THE POTOMAC CONFERENCE, October 5-6, 1992
SINO-TIBETAN RELATIONS: PROSPECTS FOR THE FUTURE
October 5, Afternoon Session I.
ENVIRONMENT & ECONOMIC DEVELOPMENT
Environmental Issues / Environmental Security
Economic Development and Subsidies /
Impact of the Reform Policies in Tibet
James D. Seymour, Moderator
+ + + + + + +
ECONOMIC DEVELOPMENT AND SUBSIDIES
JAMES D. SEYMOUR
Okay, we now move into the next part of our panel, during which I
intend to be a somewhat stricter disciplinarian than I have been! I
do have permission from our head dictator, Jeanne-Marie Gilbert, to
let things slip about 15 minutes behind schedule. It just means that
during the reception you will have to drink faster!
So it now gives me great pleasure, and of course we come to the subject
of the economy which we can't possibly do adequately and fairly, but
nonetheless we're going to touch on some of the main issues. And to get
the discussion going, I'm pleased to introduce one of the main movers and
shakers of this conference, Tseten Wangchuk Sharlho of Tibet Forum.
TSETEN WANGCHUK SHARLHO
When the Chinese talk about economic development in Tibet you can often
see that they pretty much emphasize how much subsidies they have poured
into Tibet since China took over in the 1950s. Yet, if you look at
subsidies - how much is being put in, how they're used and what results
they're getting - we can pretty much see a basic picture of economic
development in Tibet since China took over. I would like to discuss the
subsidies issue, and also to point out some general economic conditions
in Tibet and give some thought to the future viability for economic
development in Tibet.
However, the first thing, I think, that I have to say is on the
statistics. It's really difficult when you say Tibet: what territory
exactly are we talking about? "Tibet, the Tibetan Autonomous Region" or
"Greater Tibet?" The viability of the data is questionable to begin
with, and it's really difficult to talk about all the Tibetan areas
together because we can't get that data from the Chinese government, they
just don't put it together. What I say in the following, then, is that
basically the data is from the Tibetan Autonomous Region . However, I
don't think that only this is Tibet. And, I think that what I say
probably also can be extrapolated to other parts of Tibet.
In 1955, Mao Zedong read a report on the situation in Tibet. The report
stated that the increasing number of Chinese military and other personnel
were causing food and other shortages as well as a rapid rise in the rate
of inflation. The report recommended that subsidies be used to offset
this situation. Mao made a notation at the end of the report:
"I fully expected this. We will have to subsidize
Tibet for a considerable time. Yet, I am sure
that Tibet has many natural resources, so that one
day, not only will it pack back what we have put
in, but it will also give us many more benefits."
This one notation gives you the entire picture of the Chinese rationale
and method for economic development in Tibet for the past few decades:
Need more Chinese, bring in more Chinese, need more money to look for
minerals and resources to exploit. So, I will go now to my paper.
BEIJING'S SUBSIDIES IN THE TIBETAN ECONOMY
China is faced with criticism of its policy toward Tibet both from the
international community and through continuous dissent from the Tibetan
population in Tibet. (Because of the unavailability of sources, in this
paper, Tibet refers only to the Tibetan Autonomous Region.) The Chinese
government defends its policy in Tibet, arguing that from 1952 to 1984
Beijing subsidies to the Tibetan economy amounted to more than seven
billion yuan [Note 1], with the total yearly subsidy reaching 777 million
yuan in 1984 alone . For a thinly populated area like Tibet, a
subsidy of this size should have been a substantial capital investment
for the economic development which is supposed to have greatly benefited
the Tibetan population. However, in spite of 40 years of under control
by Beijing, Tibet's economy remains backward even compared to
underdeveloped regions in China. In 1987, in rural areas which comprise
nearly 90% of the Tibetan population, annual income was only 367 yuan,
while the average peasant income of China for the same year was 782
yuan. In Tibet, 95% of factories are still operated by hand, while
only 5% are semi-mechanized or mechanized. Furthermore, 74% of the
population is still illiterate. The revenue of the region has been
computed in negative figures for decades; the budget is entirely
dependent on the subsidies. These examples point to a discrepancy
between Beijing's claims based on the total figure expended and the
discouraging economic evidence that has resulted from actual spending
practices; a typical assertion by Chinese officials can be misleading:
"From 1980 to 1984, were the subsidies divided equally, the average
person in Tibet would have received 356 yuan a year." These claims by
Beijing and the offsetting evidence demonstrate a gap between the stated
economic aims of the subsidies and their actual purpose. This paper will
attempt to examine the failure of the subsidies in terms of economic
development, and postulate that they serve a largely political, rather
than economic, purpose.
