described as a major shift from a command or planned to a market economy, with a distinction being made between liberal rationalist (Nee 1989; Sachs and Woo 1999) and institutionalist theories (Guthrie 2002; McMillan and Naughton 1996). Both approaches frequently refer to the debate that materialized after the collapse of the Eastern Bloc. This debate, which centered on the question of how to transform a command economy into a market economy, had both political and practical ramifications.
While neoliberal authors recommended that Eastern European transition economies take a “big bang” approach based on the premise that the new cannot evolve within the framework of the old, the selfsame authors declared China to be a special case that quite clearly did not follow these political recommendations. For this reason, China was able to grow only because the initial conditions there were more favorable than those in former Eastern Bloc countries. In terms of prospects, a slowdown in growth and considerable instability was expected in China (see, for example, Sachs and Woo 1999). In addition, the lack of clearly defined property rights and state bureaucracies’ interference in corporate processes were seen as the main obstacles preventing the smooth transition to an efficient market economy (D. Yang 2004, 11–12).
By way of contrast, institutionalist authors drew attention to innovative entrepreneurship that did not necessarily manifest itself in the form of abrupt privatization. These authors recommended linking the old with the new, proposing an institutional framework that fosters entrepreneurial risk and establishes trust. Taking into account socioeconomic points of view, authors focused on the effectiveness of existing institutions as well as on path dependencies that affect the development of new markets in China (Guthrie 2002, 8–11, 22–23). Other authors (Wank 1999; M. Yang 2002) referred to the tradition of frequently informal network relationships (guanxi).
Another slant on this can be found in comparative research on post-communist transition countries (see Pickles and Smith 1998). King and Szelényi, for example, employed a class theory method to develop three key models for the formation of new capitalist systems in former “state socialist” societies. The first model uses a capitalism-from-above approach, which is essentially the attempt by the former state and party elite, in Russia in particular, to create a market system based on neoliberal concepts and within the framework of large-scale privatization schemes. The second model described by King and Szelényi is capitalism from without, as seen in Hungary, for example, where foreign investors played a dominant role. The third model—capitalism from below—refers to a new indigenous corporate class that emerged even before 1989 and gradually increased its influence; this model was particularly pronounced in China. By the end of the 1970s, the technocratic staff, including managers, had reached a hegemonic position without ousting the old party officials; an alliance between these two class groups determined the country’s social development from that moment on. The gradual reforms and increasing openness toward direct foreign investors then led to the development of a new type of capitalism in the PRC (King and Szelényi 2005, 220–22; see Eyal, Szelényi, and Townsley 2000).
This undirected experimental dynamic from below also formed the basis for another debate that will now be briefly outlined.
Innovative Entrepreneurship and Marketization
In order to attempt to understand the paradox of unleashing market forces amid a communist-run country, market- or corporate-centered approaches describe the advent of a new entrepreneurship as the essential catalyst for change. The prerequisite for successful growth was and still is, first and foremost, the creative entrepreneur. Accordingly, creative entrepreneurship had found a new home—particularly in parts of rural China of the 1980s—and was rapidly spreading to the cities (see, for example, Yasheng Huang 2008).
In line with this, China’s rigid political system was seen as incompatible with the needs of a market system. China experienced two diametrically opposed development logics—political power and control logic versus economic growth and profit logic. With regard to the resultant development trends, either an inevitable democratization (Rowen 2007) or a collapse of the system (Pei 2006) has been and indeed continues to be predicted (for an overview of this, see Heberer and Senz 2009). In the case of democratization, this would lead to the development of a market economy with liberal characteristics akin to those found in other parts of the world. Especially in recent political economy studies, however, this forecast is justifiably challenged, as shown below.
The Debate over the Adaptive and Regulatory Capacity of the Party-State
A number of studies emphasize the need for a proactive central government and/or subnational political authorities in order to achieve a favorable growth path (see Heilmann 2008, 2009; A. Hu 2010; C. Lin 2006; Perry 2007; D. Yang 2004; Zheng 2010). The Chinese party and state elite is regarded as a pragmatically forward-thinking political power that—similar to the case in other developmental states in East Asia—acts as a driver of modernization.4 Seen from this perspective, the authoritarian system in China, which still leaves the elites with some freedom for debate, is regarded as a highly beneficial political driver of economic development. In addition, a relationship structure developed that triggered competition between the political authorities that were subordinate to the central government, boosting economic growth (Oi 1995; see also Montinola, Qian, and Weingast 1995). According to China researchers, the post-1970s party-state had the extraordinary ability to adapt to an ever-changing environment. In the unfolding reform process, moreover, orientation toward national sovereignty was of the utmost importance, as was state control over key areas of the economy and public infrastructure planning.
For this reason, the proposition that China was seeing the emergence of a type of “crony capitalism,” which, as in other developing and newly industrialized economies, encumbers economic growth, has been challenged. On balance, the political leadership’s capacity for learning and adapting in fact helps stabilize the system. Accordingly, party rule is expected to remain in place, albeit by merely “muddling through” more than anything else, even as the process of market expansion continues.
In the course of the present work, repeated reference will be made to these studies. However, I believe they tend to have shortcomings that imply the existence of market/state dualism. While the policy-centered approach indicates that the Chinese government has an astute capacity for foresight—something that does not appear congruent with the anarchic reality of the Chinese reform process—the market or corporate-centered approach (introduced above) is too one-sided in its description of the forces at play in the reform processes. Moreover, the continuing legacy of elite-centered research on totalitarianism may well reinforce the abrupt juxtaposition of state and economy, and, by extension, society, where the state still is largely seen as an external regime of control and not as an actor in society (see Lieberthal 1995, 292–304).
Before addressing this problem in more detail, however, allow me to touch on another discourse that explores the character of the Chinese economy.
China as a Socialist Market Economy and/or Hybrid Model
Until very recently, the prevailing system in China was seen as a form of socialism known as Maoism. In the early 1990s, once even the Chinese government began officially speaking of the transition to a socialist market economy, cracks appeared in this argument. With the party continuing to play a commanding role and areas of the economy remaining in state ownership, however, some authors continue to assume the foundation of the noncapitalist society to be relatively intact (N. Lin 1995; Robins 2010). This was in line with the official position of the Chinese government. Some authors even agree with the government’s belief that the policy of opening up and marketization are transitional stages toward more developed forms of a socialist society and democracy (see Itoh 2003; X. Li 2008).
However, even authors who employ theoretical tools that show a market socialist society to be conceivable in an ideal-typical scenario remain skeptical about these assumptions (Lippit 1997). One line of criticism is that in none of the existing Chinese business types do the workers have more democratic powers than those
