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Cooperatives and China Gung Ho is the oldest Chinese cooperative association and is the closest to the principles of the international cooperative movement. It is not, however, the biggest and the most powerful cooperative organization in China. This chapter explains why. The origin and the role of cooperation in Asia, and particularly in China and other countries with a Confucian culture, have received relatively little attention in scholarly research (Taimni, 2000; Bernardi and Miani, 2014). In 1844, the first modern cooperative organized around a formal business model was established in Rochdale. In the following 150 years, the modern cooperative became a worldwide model of economic organization in agriculture, retail, manufacturing, services and banking sectors (Birchall, 1997) and arrived in Asia with a few decades of delay. The modern form of cooperative arrived in China at the beginning of the twentieth century.
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Andrea Bernardi
Co-operatives and China
Gung Ho is the oldest Chinese co-operative association and is the
closest to the principles of the international co-operative movement. It is
not, however, the biggest and the most powerful co-operative organization
in China. This chapter explains why.
The origin and the role of co-operation in Asia, and particularly in
China and other countries with a Confucian culture, have received rel-
atively little attention in scholarly research (Taimni, 2000; Bernardi and
Miani, 2014). In 1844, the first modern co-operative organized around a
formal business model was established in Rochdale. In the following 150
years, the modern co-operative became a worldwide model of economic
organization in agriculture, retail, manufacturing, services and banking
sectors (Birchall, 1997) and arrived in Asia with a few decades of delay.
The modern form of co-operative arrived in China at the beginning of the
twentieth century.
The word ‘co-operation’ in English means ‘working together,’ using
the prefix ‘co-’ from the Latin ‘cum’ (‘be with’). The Chinese definition is
more complex. It brings in a number of related concepts that in English
have found expression through other formulations, such as ‘mutual aid,’
‘mutual help’ and so on. In Mandarin Chinese, the characters used for
co-operative are 合作社; the Pinyin transliteration is He Zuo She.
He (): a pictographic character. The character is reminiscent of a
container, the lower rectangle (), with a lid, the upper triangle ().
This originally meant ‘close or shut the lid.’, subsequently, it has come
to mean assemble, unite, ally, combine, and even to merge, amalgamate,
marry and make friends (Zuo, 2006; Xie, 2000).
Zuo (): an ideographic character. In ancient bronze-age inscriptions,
the lower part resembled a knife and the top represented divination. The
overall image is that of an oracle engaged in divination through the use of
the knife on plants or animals. The range of meanings of the character has
52 A. BernArdi
included making, embarking on, cutting and setting up. Later the mean-
ing of the character was extended to doing, arising, building, performing,
playing and reaching (Gu, 2008).
She (): an ideographic and pictographic character. In the ancient
scriptures of the Bronze Age, it represented veneration of the god of the
earth. The character is composed of two parts: on the right, a stone altar, a
place for offerings and sacrifices, and on the left worship combined with the
character for wood. In ancient times, these traits take on the complex mean-
ing of a place of sacrifice to the god of the earth, municipality and agency
(Gu, 2008). Today, the immediate meaning is work unit or social structure.
The place of worship of deities or ancestors in Chinese villages was located
at the centre of the family home or the village itself. For this reason, the
image of the place of worship takes us to the idea of social structure.
While He stands for an attitude (coherence, no conflict, harmony),
Zuo stands for a form of behaviour (to act, to do, to start) and, finally, She
stands for a place where the action takes place (the team, the group, the
community, the small firm). Thus the etymology of the Chinese word for
co-operation invokes images of union, mutual help, realization, society and
community. Such images are fully compatible with the western conception
of the idea of co-operation (Cheng-Chung, 1988). In this model of a firm,
it is the workers and members of the co-operative who are its owners.
It is possible to divide the modern history of the Chinese Co-operative
Movement into three phases: the Republican period (1912-1948), the
Maoist period (1949-1976) and the Contemporary China period (after
Mao’s death in 1976). The Republican period and the Contemporary
China period see a gradual convergence with the international notion of
the co-operative. Maoism has represented a deviation from the western,
or, indeed, international notion of co-operation. The Maoist version of
co-operation, even more than the Soviet one, has instead represented a
discontinuity from the traditional idea of co-operation (MacFarquhar and
Fairbank, 1987, 1992; Bernardi and Miani, 2014).
The history of Chinese co-operation, excluding the primordial forms
of informal co-operation widely present in ancient civilizations world-
wide (in China connected to the management of water for agricultural
purposes), seems to date from the first decade of the twentieth century.
For a long time, the Empire of Japan controlled Manchuria (1931-1945)
G: GunG Ho
and the island of Taiwan (1895-1945), and during this period successful-
ly introduced the co-operative model in agriculture. However, a native
Chinese Co-operative Movement emerged, at the time of the establish-
ment of the Republic of China in 1912. In the early decades of the twen-
tieth century, some Chinese political and social reformers, such as Sun
Yat-sen, the founding father of the Republic, introduced the co-operative
model encountered abroad. This idea met with repression out of fear that
co-operation came hand in hand with socialism. In 1921, the Chinese
Communist Party was founded.
