enjoy more favorable conditions. For example, they have access to more government resources. However, every thing has two sides, and being within the system is no exception. The major disadvantage is its limitation in terms of research perspective. Constrained within the framework of the governmental system, these research organizations are inclined to make more efforts in explaining rather than raising doubts about current policies.
In certain cases, we face respective markets. They put more emphasis on explaining policies, while we make more efforts in discussing or challenging polices. Thus, comparatively speaking, Unirule holds a rather neutral attitude. It should be noted that organizations within the system are not neutral as they are more in favor of existing policies. Their tendency of straying away from neutrality, however, has detrimental effects on themselves. This is because the community, the media, and even the government themselves do not believe in this tendency in many occasions. Normal governmental departments wish to hear different opinions so that better polices can be worked out, rather than making research organizations to explain whichever implemented policies. If research organizations say yes to every policy that has been enforced by the government, there would be nobody for reference. In this way, Unirule Institute has built a pretty high reputation among governmental departments through the years. A wise government, whether it’s central or local, prefers to hear the truth instead of non-neutral flatteries.

Why we say Unirule still see development space? Simply because of the harsh environment we face and governmental research organizations’ incapability of transcending the system. With an identity of non-governmental and non-profit organization, Unirule enjoys more credibility, and people prefer to believe in consulting reports produced by Unirule rather than those by organizations within the system. At the least, Unirule’s voice exists as an independent one.

It might be quite a miracle for Unirule to have survived in such a tough situation when there are so many organizations within the system while so few organizations outside the system. Though we feel a little sad about Unirule’s present situation, it might be better for organizations like Unirule to be in such a situation, because Unirule is bound to face more competition if the general climate is favorable for the development of various non-governmental think tanks.

Question 4: Does Unirule have any successful cases which influenced the state’s decision-making?

Prof. Sheng:
We do exert certain influences.
For one thing, our influence is mostly in terms of people’s views. Claims of Unirule Institute and key members of Unirule are publicized in articles and books, and known by common people, thus influencing their opinions. For example, Unirule Institute advocates economic liberalism, marketization, privatization, small-sized government, and limited & effective regulations. Such claims did exert subtle influence on the consensus of society, including the government, throughout the years. That’s why we had witnessed the fundamental orientation of reform targeted at marketization, privatization, small-sized government, and limited & effective regulations, rather than the opposite way. This is one of the small contributions Unirule Institute ever made. As an organization with its distinct claim of economic liberalism, Unirule has done some work in making all these changes happen.
For another, we also provide reform proposals directly in related fields, such as the telecommunication reform proposal, which was initiated firstly by us. It was a telecommunication legislation proposal entrusted to us by China Unicom Corporation. “Neutral Term” had already existed by then. Unicom also asked, “Since we have offered money, why our requests can not be added in?” Our answer was, “This is an issue concerning public interests instead of a corporation’s private interest.” It turned out the subsequent telecommunication reform proposal was very close to our legislation proposal.
Besides, we have been quite explicit in advocating marketization reform of public utility. We held a forum on public utility reformation at the end of year 2002. Soon afterwards the Ministry of Construction (now the Ministry of Housing and Urban-Rural Development) also issued a document whose name probably was “Suggestions on Marketization Reform of Municipal Public Utility”, which actually meant to promote marketization reform. Afterwards we accepted a consignment from the Ministry of Construction to conduct a comparative research on regulations on public utility in major classic countries around the globe. We gave our research findings to the Ministry of Construction, who then submitted to the State Council. That’s how Unirule made its contribution in the reform of public utility.
In recent years, we are mainly engaged in advocating reform on land system, and we’ve done several researches on land issues, including “Research on Land Property Rights System under the Background of Urbanization” led by Prof. Zhang Shuguang, some researches on small property rights, and the research on “Farming Land Protection and Grain Security” which aroused hot discussion not long ago. As we know, many of the decisions made by the Central Committee of the CPC on the 3rd Plenary Session of 17th Conference were targeted at the orientation of land marketization, to which our researches might have made a little contribution. Presently, we are conducting a research on the Law of Land Administration, and a document which will have its effect quite soon is a criticism on the Draft Amendment on the Law of Administration proposed by the Ministry of Land and Sources. Today we have just sent this article to Chairman Wu Bangguo. All these mentioned above are rather direct and concrete proposals or suggestions, and it’s safe to say that they have exerted certain effects.

