Area Studies
Return to Conference Index


October 5, Afternoon Session I.

  Environmental Issues / Environmental Security
  Economic Development and Subsidies / 
  Impact of the Reform Policies in Tibet

James D. Seymour, Moderator

+ + + + + + +



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.


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.


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 [2].  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.[3]  In Tibet, 95% of factories are still operated by hand, while 
only 5% are semi-mechanized or mechanized.[4] Furthermore, 74% of the 
population is still illiterate.[5]  The revenue of the region has been 
computed in negative figures for decades; the budget is entirely 
dependent on the subsidies.[6]  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."[7]  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."[8]  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,[9] 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


Table 1

          (/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."[10]  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.  
However, the

Table 2

              ~~~~~~~~~~~~~~        ~~~~~~~~~~~~~~~~
              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
                    of Statistics_ 


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.[11]  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).[12]  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.[13]  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." [14]  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" [16].  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.  

Table 3
       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." [18]  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

Table 4

               YEAR RANGE          % SUBSIDIES
               ~~~~~~~~~~          ~~~~~~~~~~~
                 1960s                34.83%
                 1970s                69.79%
                 1980s                85.13%

                   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.[20]  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),
     p. 232.

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),
     p. 292.

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.