research is the lack of proper analysis of the interplay between the economy and the state or companies and state institutions on different geographical and administrative levels and in informal networks. On the one hand, as I will demonstrate, market-centric approaches result in biased analysis of China’s reform. Thus, predictions of an abrupt transition from the “plan” to the “market” proved to be flawed in light of the adaptability of state developmental regulation. Despite the transfer of functions from government agencies to companies and the dismantling of binding plan targets in favor of more indicative planning and market-led allocation, China can hardly be described as a liberal market economy. On the other hand, state-centric approaches attribute China’s leadership with a degree of foresight and capacity to control that can in no way be reconciled with the anarchic reality of the Chinese reform process. This, albeit perhaps inadvertently, also correlates with the political leadership’s self-perception. It is possible that the legacy of elite-centric totalitarianism research has thereby contributed to a stark contrast between the state and the economy and, in a wider sense, also society where the government is understood as an external regime rather than a social actor (see Fewsmith 2008).
The present work maintains that in order to analyze economic dynamics, we need to refer back to the interdependencies and overlaps between the economy and the state, which, during the course of reform, created close alliances between private actors and (local) government elites. For this reason, capitalist development in China (and elsewhere) cannot be seen as synonymous with markets and private enterprises. In certain phases of capitalist development and with some forms of capitalism, strong political steering plays a particularly important role, which may largely be determined by the drivers of capitalism. Further, political actors can, in certain situations, resemble market actors—particularly when they only have to devote themselves to managing redistributive functions to a limited extent because, for instance, social rights and civil society space is restricted or the social balance of power permits this. In this context, China research refers to the “entrepreneurial” state, “local state corporatism,” and similar structures. In addition, the legal and de facto power of control over the means of production in China are diverging to the extent that legal owners are ceding control, partially or fully, to other actors. In contrast to hypotheses harnessing actors’ preferences to their institutional form (to the “public” state sphere or “private” market sphere, for instance), I present an alternative explanation. I propose that the embedding of political actors in a broader capitalist system, while not determining all the preferences of these actors—state institutions have different criteria for reproduction than companies, and they also have differing development mechanisms—does have a powerful impact on them.
Bearing this in mind, I will later pose the question whether and to what extent a public-private hybrid regime and novel state-capitalist forms constitute an overarching dimension of Chinese capitalism reflecting the drivers of global capitalism and specific national and regional characteristics.9 In a subsequent step, I explore the different mechanisms and strategies of state intervention and regulation in the Chinese system of multilevel governance, that is, the existence of many centers of power below the central government level, and of heterogeneous production regimes in the economy. Here I concentrate on the changing relationship between indicative or market-creating and imperative or market-restricting forms of political regulation. The objective of this approach is to examine the extent to which the new Chinese capitalism differs from coordinated or dependent varieties and other state-permeated forms of capitalism (see May, Nölke, and ten Brink 2013).
(2) A virtual absence of civil society and democratic conditions has led to the development of extremely unequal power relations in China. The workers have virtually no opportunity to participate. This has resulted in imperfect and fragmented coordination in the labor and employment systems. Any comprehensive analysis of the Chinese development process should incorporate this frequently neglected level of action. The last few decades have seen the emergence of an important body of literature on this. Drawing on, inter alia, corporatism research in industrial sociology, this literature examines the socioeconomic consequences of the relative powerlessness of the subordinate groups, as well as their sporadic empowerment (see Y. Cai 2010; A. Chan 2001; K. Chang, Lüthje, and Luo 2008; Friedman 2011; C. Lee 2007; Lüthje, Luo, and Zhang 2013; Perry and Selden 2003).
Finally, it is important to establish in this context whether the partystate generates sufficient social cohesion not only to foster a close alliance between the political and economic power elites but also to integrate the subordinated classes and to channel expectations of upward social mobility, or whether there is an indication of the limitations of China’s model of subordination and of social counter movements.
From a methodological perspective, my analysis is based largely on studies of secondary literature. In the empirical sections of the study, I also analyze specialized economic literature and statistics including from the National Bureau of Statistics of China. Additionally, I incorporate findings from the numerous research and conference trips I made to China during the period from 2008 to 2016, visits to private and state-owned (Chinese and foreign) companies, and discussions with Chinese academics. As a partner in a research project conducted by the Frankfurt Institute for Social Research (coordinated by Boy Lüthje and funded by the German Research Foundation, DFG), I was also able to participate in several interviews with company and labor union representatives and members of nongovernmental organizations (NGOs).
To provide a historical account of China’s socioeconomic dynamics, I use qualitative content analysis (see Hall 2008). Here, I combine empirical-historical analysis and theoretical generalizations in a way that “does not [seek] to identify statistical correlations between variables but rather attempts to find an explanation for unclear macro-phenomena by identifying the processes and interdependencies contributing to their occurrence” (Mayntz 2002, 13, my translation). In short, I reconstruct and systematize historical developments using a theory-based approach.
Main Hypotheses
To address the three research questions outlined at the beginning, I formulate the following hypotheses. These focus on the principal features of China’s socioeconomic system (1a and b), on the key dynamics shaping this system (2a, b, and c), and on the current, at times paradoxical, lines of development (3a and b).
(1a) China’s political economy is a competition-driven form of state-permeated capitalism with a heterogeneous internal structure. From the end of the 1970s onward, it was selectively integrated into global economic processes and consequently impacted by the phase-specific process of liberalization. Contemporary developments in China are therefore fundamentally based on the drivers of capitalism observed in other processes of modernization yet, in many respects, have also taken on their own distinctive form. As the somewhat cumbersome expression variegated state-permeated capitalism10 suggests, the party-state in China does not retreat from liberalization and marketization tendencies but has contributed and is continuing to contribute to the establishment of a new type of capitalism.
(1b) In this respect, the party-state itself is an integral part of Chinese capitalism and should be treated as such in our analysis. In order to acquire an understanding of China’s political economy, the importance of the drivers of capitalism in China’s public-private system of multilevel governance must therefore be borne in mind. Here, there is evidence of distinctive forms of capitalism, such as local state-permeated capitalism. This is defined by (local) state and private entrepreneurs and characterized by the coexistence of competition and planning as well as nonmarket institutions, which, at the same time, are themselves also subject to competition. Considerations stemming from state theory and CPE, of the actual cross effects of institutions that are built (at least at first glance) on less than solid foundations give us a clearer view of the aforementioned types of capitalism. Further assumptions, linked to the institutional basis and contextual conditions of market expansion, focus on other distinctive characteristics of the PRC. Examples of this are a less stringent interpretation of contracts in contrast to strictly enforceable rules in the West and the significance of informal networks and consultation between the political