Question 5: Could we say that some of the think tanks or research organizations of the central government are more or less borrowing or even plagiarizing Unirule’s research findings?

Prof. Sheng:

I don’t think we should use the word of “Plagiarize”. Our research findings are public goods, and we would feel rather pleased if our findings are borrowed and thus have influence on policy and institution decision-making process. However, this does not mean we’re not concerned about intellectual property rights. It’s just that we consider intellectual property rights a subordinate issue.

Question 6: Is it possible to realize the “Revolving Door System” of the United States in China?

Prof. Sheng:
“Revolving Door” actually means the interaction between the private sector and the government, and I consider it an excellent system. In a healthy society, there should be considerable interaction between the private sector and the government, instead of the situation that a person either belongs to the private sector or the government. One of the benefits we obtain from changing places with each other lies in that we are granted with the opportunity of understanding the society in an all-round way. I’m quite optimistic that such a system might be realized in China in the near future.
How large is the gap between the private sector and the government when we have a thorough consideration? It’s hard to say. The difference of ideology no longer exists between them, and it’s even not safe to say that the government sticks to Marxism in a stronger way than the private sector any more. Their differences are only reflected in their different opinions towards certain specific systems or policies, which is neither systematic nor fundamental difference.
However, it should be mentioned one type of difference does exist. That is, some governmental departments think about problems, draw up policies, systems, and even laws or regulations simply from their own perspective, and with their departmental interests packed in. This issue is quite difficult to cope with. Comparatively speaking, non-governmental organizations care more about public interests as they are more detached than governmental departments. To certain extent, it is the non-governmental organizations who are more capable of representing public interests and stand at a neutral position in a better way. The government departments are incapable of doing this as they might only stand at the position of their own department instead of that of the whole government. Therefore they might do a less excellent job than some of the non-governmental organizations in certain cases.
For instance, the Land Administration Law Amendment Draft recently criticized by us, is a typical exemplification of the explosion of departmental interests, and that’s why Unirule Institute has stood out at this time. We believe that we’re more detached than them, as we tried our best to stand on the public’s position when considering the Land Administration Law, without any consideration of the interests of any sector.
Therefore, it’s rather beneficial for the private sector and the government to maintain sound interaction, especially in terms of research organizations. It’s not good for a person to stay in a particular place too long. In a healthy society, it should not be the case that a certain group of people is the given officials, while the other group of people given non-officials. Instead, there should be sound interaction. I also believe in the possibility of interaction, as strictly speaking, there’re no fundamental disagreements but certain different opinions in terms of practical operation, and some different tendency resulted from their different positions. If sound interaction is conducted, the problem of different tendency will be gradually eliminated.

Question 7: Our respected Professor Mao Yushi expressed some eye-catching opinions in recent two years, such as, Speak for the Rich and Do for the Poor, Objection to Affordable Housing, High Tuition Fee is Good for Education Equality, etc. Are these viewpoints only Prof. Mao’s own opinions or they stands for Unirule Institute’s opinion? What do you think?