In 1951 when China took over Tibet, because the previous Chinese
government had no political roots, the legitimacy of China's control was
questioned. Mao justified the takeover by saying that it was "the
mission of China to bring progress to Tibet" and "to help Tibet and its
people." In order to gain and consolidate control, thereby
establishing legitimacy, in addition to building up the military in the
region, the Beijing government concentrated on two activities: one, an
immediate effort was made to establish a Chinese bureaucratic system in
Tibet, and two, a longer term effort was mounted to effect the migration
of the Chinese population into Tibet. The majority of economic
activities focused in these two directions. Because of Tibet's
geographic isolation and lack of indigenous industry, these two policies
were bought at the great cost of importing bureaucratic administration
and constructing an infrastructure upon which to build an industrial base
primarily for the purpose of creating jobs.
Throughout the fifties, except for maintenance and enlargement of the
army and for the building of roads to facilitate the movement of troops
and supplies, most of the subsidies allocated were for the beginnings of
the Chinese bureaucratic structure that was to supplant the existing
Tibetan system and personnel. Particularly after the establishment of
the Tibetan Autonomous Region in 1965, the cost of administration
increased dramatically because the structures in place in Chinese
provinces were copied wholesale in Tibet, without consideration of
Tibetan requirements or conditions. Although the entire Tibetan
population totaled only one/eighteenth of that of the average province in
China, the one-to-one match of the Central Government level of
bureaucracy created a burgeoning administration that would require
ever-increasing subsidies to support. For example, even though Tibet had
only a tiny industry, an impressive Department of Industry worthy of a
much more populated and advanced area was established; the number of
personnel and attendant costs still have yet to be balanced by industrial
output. From 1952-1984, the subsidy allocation to direct administration
was 15.4% of the total expended, and since the eighties, the increase
in administrative costs rose at a rate higher than that of the subsidies
themselves [see Table 1]. In actuality, the real cost of administration
was even greater than these figures show, because of the ancillary costs
of servicing administrative personnel (see below).
Of particular notice, while an increasingly large percentage of the
subsidy allocation has gone to support the direct cost of administration,
the single greatest percentage of the total subsidies, more then 30%, has
been spent on "Capital Construction Investment." What this percentage
hides, is that often the majority of the
COMPARISON OF DIRECT ADMINISTRATIVE COSTS
IN THE TIBETAN AUTONOMOUS REGION
TO TOTAL SUBSIDIES FROM BEIJING
Year ADMINISTRATION COST BEIJING'S SUBSIDIES
TOTAL RMB ANNUAL TOTAL RMB ANNUAL
(/10,000) % Incr. (/10,000) % Incr.
1970 2494.4 N / A 18344.1 N / A
1975 3873.1 9.2 27291.1 8.3
1980 7598.8 14.4 60104.0 17.1
1984 13749.5 16.0 77704.2 5.3
Source: _Tibetan Yearbook 1989_
allocation is for nonproductive construction such as administrative
buildings, and housing for state-owned-enterprise employees. In recent
years, "the sites of office buildings for many units have grown more and
more big, the office equipment and furniture in them has become more and
more elaborate, and many units have torn down the plain doors and walls
of the buildings and replaced them with fancy versions. In Lhasa, the
average office and theater space [for the unit] per bureaucrat is the
highest in all of China." Ironically, since the start of the
economic reforms, the percentage of nonproductive construction is
increasing [see Table 2]. It should be noted that bureaucracies in
general are difficult to dismantle; the difficulties in this case are
greater since it would require either a massive exodus of Chinese workers
back to China, or an outflow of bureaucrats to entrepreneurial or
industrial positions (see below). Clearly, the top-heavy administrative
burden has become an important obstacle to economic development.
