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      Analyzing China’s Political Economy

      In this chapter, I introduce an approach to analyzing China’s political economy on the basis of the current state of the art. I begin with a broad outline of the relevant discourse in China studies and insights, gaps, and desiderata. In the second part of the chapter, I outline my own research framework.

Insights, Gaps, and Desiderata in China Research

      This section provides an overview of relevant traditions and discourse in China research over the past few decades. These yield substantive findings but, at the same time, also exhibit gaps and desiderata. Here I focus on studies from the social sciences and only refer in passing to authors in related disciplines.

      In Western social sciences, for many years, the debate about the People’s Republic of China (PRC) mostly was part of the analysis of actually existing “socialist” systems. (A concise overview of the historical development of the relevant theories is provided by Stark and Nee 1989; Scharping 1988.) During the early Cold War era, China was primarily analyzed on the basis of theories of totalitarianism, whereas since the 1980s, institutionalist studies shaped the field.¹

      After World War II, approaches based on theories of totalitarianism dominated. These focused particularly on the communist ideology, on the importance of individual leaders, and on the concentration of power in the Maoist Communist Party (see, for example, Lewis 1963). China was viewed as the antithesis of Western-style liberal democracy. Reflecting this, economists depicted a stark contrast between a decentralized market economy and a centrally planned one. Their objective was to construct a clash of ideologies that was politically expedient during the Cold War era. In slightly simplified terms, the studies frequently culminated in the following elitecentric proposition: equipped with almost absolute power and having eliminated autonomous social spheres, a bureaucracy steered by a party apparatus was able to succeed in controlling Chinese society as it saw fit. However, because these assumptions threatened to hypostasize the one-party rule into a stable unchallenged regime and, to a large extent, ignored the CCP’s internal conflicts or social resistance, the hypotheses based on theories of totalitarianism tended to draw rather inaccurate conclusions (for a critical account, see Dreyer 1996, 7–21; see also Shue 1988; Walder 1986).²

      In the 1980s, institutionalist approaches took on a certain appeal.³ These theories, which are in contrast to efficiency theory schemata, increasingly took recourse to the institutional contexts of political or economic behavior. In state socialist systems, change was found to be driven by forces beyond the control of the state. The focus here was on examining the charged relationship between state and society. The objective was to be able to define political conflicts and socioeconomic development trends (Xie 1993) or, for example, to pinpoint internal corporate negotiation processes in “communist” enterprises (Walder 1986) by refining overly simplified assumptions of the existence of fixed corporate despotism. Action taken by the state is thus seen within the context of state/society relations in order to shift the focus more toward the processes and conflicts that are inherent in state action (Derichs and Heberer 2008). Accordingly, China can be examined using similar instruments to those that have long since been widely applied to the analysis of Western societies or countries of the Global South.

      From the 1990s to date, many different authors have published empirical studies that, in one form or other, picked up on these traditions. Also presented here are certain discourses that were instrumental in providing important insights but also exposed unresolved problems in research on China.

      From Command to Market Economy: Discourses in Transformation Research

      The transformation process in China has generally been 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

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