Flexible Rules Archives - understand-culture

Red-Hat Enterprises

A private firm in China that registered as a collective or state enterprise was said to wear a hong maozi, a “red hat.” In a common form, the owner attached the firm to some unit or enterprise, took out a collective business license and paid a management fee. That unit did not touch the money or the running of the business.

In 2005, Dai Yuanchen wrote in the journal Southern Economy that the red hat was a countermeasure “forced by discrimination by ownership.” With it, a firm had political protection, found it easier to get things done and could enjoy certain advantages.

The Sina Model

In 2000, the internet portal Sina listed its shares in the United States. Its control over the business in China rested on contracts, not on ownership. Chinese lawyers call such a structure xieyi kongzhi, “control by agreement,” or the “Sina model.” The other name, VIE, for variable interest entity, comes from American accounting rules.

The law firm Zhonglun explains why it spread. China restricted or banned foreign investment in fields such as the internet, the news media and education. The American SEC and the Hong Kong exchange accepted the structure, so it became an important route for Chinese companies to list abroad.

Gaokao Migrants

By the rules, students sit the gaokao where their household registration is. Admission rates differ widely by province. In 2013 and 2014, more than 20 percent of candidates in Beijing, Tianjin and Shanghai were admitted to first-tier universities. In thirteen provinces, the rate was 6 to 10 percent.

Some families move a child’s school or household registration to a province with a lower cut-off. Such students are called gaokao yimin, gaokao migrants. In 2016, the Ministries of Education and Public Security ordered strict action against them. Of 84 court judgments on gaokao cheating from 2012 to 2015 found by the Procuratorial Daily, 27 were migrant cases.

The First Land Auction

On December 1, 1987, Shenzhen auctioned the right to use a plot of land, the first auction of land use rights in the People’s Republic. The plot measured 8,588 square meters. The right ran for 50 years and sold for 5.25 million yuan.

On April 12, 1988, the National People’s Congress amended the Constitution to say that “the rights to use land can be transferred in accordance with the law.”

Policies Above, Countermeasures Below

上有政策，下有对策: “There are policies above, and countermeasures below.”

Xi Jinping has drawn a line against it. Leading officials, and above all the “number ones” of Party and government, he said, must “never be allowed to practice ‘policies above, countermeasures below,’ and still less selective implementation.” People’s Daily quoted the sentence in June 2026.

Collusion at the Grassroots

In a study titled “The Phenomenon of Collusion Among Grassroots Governments,” the sociologist Zhou Xueguang describes how local governments deal with the policies and inspections of their superiors. They use all kinds of means of “policies above, countermeasures below.” Collusion among grassroots governments, he writes, has become “an institutionalized form of informal behavior.”

Zhou also notes that some of these practices have been “an important source of institutional innovation.”

The Vocabulary of Countermeasures

走过场 To cross the stage. In Chinese opera, a role that enters and leaves at once. Figuratively, to do something only for the form.

钻空子 To drill into the gap. To use a loophole or an opening.

打擦边球 To hit an edge ball, as in table tennis. To bend the rules. In 2025, the Party’s website quoted Xi Jinping: “Many leading officials start by hitting edge balls, breaking the Eight-point Regulation, and in the end it becomes a big problem.”

土政策 A homemade policy. Rules and decisions that a locality, office or enterprise makes on its own.

Tutoring Goes Underground

In July 2021, the “double reduction” policy forced tutoring companies for school subjects to become non-profit organizations. A year after the policy, many small tutoring businesses had moved underground.

On December 13, 2022, the Ministry of Education and eleven other departments issued an opinion against “hidden and variant” subject tutoring. Recruitment and tutoring websites were barred from posting tutoring jobs, and advertising tutoring to primary and middle school students was banned.

The Vocabulary of Flexibility

变通 To adapt. To act according to the actual situation, not bound by convention. The word is old. The Book of Changes says: “Nothing changes and gets through more than the four seasons.”

通融 To make an exception for someone. To stretch the rules as a favor.

合情合理 To accord with feeling and with reason. The everyday word for “reasonable.”

The Xiaogang Pact

On a winter night in 1978, dated by Chinese Wikipedia to November 24, eighteen farmers in Xiaogang village, Anhui, signed a pact at great risk to contract the collective land to households. Each pressed a red fingerprint on a worn, creased sheet of paper. The members also promised to raise the leaders’ children until the age of 18.

In 1979 Xiaogang had a record harvest of 66,000 kilograms of grain, equal to its total from 1966 to 1970.