COMPARISON OF PRODUCTIVE TO NON-PRODUCTIVE
CAPITAL CONSTRUCTION INVESTMENT PERCENTAGES
IN THE TIBETAN AUTONOMOUS REGION AND CHINA
YEAR % PRODUCTIVE % NONPRODUCTIVE
China Tibet China Tibet
1982 54.5 54.5 45.5 45.5
1983 58.3 49.6 41.7 50.4
1984 59.7 31.5 40.3 68.5
Source: _Tibetan Yearbook 1989_, _Chinese Book
high percentage of administrative costs is not only tolerated by Beijing
but continually encouraged given the realities of maintaining political
and bureaucratic control in Tibet.
Prior to 1950, the number of Chinese in the country was so small as to
be counted by hand. In order to implement Chinese policy in Tibet, gain
political control, and change the social structure, huge influxes of
Chinese immigrants were brought or enticed into Tibet at a significant
cost. Official immigrants (i.e., counted in statistics) include
bureaucrats, some professionals, and unskilled laborers. Because of its
geographically isolation and, by virtue of its high altitude, Tibet is
considered by the Chinese to have difficult living conditions; many extra
wages, benefits, and other privileges, are provided as incentives to the
immigrants and their families and are costed into the subsidies. Fully
98% of the official immigrants to Tibet work in the state-owned
enterprises. In 1985, the average state-owned-enterprise employee
received an annual wage 87.6% higher than his counterpart in China (2143
yuan to 1442 yuan). Health and hospital care, education, and special
social service benefits to the Chinese immigrants and their families
account for a large part of the allocations of the subsidies to Tibet in
each of these areas. Because Tibetan indigenous agriculture and
commercial enterprise cannot support the massive numbers of immigrants,
sizable amounts of grain, vegetables, and other products and goods are
imported at great subsidized expense. For every yuan's' worth of goods,
1.33 yuan is added to its cost by the time it has been distributed in
Tibet. An additional extraordinary benefit for Chinese workers in
Tibet, is the vacation policy: for every year-and-a-half of employment,
an all-expenses-paid three-month vacation back to China is provided for
in the subsidies. Usually, because of transportation difficulties, this
three months is extended and "fully one-fourth of a unit in Tibet is on
vacation in China at any given time."  Because of the long duration
of the vacations, considerable sums of income and expenses are spent in
China, not Tibet. Some monies from the subsidies never even reach Tibet:
also provided for in the subsidies is a special massive retirement
housing project, located in China, for retired Chinese workers from
At the inception of the economic reforms in 1984, the tourism industry
was given priority in subsidized planning, with 43 major special
projects announced. Substantial numbers of new permanent and
transitory workers (official and unofficial) flooded into Tibet to
benefit from the small entrepreneurial opportunities afforded by the
tourist trade and to participate in the special construction projects
[see Table 3]. Often these laborers, many of them young and
middle-aged males, arrive without their families, and send the
subsidized wages almost entirely back to China. This is often the
case with a large percentage of the official immigrants to Tibet in
the state-owned enterprises as well. So, again, what is counted as a
subsidy to Tibet simply flows directly back to China, sapping the
strength of the propped-up economy.
That the cost/benefit ratio of the policies in Tibet is unbalanced in
economic terms may seem obvious on reflection, it had not been publicly
acknowledged by the Beijing government until Hu Yaobang visited Tibet in
1980. He was appalled at the high cost of development with no
productivity, and at the wastes and inefficiencies of the over-heavy
administrative and immigration practices. In his outrage, he vowed that
"80 percent of the Chinese were to be withdrawn from Tibet" . It
would appear that a cooler, bureaucratic head prevailed on his return to
Beijing. As his promises were never carried out, most likely a political
cost/benefit analysis showed that the subsidies were an essential expense
in order to maintain long-term control over Tibet.