Prof. Sheng:
Members of Unirule Institute is rather special in that they are scholars at the same time. All members of Unirule Institute have their freedom to publicize their personal viewpoints, and our organization put no limitations or restrictions. Neither I nor Prof. Mao needs to report to our institute and asks for its opinion about whether it is appropriate when we want to publicize an article. Members of Unirule Institute, especially the key members, are different from corporation president and person in charge, or spokesman of the government, in that they have double identity.
Scholars of all organization have freedom of expressing their views, including the Academy of Social Sciences. Most of the opinions and articles of key members of Unirule Institute are in accordance with the tendency of our institute. For instance, advocating economic liberalism is the consensus of all Unirule members, and relevant publications requires no report. However, the specific ways of expressing views might differ. Subtle differences exist among members of Unirule, but we can tolerate diversity and dissent.
Prof. Mao might emphasize more the role of market, which is no big difference from others’ opinions and just a different style of expression. He knows clearly about market failure. Moreover, he is enthusiastic about public welfare and public awareness, and wishes to get his ideas across to the public in simple words and popularize knowledge about economics. That’s also why his articles are generally very easy to understand. However, he is quite “naive” in certain aspects. For example, he might have overstated the role of market, believing that he can make the public know about economics through his own influence, which is actually quite a difficult mission. That’s because public media and public views have their own feature, that is, common people prefer to get to know about issues in a straightforward way, while issues of economics go through several logical links from reasons to results. In certain cases, Prof. Mao believes that his words could be understood by the public, but actually his ideas might not be understood for the moment, perhaps never will.
Surely, his way of being “naive” is sometimes rather cute. For instance, in his article “Speak for the Rich and Do for the Poor”, the key point is the definition of the rich and the poor. In order to make his article easy to understand, Prof. Mao did not give strict definition. However, by the rich, he definitely means people who become rich in the market while obeying market rules, rather than those who make money through corruption and degeneration. I firmly believe that Prof. Mao definitely does not mean the latter group of people as he himself strongly detests corruption and degeneration. If we can understand “the rich” in the rightful way, then his idea is correct. We would be attacking all the rightful ways of becoming rich if we attack the rich, and we would block the poor’s road of becoming rich if we do not speak for the rich. This is Prof. Mao’s reasoning and argument.
Many people are just trying to please the public by speak for the poor publicly while actually doing nothing for the poor. Prof. Mao did do things for the poor. He set up the small loan fund many years ago and runs a nurserymaid-training school. There should be no doubts about the fact that he is doing things for the poor.
Besides, ideas of our members may not be correct in every way. They are just analyzing certain issues from their own perspective. Take Prof. Mao as an example, he opposes affordable housing, and people who have purchased affordable houses feel unhappy about his opinion. Prof. Mao is speaking on the position of the whole society and the people. Individuals who benefit from affordable housing policy certainly can have objections, but we can not say their objections make too much sense. If one individual is for anything which benefits himself and against anything which does not benefit himself, then he is not qualified to talk about public issues. Affordable housing equals to a huge subsidy granted by the government, ranging from 100 thousand RMB at least to several hundred thousands at the most. The key problem is why you’re selected for such a huge subsidy? The issue of social equality is involved here. In general, Prof. Mao is a rather straightforward person, who speaks whatever he has in mind and does not feel like making things complicated.

Question 8: With the development of “Hard Power” of our country, think tanks in China, who represents the “Soft Power” of our country, are bound to step on the front stage and stand at a leading position. Judging from present situation, non-governmental think tanks still have a long way to go. In your opinion, what do Chinese think tanks need to do to make them compatible with the economic and military strength of our country?