We know that the first co-operatives appeared in 1912 and the first
co-operative bank was founded in 1923 in Hebei Province. We also know
that in 1937 there were over 12,000 co-operatives across 191 counties
(Fairbank and Feuerwerker, 1986). The European co-operative ideals and
practices, once they had arrived in China, were elaborated by local intel-
lectuals; for instance, Xue Xian-Zhou, who theorized a utopian ‘Project of
National Co-operativisation’ (Cheng Chung, 1988).
Between 1928 and 1949, following a financial crisis, the Nationalist
Government of Chiang Kai Shek decided to support the introduction of a
system of credit co-operatives along the German Raffaisen model. During
the era of Chiang Kai-Shek’s Republic of China, Chinese organizations for
the promotion of co-operative firms were established with the financial
and intellectual support of the West. This is the case with the intervention
of the Rockefeller Program and of the missionary devotion of a Christian
philanthropist and social reformer, John Bernard Tayler (Trescott, 1993).
Gung Ho Co-operatives
The oldest co-operative society was founded in wartime, with a set
of values including mutual assistance and the defence of national iden-
tity. This organization, named the Gung Ho, or ICCIC (International
Committee for the Promotion of Chinese Industrial Co-operatives), was
founded in 1938 in Hong Kong, thanks to the inspiration of the New
Zealander Rewi Alley and some other foreigners (intellectuals, journal-
ists, western diplomats, adventurers, bankers, Christian missionaries and
British politicians) and western-educated Chinese (engineers, intellectuals
and the wife of the founder of modern China, Dr Sun Yatsen). Their aim
was to organize the unemployed and refugees to take part in productive
activities in support of the war of resistance against the Japanese invaders.
Gung Ho spread throughout the unoccupied Chinese territories from
54 A. BernArdi
1939 and reached its peak in 1941. Approximately 3,000 co-operatives
were active, with 30,000 members, and produced essential goods for the
population, as well as supplying the front with blankets, uniforms and
other goods for the Chinese army (Cook and Clegg, 2012). The Gung Ho
became the place for the cultivation of ideas and the mobilization of pat-
riotism and independence. Something very similar occurred in Finland.
There, the Pellervo Society and its co-operatives, during the Russian rule
of Finland, were the only associations not prohibited by law. The society
was then a place for the elaboration of co-operative and patriotic ideals.
The Statute of the ICCIC says that the spirit of Gung Ho is to ‘work
hard and work together, helping one another to achieve common pros-
perity’. The organization’s principles are: voluntary organization, self-fi-
nancing, self-government, independent accounting, taking responsibility
for gains and losses, democratic management, with distribution to each
in proportion to their work and dividends in proportion to shares. These
resemble modern western principles of co-operation and recall many
aspects of the ICA Manchester Statement in 1995 (voluntary and open
membership; democratic member control; member economic participa-
tion; autonomy and independence; education, training and information;
co-operation among co-operatives, and concern for community).
The Gung Ho was supported by western individuals, organizations and
government bodies because of its strategic role during the Japanese invasion
and the Second World War (Barnett, 1940). The British Empire and the
USA decided to fund and support the Gung Ho because they recognized
in it a social democratic political and economic alternative to the increas-
ingly powerful Chinese Communist Party (Wales, 1941; Barnett, 1940).
The Gung Ho originally operated in the areas under the control of both
the Communist and the Nationalist armies and was supported by both
Mao and Chang Kai Scheck, though this support was accompanied by a
certain suspicion and they both soon started to express objections about its
foreign-influenced nature (Cook and Clegg, 2012). When Mao gained full
control in Mainland China, he managed to have the activities of ICCIC
suspended. Mao’s ideology did not fit well with the Gung Ho which was an
advocate of democracy, bottom-up participation and industrial rather than
agricultural development (Fairbank, 1998; Vermeer, Pieke and Lien, 1998).
Despite formal support by Mao Zedong, Zhou Enlai, Soong Ching
Ling, Ye Ting and other revolutionary leaders for its contribution to the
cause of Chinese liberation, the ICCIC activities were suspended in 1949.
Other associations of co-operatives, more in line with party ideology and
the institutional developments of China, were established later. Among
G: GunG Ho
those, for instance, the All China Federation of Handicraft and Industrial
Co-operatives was established to serve national planning started in 1950.
Such federations still exist and they have kept a very strong relationship
with the Government.
Co-operatives and Maoism
A very different period begins when Mao enters the stage of Chinese
history (Osinsky, 2010). Even before the establishment of the People’s
Republic of China in 1949, Mao had recognized that it would be neces-
sary to organize production, consumption and credit along co-operative
lines in order to develop a collectivized economy (Keating, 1997).
Maoism took shape during the Civil War and the 1933-1935 Long
March and was put to the test, drawing from Marxism-Leninism and
from the Soviet example, in the remote base of the Red Army in the
middle of China, near the city of Yan’an, where Mao’s revolutionary army
was headquartered. Mao quickly focused his strategy on agriculture rather
than on industry (Teiwes and Sun, 1993) or on the intellectual class.