ORIGIN OF NEWLY ARRIVED CHINESE WORKERS
TO THE TIBETAN AUTONOMOUS REGION
NUMBER & PERCENTAGE TO TOTAL June to August 1985
PROVINCE WORKER % PROVINCE WORKER %
~~~~~~~~ ~~~~~~ ~~~~ ~~~~~~~~ ~~~~~~~ ~~~~
TOTAL 100 NINGXIA 1860 3.3
SICHUAN 28650 50.5 JIANGSU 1850 3.2
GANSU 4410 7.8 FUJIAN 1670 2.9
QINGHAI 4380 7.7 HENAN 1540 2.7
ZHEJIANG 3870 6.8 HEBEI 810 1.4
ANHUI 2470 4.4 HUBEI 720 1.3
SHANXI 1290 2.3 SHANDONG 663 1.2
HUNAN 1870 3.3 OTHER 750 1.3
Source: _China's Population, Tibetan Volume, 1988_
In spite of the high degree of waste, some portion of the subsidies went
to productive investment and a few beneficial agricultural programs were
established. However, industry was overwhelmingly inefficient and lost
money; industry profits have has been negative since 1967 <17>. "From
1952 to 1985, the total net revenue of Tibet amounted to -0.33 billion
yuan; at the same time, Central Government subsidies to Tibet totaled
8.89 billion yuan."  There are two important reasons for this
continual loss. One is that investment in a particular industry has not
been based on economic viability. Subsidies are distributed to the units
without regard for their efficiency, capacity for production, or for
output. A vicious cycle has developed: the more the units lose money,
the more subsidies they receive, and the more they become dependent on
the subsidies [see Table 4].
This type of investment-as-subsidy cycle has become known to Chinese
economists as "infusion economics," whereby an economy can survive only
with continuing and increasingly massive infusions of subsidies. The
second reason for the continual loss in terms of output value is the
failure of the Tibetan rural and urban economies to integrate. The
agricultural and nomadic population remains in a
TIBETAN AUTONOMOUS REGION
PROPORTION OF SUBSIDIES TO GROSS OUTPUT
(COMBINED AGRICULTURAL AND INDUSTRIAL)
YEAR RANGE % SUBSIDIES
Source: Cheng, p. 26.
Note: Agricultural output, which has received very
little of the subsidies, accounts for up to
80% of the total output.
largely primitive condition with the economy dependent on hand-crafted
goods or agricultural products produced mainly under natural conditions.
The merging of a bottom-up pastoral economy with the top-down,
subsidy-based urban economy is next to impossible. Each economy is an
obstacle to the other, and there is little to exchange between them:
neither goods, capital, nor labor.
Although irrational in economic terms, one reason for allowing this
circumstance to persist, is that many of the continuing investments serve
purely political needs. In the seventies, the political campaign policy
of "filling in the blanks," enabled investments to be made that were in
actuality solely cosmetic manifestations of Chinese development of Tibet.
"In Lhasa, in Chamdo, glass factories and chemical factories were built.
Within a few years, 15 million Chinese yuan had been wasted."<19> In
order to establish the first generation of Tibetan coal miners, a coal
miner being an indispensable icon of the proletariat, investment of
almost 5 million yuan was made in developing a Xiang-yang ("toward the
morning sun") coal mine, to the west of Lhasa. After the requisite
propaganda value was milked from the project, the non-producing mine was
abandoned; Lhasan wags refer to the project as the Yak Dung Coal Mine
because, as no coal was either found or mined, the worker cafeteria was
fired by yak dung. For the ten-year anniversary of the formation of the
Tibetan Autonomous Region, it was decided that a major road would be
built from Lhasa to every county of Tibet. Twenty three million yuan
were invested in one road alone to the remote Medok country. Uncounted
miles of road were constructed over the jagged, forested, and jungled
terrain; the project was abandoned after the entire investment expense
was spent and lost--the road, as the economy, goes nowhere. Also, almost
without fail, the factories and industries are over-employed in order to
create a job market for the Chinese immigrants--so needed to dilute
Tibetan social structure and help maintain Chinese order. A typical
example is Naching Power Plant: based on the level of power output, a
sister plant in China would need only forty workers to operate the plant;
Naching employs more than 300. This type of investment for political
purposes and window dressing draws a great portion of the subsidies but
contributes little to the economic development of Tibet.