Prof. Sheng:
It should be said that I’m still rather optimistic.
Take Unirule Institute for example. In fact, the repression period mentioned above has passed, and the environment for private organizations’ survival is relatively improving. Even some of the governmental departments are now carrying out cooperation and frequent contact with Unirule Institute. Unirule Institute is now often included in the consulting list when governmental organizations asks for opinions or advice.
The government’s attitude towards non-governmental think tanks is of vital importance. In the past, people held a prejudice about non-governmental think tanks in China, considering them as similar to some organizations in former Soviet Union and countries of Eastern Europe, who devoted themselves to Color Revolution. In fact, this is their misunderstanding, overreacting and sensitivity, and what they did to non-governmental think tanks equals to destroying our society’s “brain”.
The government has now gradually realized that think tanks can not function well if they are all put under the leadership of the government. The mechanism of governmental think tanks determines that they are more inclined to explain the current policies and fail to live up to their expectation of providing sound policy consulting.
Therefore, now the government is rather concerned about the development of non-governmental think tanks, and I believe changes will happen to their opposing attitude. This definitely will influence Unirule Institute’s development. Unirule did not fall in harsh environments and it is still functioning in a healthy way and with good intention. We repeated saying that “we actually means to help the government, even our criticism is well intended to help the government.”
I perceive that the government might head towards the direction of allowing non-governmental think tanks more space. No fundamental and systematic changes have taken place yet In order to achieve this goal, firstly, what non-governmental think tanks need only is to be granted with more legal space. It is not necessary for non-governmental think tanks to expect encouragement from the government. What we would expect at present is fair treatment and that we could be legally recognized as non-profit organizations when we have met all relevant requirements, without having to find governing units for ourselves. I believe this change will take place sooner or later.
In the very beginning, development of private enterprises was strongly repressed and it’s very difficult to get registered as private enterprises, while now it’s very easy to register. It’s the same case with non-governmental think tanks. I think there will be major breakthroughs in registration of non-governmental think tanks in recent years, thus allowing the development of non-governmental think tanks and NGOs. In this way, the cost of running a think tank will be greatly reduced and it’ll be convenient to get into this field with less restrictions.

Secondly, such systems as donation tax exemption system and heritance tax system should be designed so that more civil funds will emerge and their competition will promote the development of non-governmental think tanks in return.
When we look back, we find that many private enterprises are now booming after 30 years of reform and opening-up. If the entrance barrier is eliminated for NGO and non-governmental think tanks and certain supporting measures are taken in terms of institutional environment, a miracle definitely could be imagined in mental production field.

(Revised by the Interviewee)               July 9th, 2009

Unirule Announcement on the Website Incident

Unirule Announcement on the Website Incident

Between 15:00 and 16:00, January 20th, 2017, the following websites and self-media accounts were unaccessible, including Unirule Institute of Economics official websites, the auxiliary websites of “Unirule Centre for Public Private Partnership” and “”, WeChat public accounts of Unirule scholars, and Microblogs of main Unirule members; several personal WeChat accounts of Unirule main members were shut down, and problems also occurred to Unirule email system. An online circulated message claimed that “Beijing Internet Information Office” was responsible for the shutdown of the aforesaid online platforms, and we were not able to confirm the authenticity. So far, we can not confirm whether this is an administrative action of due process of law. Therefore, we consider it a violative technical action towards Unirule Institute of Economics as a whole.

Here are the reasons:

  1. If this act was carried out by Beijing Internet Information Office, then the responsible entity failed to communicate with Unirule for clarification of facts according to Article 30 of the Administrative Penalty Law of the People’s Republic of China (hereafter referred to as the Administrative Penalty Law); Article 30 of the Administrative Penalty Law stipulates that “if the facts about the violations are not clear, no administrative penalty shall be imposed.”
  2. The responsible entity failed to inform us beforehand according to Article 31 of the Administrative Penalty Law that stipulates “Before deciding to impose administrative penalties, administrative organs shall notify the parties of the facts, grounds and basis according to which the administrative penalties are to be decided on and shall notify the parties of the rights that they enjoy in accordance with law.”
  3. The responsible entity failed to follow Article 32 of the Administrative Penalty Law that stipulates “Administrative organs shall fully heed the opinions of the parties and shall reexamine the facts, grounds and evidence put forward by the parties”. The rights to“ state their cases and to defend themselves” were not respected by the responsible entity.
  4. The responsible entity failed to issue a stamped “form of decision for administrative penalty” before shutting down the aforesaid online platforms according to Article 39 of the Administrative Penalty Law in order to clarify the “violation”, and the proper penalty by this law.
  5. The responsible entity failed to inform us of our right to “request a hearing” according to the Administrative Penalty Law beforehand, which led to the fact that we missed the opportunity to resort to this right.
  6. After the shutdown of Unirule online platforms, there was no channel for appealing, and the entity of Beijing Internet Information Office was not able to find via the website of the Beijing municipal government.
  7. This act is a violation of Article 35 of the Constitution of People’s Republic of China, stipulating that “Citizens of the People’s Republic of China enjoy freedom of speech, of the press, of assembly, of association, of procession and of demonstration.”

