and nationalization tendencies—it must be assumed here that, since the 1970s, inter- and transnational integration has gained ground. The question then arises to what extent this has affected the development of China, a country that has a (potentially) extremely large domestic market and a government that, for a long time, had an interest in restricting or steering international influences.
Interim Conclusion
Finally, I will now reiterate the key points shaping the analysis that constitutes the main part of the present work. The following analytical strategy can be formulated to address the three key research questions: (1) the predominant features of China’s political economy, (2) the fundamental driving forces and dynamics of the reform process and the subsequent rapid growth, and (3) the current lines of development and paradoxes inherent in the growth path.
First, I have integrated drivers of capitalist development into my research framework. In the following, I will examine to what extent these driving forces came into play in China, and in what way, and to what extent they contributed and still contribute to the country’s modernization. Here, the analysis of links between state, economy, and other societal actors aims not only to provide insights into the structure of China’s political economy but also explanations for the relative consistency of the political status quo and indications of its potential for destabilization. I expect to identify plausible explanations by incorporating an analysis of close alliances between companies and government bodies as well as of the segmentation, segregation, and subordination of the working population.
My objective here is for my analysis to have a transnational focus because varieties of capitalist development do not unfold counter to the global market but rather with and within it. In other words, the trajectory of reform in China’s history can be adequately and convincingly described only by taking into account its integration in inter- and transnational processes, not least because the PRC was able to profit more than any other large country from favorable global economic circumstances.
Second, the strong assumption of universally applicable drivers of capitalism (manifested differently during different historical phases) has been relativized using approaches from action theory. My research framework has, to all intents and purposes, been historicized: capitalist dynamics in China encountered and continue to encounter preexisting social arenas and sociocultural traditions that lend the country’s political economy a distinctive form. These factors are studied in the main body of the present work and integrated into the notion of interrelated types of capitalist-driven modernization. With a view to the conflictual interplay characterized by power imbalances between the three key groups of actors (entrepreneurs, state actors, and workers), I will describe the dynamics and paradoxes of Chinese development.
Third, on the basis of these key assumptions, I have introduced a series of tools that serve the further analyses. In an attempt to gain an insight into the effectiveness of capitalist driving forces in specific institutions, I combine political economy analyses on the dynamic and crisis-ridden expansion of markets with empirical findings from China studies. This enables me to identify different and, in some cases, distinctive forms of politically integrated entrepreneurship, of competition also occurring in noneconomic institutions, and socioeconomic development trends. At the same time, going beyond a one-sided (neo-)Schumpeterian understanding of the individual entrepreneur’s capacity for innovation, I refer to underlying institutional and organizational conditions provided, inter alia, by the government.
The distinction between five different dimensions of capitalist systems is also useful for a systematic study of the drivers of capitalism in China. With regard to the five dimensions listed—the sphere of the “horizontal” competitive relationships between companies, the “vertical” axis of industrial relations, the interactions between economic and political actors, the financial system, and, finally, the sphere of transnational integration—I will seek to establish whether and how capitalist dynamics emerged at these levels in China and play a dominant role. I will also explore possible complementarities between these spheres and cross effects between institutions that improve economic efficiency.
The tools for examining gradual institutional change serve in particular to provide us with an insight into the significance of informal institutions and negotiation processes in China, the reforms of the party-state, and the phenomenon of circumventing formal regulations (for instance, with regard to comprehensive enterprise reforms).
The assumption of unequal and heterogenous, combined and interlinked developments in capitalist-driven modernization processes is useful for examining unstable dynamics in China. An attempt will be made to substantiate the idea that heterogeneous production regimes, business types, and state policies were not only beneficial for economic development but simultaneously triggered unintended, paradoxical consequences.
Findings from state theory prove invaluable in my analysis of political reform strategies in China’s multilevel system of governance and to explain the adaptive capacity of the party-state, and limitations of political steering. It is thus possible to distinguish between various forms of state intervention and regulation, for instance, market-creating, market-regulating, and market-restricting measures. In addition, based on the assumption of a differentiation between market and state actors in modern societies, using findings from recent China research, further specific features of the political in China’s political economy can be mapped out. These features include the behavior of political actors, in which the latter directly perform entrepreneurial functions, and the relevance of local pilot projects for accelerating the reform processes.
Finally, tools from sociology facilitate an analysis of China’s segmented industrial relations and the phenomenon of labor market segregation.
In the main body of the present work, I will be unable to provide a sufficiently in-depth analysis of capitalist development in China or a satisfactory examination of all the theoretical considerations introduced in this chapter. However, I also see my research framework as groundwork for further empirical research that, by focusing on the case of China, might contribute to an expanded version of a theory of capitalism.
CHAPTER 2
From Mao to the Hu/Wen Era
The Origins and Trajectory of Capitalist-Driven Modernization
With the help of my research framework, I will now analyze the nature of Chinese modernization and assess to what extent and in what form drivers of capitalism can be determined in the areas examined. The focus of the present chapter is the period of reform from the 1980s into the 2000s. First, however, I will describe the background to the transition under Deng Xiaoping, that is, the key historical features of China’s political economy from the 1930s to the 1970s. In contrast to more nationally oriented accounts, already at this early juncture, I also describe international factors that had a significant impact on the development and transformation of the Maoist model.
Protocapitalism: The Historical Background to the Transition Under Deng
The beginning of the process of reform at the end of the 1970s saw the government of the PRC facing the almost herculean task of restructuring a country with a billion inhabitants without undermining its social stability. This huge challenge was further complicated by the severe social crisis faced by the party and state leadership in the aftermath of the Cultural Revolution. It was this very crisis that left the leadership no alternative but a precarious attempt at fundamental reform.
In the following section, I will summarize the key characteristics of the classical Maoist stage of development. Here I discuss continuities with Deng’s later restructuring, which is often prematurely referred to as the “new Chinese revolution” (Pei 1994). This section demonstrates that it is also