Beijing's subsidies of the Tibetan economy, in spite of what many argue,
have not been a positive driving force in the development of the Tibetan
economy; neither have they benefited the Tibetan population as many
assume. Because of the continuous question of China's legitimacy of rule
over Tibet, and China's internal political unrest, although the emphasis
of today's China is on an efficient economy, the need to maintain order
and keep the Tibetan economy dependent on Beijing has proved far more
vital to China's political interests.
Now, let me move on to the last thing I want to say something about:
the future. Recently, a lot of Chinese who used to say that you cannot
divide the Motherland are putting out another argument, saying that if
Tibet separates from China, it cannot survive economically. Typical of
this kind of argument, in one paper published by the Center for Modern
China recently, which I quote from here, says "if Tibet is independent,
all the Chinese government subsidies would stop and, therefore, all
electricity and running water would stop, and cars and trucks would have
no gasoline, and television and other modern facilities would stop, and
famine would cause a great many to starve to death."
Although I'm not saying that such a transition would be smooth, but if
you really look at the economic situation in Tibet, such arguments cannot
be made. First, more than 85 percent of Tibetan population lives in
rural areas which only receives 10 percent of the subsidies. Most of
this 10 percent goes into political things - communist party, women's
association, nothing much in the way of productivity.
Another thing, even now out of the combined output of agriculture and
industry in Tibet, the agricultural portion is always around 80 percent.
Since the subsidies have nothing to do with agriculture, even if
subsidies are stopped, it will not have much impact on the 80 percent.
After all, we managed to survive thousands of years without Chinese
subsidies and I think we'll be able to continue to survive. In Nepal, 80
percent of exports are controlled by the Tibetans. If we can do it in
Nepal, why not in Tibet?
Also, people say if the subsidies are stopped, it's going to stop
electricity and running water. In that part of Lhasa where I grew up, we
never had those things anyway, so why worry about it? Thank you.
Note: All publications, except for note 8, are published in Chinese.
All translations are my own.
1. Wang Danu, "Some Thoughts on the Strategy of Social
Development of Tibet," _Tibet Studies_ (Tibetan
Academy of Social Sciences), No. 1 (1988), p. 26.
2. Department of Statistics of TAR, _Economic and Social
Statistics Yearbook of Tibet 1989_ (Beijing: 1989)
(hereafter cited as Tibetan Yearbook 1989)
3. Guan Puran, "The Impact of Some Uneconomic Elements
on Economic Development," _Tibet Studies_, No. 1
(1987), p. 20.
4. Dawa Samdup, "Economic Strategies of Tibet," _Tibet
Studies_ No. 3 (1989), p. 6.
5. Peng Cun Xian, "Educational Achievement Levels and
Educational Reforms in Tibet," _Tibet Studies_, No 2
(1986), p. 6.
6. Li Zhuquing, _Economic Development and Strategy of
Tibet_ (Beijing: Nationalities Publications, 1990),
7. Guan, p. 19.
8. Dalai Lama, _My Land and My People_ (New York: Potala
Publications, 1972), p. 115.
9. _Tibetan Yearbook 1989_
10. Wang, p. 26.
11. _Chinese Population, Tibetan Volume_ (Beijing:
Chinese Financial Economic Publications, 1988),
12. Guan, p. 20.
13. Guan, p. 23.
14. _Chinese Population, Tibetan Volume_, p. 154.
15. _Chinese Population, Tibetan Volume_, p. 149.
16. Jigme Ngapo, "Behind the Unrest in Tibet,"
_China Spring_, No., (1988), p. .
17. Li, p. 232.
18. Zhen Ran, "A Burdensome Transition for the Tibetan
Economy," _China's Tibet_, (Fall 1989), p. 26.
19. Li, p. 137.
20. Li, p. 137.