The number of Chinese co-operatives leaps from 722 in 1928 to almost
169,000 in 1948 (Du, 2002). With the establishment of the People’s
Republic of China, Mao would progressively collectivize the organization
of economic production based on the Soviet model, but going further still
(Teiwes and Sun, 1993). In rural areas – a large part of Chinese territory even
today, and especially at that time – three main types of co-operatives devel-
oped: production co-operatives, distribution and marketing co-operatives,
and rural credit co-operatives (Cheng, 2006; Lynette Ong, 2012).
The escalation of the collectivist ideology began in 1958, with the
launch of the Great Leap Forward. In that long period, several forms of
collective work were deployed in agriculture, industry and services. The
co-operative model was involved in that huge economic, political and
social experiment that peaked in the 1970s but which, as it turned out,
proved dramatically ineffective and inefficient when it came to fulfilling
Mao’s projected goals. The concept of People’s Communes originated
in 1958. By the end of that year, more than 740,000 rural production
co-operatives had been reorganized into 26,000 People’s Communes. The
system would remain fairly stable until the decade of opening-up policies
and reform when new forms of co-operative arose under such names as
‘specialized co-operatives’ and ‘stock-holding co-operatives’ (MacFarquhar
and Fairbank, 1992; Vermeer, Pieke and Lien, 1998).
56 A. BernArdi
An example of how the co-operative model was used by Mao, beside
Soviet-style collectivization, is the so-called Rural Co-operative Medical
Scheme. This was the main provider of health care in rural China until the
late 1970s (Bernardi and Greenwood, 2014). Also in this case, Mao used
the co-operative model ideologically partially to disguise his plans of forced
collectivization and propaganda. During his long rule of China, collectiv-
ized work and production were confused with the notion of the co-operative
firm that had appeared in China before Mao gained power.
Co-operatives in China today
Over the years, very different organizational forms and structures have
been given the label co-operative or collective (see Table 1). The dramatic
institutional transition that transformed the nation at the founding of the
Republic and later of the People’s Republic, through Maoism, the Cultural
Revolution, the opening-up policies, to the most contemporary reforms, has
entirely altered the legal framework and the very notion of the co-operative
in China (MacFarquhar and Fairbank, 1987, 1992).
Table 1
institution sector Period cHArActeristics
Gung Ho Co-operatives Manufacture 1938-49
Small scale, voluntary membership,
individual investment in the equity
and individual incentives.
Mutual Aid Team Agriculture 1949-55
Up to 5 families, voluntary
membership, individual ownership
of land.
Elementary Co-operative Agriculture 1955-79 Up to 30 families, voluntary
membership at the beginning.
Advanced Co-operative Agriculture 1955
No individual ownership of means
of production, no voluntary
People’s Commune Agriculture 1958-78
Up to 5,000 households originally,
than 30 families, no voluntary
Supply and Marketing
Agriculture and
From 1954,
reformed in
No voluntary membership until
reform. 15 and then 30 years lease
of land to farmers, individual
responsibility on productivity and
G: GunG Ho
Technology Association Agroindustry
and distribution From 1980s Focused on technological
Household Responsibility
System Agriculture From 1981 Voluntary membership. Individual
responsibility and rewards.
New Rural Co-operative
Medical Scheme Health-care From 2002 Voluntary membership.
Specialized Farmer
Consortia and
Agroindustry From 2007
Individual lease of the land for a
medium to long period. Small and
multi business.
Maoist variants are examples of deviation from western principles. Over
time, efficiency, responsibility and incentives that were originally individual
became collective. The average dimension of the collective grew and volun-
tary membership disappeared. The most recent forms represent a return to
the original characteristics: small scale, individual participation and incen-
tives (Keating, 1997; Xiangyu, Schmit and Henehan, 2008). The co-oper-
ative societies that today represent China at the International Co-operative
Alliance, however, are not small at all. They are giants with millions of
members and employees and very close relationships to government bodies.
The Gung Ho society still exists and is also a member of the ICA but of
minor importance compared to other Chinese organisations.
Despite some historical problems and some contemporary uncertain-
ties, the co-operative movement has certainly proved to fit with Chinese
institutions and local contingencies and it might prove especially useful
to help face the transformations that contemporary China is undergo-
ing, particularly in dealing with social and economic inequalities and
sustainable development. The Chinese Government and Legislature have
recently (in the 12th Five-Year Plan and in the 2013 meetings of the
National People’s Congress) defined such challenges and, in some cases,
have explicitly mentioned the co-operative firm as a tool that might help
to address them. The memory of forced collectivization and limits placed
on the growth of a proper civil society are far from helpful to the revival of
co-operation in China. However, notwithstanding a very heavy historical
legacy and some contemporary institutional constraints, a bright future is
possible and desirable for the Chinese Co-operative Movement.
58 A. BernArdi
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