After all, this act of “shutting down”Unirule online platforms fall short of due process of law stipulated by Article 41 of the Administrative Penalty Law, “If, before making a decision on administrative penalty, an administrative organ or its law-enforcing officer, fails to notify, as stipulated in Articles 31 and 32 of this Law, the party of the facts about the violation, grounds and basis on which the administrative penalty is imposed, or refuses to heed the party’s statement and self-defense, the decision on administrative penalty shall be invalid”, and should therefore, be deemed invalid.

Except the aforesaid three Unirule websites, other Unirule online platforms including Microblogs, WeChat accounts and the email system did not show evidence of government-backed interruption:

  1. Unirule Microblogs showed “Abnormal Login, currently unable to visit”, which is a sign of technical problem;
  2. Unirule WeChat public accounts showed “violation of relevant laws and regulations” without clarification by the service provider;
  3. The personal WeChat accounts of main Unirule members were shut down by “WeChat Team” of the service provider, stating that these accounts “violated personal WeChat use codes” without clarification;
  4. Unirule email system was disrupted, and no entities have claimed responsible.

Therefore, no direct evidence shows that the disruption of Unirule and its main members’ Microblogs, WeChat public accounts, personal WeChat accounts, and Unirule email system was a result of government departments’ activity.

In addition,

  1. The website of “Unirule Centre for Public Private Partnership” has ceased to update since 2013. Even if there was “violation” of the law, the statute of limitation has been surpassed as stipulated by the Administrative Penalty Law. Therefore, the shut-down of this website was not due to the so-called “violation of laws or regulations”, but because it belongs to Unirule Institute of Economics.
  2. The fact that disruption to Unirule websites, Microblogs, WeChat public accounts, personal WeChat accounts, and the email system were all undertaken within an hour demonstrates that it was a coordinated act, targeting Unirule Institute of Economics, and aiming for silencing Unirule Institute of Economics.

It is the duty of the government to protect the security of citizens and institutions; and what it essentially means to protect national cyber security is to protect the cybersecurity of citizens and institutions. Only when citizens are secure, will the state and the governing personnel be secure. Therefore, we refuse to consider this deliberate sabotage of online platforms and communication of our institute an act of the government.

It is also the duty of the government to protect the freedom of expression and communication of citizens and institutions. This coordinated sabotage of all the online platforms and communication of Unirule Institute of Economics is, therefore, a severe disruption of the constitutional rights of citizens and institutions. Therefore, we believe this act that violates the duties of administrative departments, smears the reputation of the government and stains the integrity of the Constitution should also be objected by the government.

We consider all the disruptive actions towards the online presentation of Unirule Institute of Economics one unified incident. As mentioned and analysed before, some of the acts were not undertaken by the government, and some took place without the relevant government departments presenting formal legal documents. Therefore, we do not believe it is an administrative action of due process of law, and instead consider it a violative technical action towards Unirule Institute of Economics as a whole.

In this light, we, as taxpayers, sincerely urge the government to fully execute its duty and protect our cyber security. We also urge that interruption towards Unirule online communication and circulation to be stopped; that online services from our Internet service providers to be restored unless valid legal documents are provided(or issued by administrative departments); and that normal operations of Unirule websites to be recovered(or legal documents to shut them down are provided).

