Author 

Eun Kyong Choi is an associate professor in the Department of Chinese Commerce and Diplomacy in the Hankuk University of Foreign Studies. She received a Ph.D. from Princeton University’s Politics Department. Her research interests include tax institutions and social welfare in China. She published several articles, including “Patronage and Performance: Factors in the Political Mobility of Provincial Leasers in Post-Deng China” (2012), “The Politics of Fee Extraction from Private Enterprises, 1996-2003” (2009), and “Informal Tax Competition among Local Governments in China since the 1994 Tax Reforms” (2009). She currently has a forthcoming article entitled “Politics of Central Tax Collection in China since 1994: Local Collusion and Political Control.”

Abstract

Through a case study of China, this study investigates the impact of globalization on social welfare to the rural sector. This study provides support to the claim that globalization leads to social welfare expansion. In China, this was not conducted through a compensation mechanism in which volatility in globalization increases the societal demand for government welfare expenditure. This study finds that in countries with potentially huge domestic markets, an alternative mechanism is through the state’s change of its development strategy to a domestic consumption-driven one. I found that the volatility of exports during the global economic crises led Beijing to change its development strategies from an export-oriented to a domestic consumption-driven one. With this shift, central leaders gained incentives to extend social welfare provisions to the rural sector in order to increase consumption.

Introduction

Rural populations in China were virtually excluded from social welfare provisions in the 1980s and the 1990s despite phenomenal economic growth. Since the 2000s, however, the Chinese government has developed social health insurance and pension programs for rural populations. Although these programs are much inferior to those for urban populations, it is still a significant change for the welfare of huge rural populations in China. For the first time in the history of the People’s Republic of China (PRC), the central government has provided a subsidy for rural health insurance and pensions. In 2011, 832 million people joined rural health insurance programs, recording a 97.5 percent enrollment rate, and 326 million people enrolled in rural pension programs.

Building upon the globalization literature, this study finds that the volatility in the export markets during global economic crises had impacts on extending social welfare to rural populations in China. Facing the instability of export markets, the Chinese government changed its development strategies from an export-oriented to a domestic consumption-driven one. This impelled the center to take initiatives in building social welfare institutions for the rural populations in order to boost domestic consumption.

This study contributes to the globalization literature by specifying an alternative mechanism in which globalization leads to welfare expansion. Existing studies explain this notion by referring to a compensation mechanism: as globalization increases volatility, it creates societal demands for social welfare protection. While the compensation mechanism may work in democratic countries, it may not do so well in non-democratic regimes where politicians tend to be insulated from societal demands. This study finds that in countries with potentially huge domestic markets, an alternative mechanism is through the state’s change of development strategies to a domestic consumption-driven one.

This paper is comprised of six sections. Following the introduction, the second section elaborates a theoretical framework. The third section examines how global economic crises engendered changes in the development strategies of China from an export-oriented to a domestic consumption-driven one. The fourth section investigates how this shift of development strategy led to a social welfare extension to the rural sector as a way to boost domestic consumption. The fifth sector examines the patterns of development for social health insurance and pensions for rural populations. Finally, the sixth section draws a conclusion...(Continued)