We, hereby, would like to restate that Unirule Institute of Economics, as a private academic research organisation, is dedicated to advancing academic research, analysing current economic and social issues, and proposing reform plans and public policy suggestions. In recent years, we have undertaken research in reform of state-owned enterprises, breaking monopolies, reform of the oil system, land institutions, and reform of administrative departments, some of which were a result of positive interaction with government departments. Unirule Institute of Economics facilitates informed public policy-making. and Unirule WeChat public accounts and Microblogs are helpful supplements to the official interpretation and analysis of government policies. Therefore, they are remedies for public policy-makers as systematic deviations occur frequently. They are also an important part of the diversity of ideas in the Chinese society, providing rational thinking and a peaceful mind in the turbulent mass media.

Critiques is inevitable in the research and proposals of Unirule Institute of Economics. However, we aspire to reach the utmost stage of criticism where good intentions are held in our heart and presented in our words. We humbly admit that we are all but ordinary mortals, and that aspiration may never be fully achieved. We sincerely hope all groups of the society point out the flaws and inappropriate parts of the forms and wording of our critiques. And we will improve our work accordingly.

It is also our hope that tolerance and understanding of non-government organisations be undertaken by the authorities for the advance of the Chinese society. We note that Mr. XI Jinping’s defence of free trade principles at the World Economic Forum, and the intrinsic tie between free trade and free expression is known by everyone in the world. Free trade refers to the free exchange of commodities, and free expression refers to the free exchange of ideas. As ideas are more valuable than commodities, anyone that truly defend the freedom of trade will defend the freedom of expression.

Unirule Institute of Economics

SHENG Hong, Director

January 24th, 2017



Translated from “天则所关于网络事件的声明”

Fulfilling Constitutionalism with Everyone’s Action / SHENG Hong

When this year just started, constitutionalism was a highly discussed topic among common people. This is an encouraging fact for us, the advocates of constitutionalism. However, many people, including ourselves, have a misunderstanding of constitutionalism. First of all, it is often regarded as the issue at the state level, implying that there is little relation between the common people and constitutionalism.

In fact, it is the opposite. Constitutionalism is a structure between different levels of rules. The general principle of constitutionalism is that lower rules should obey higher ones, which exists on every level of society ranging from world to family. For example, the family order is more important than the property institutions.

Since constitutionalism can be implemented at all levels, it also involves every individual, while constitutionalism only works at the state level, ordinary people can not reach it. One can implement constitutionalism at once if it can be implemented at his level. Every level of the society is composed of many people, who need to deal with the relationship between various principles. The Confucian idea of self-educating, family’s perfecting, state’s governing, and world’s peace realizing, contains family’s perfecting. But that is not an easy task, as in order to realize family’s perfecting, we must implement constitutionalism in the family.

Starting from ourselves, we can promote constitutionalism as well as improve people’s constitutional consciousness. Experiencing the benefits of constitutionalism by ourselves will increase our expectations on the positive effects that constitutionalism can have on different areas of and levels of society and thus popularizing constitutional consciousness. If most people have such experiences and reach a consensus on constitutionalism, it will not be difficult to promote constitutionalism. Even those people who are against constitutionalism will change their opinions when they benefit from constitutionalism.

As a small unit in our society, Unirule Institute of Economics is always following the principle of constitutionalism in decision-making, operating and managing. In a manner of speaking, we are performing a small constitutional experiment. It is believed that our staff is all very excellent, but we must realize that we are all ordinary people, who have their shortcomings,, which should be remedied by institutions. It is the constitutional institutions which can constrain the human’s weakness and enlarge and aggregate their advantages. We now advocate constitutionalism without sadness for there are some critical voices expressing refusal towards constitutionalism. for we know very well that each of us could be a practitioner of constitutional reform. An increasing number of small units like Unirule following principles of constitutionalism will brighten the future prospects for China’s constitutional reform.

January 15, 2013,  Guangzhou