A variety of capitalism...with Chinese characteristics?

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Journal of Economic Geography 13 (2013) pp. 357–396
Advance Access Published on 24 January 2013
doi:10.1093/jeg/lbs058
A variety of capitalism . . . with Chinese
characteristics?
Jamie Peck*,y and Jun Zhang**
Abstract
The ‘varieties of capitalism’ framework represents an influential methodological
innovation in the field of comparative political economy. It seeks to account for
enduring spatial variations in national economic performance by recourse to
macroinstitutional analysis, drawing ideal-type distinctions between liberal market
economies, modeled on USA, and coordinated market economies, modeled on
Germany. Moving beyond critiques of varieties literature—for instance, its methodological nationalism; its preoccupation with limited, formal registers of (national)
institutional variety; its growing reliance on rational-choice, firm-centric methods; its
failure to account for the pronounced interpenetration and mutual dependence of
capitalist economies and its tendency to privilege typological elaboration over causal
explanation—this article explores the critical (counter?) case of Chinese capitalism. It
considers the extent to which the Chinese economy can be meaningfully characterized
as capitalist; the character of its state form and recent development path and its
position within—or beyond—conventional understandings of capitalist variety.
Keywords: Varieties of capitalism, Chinese capitalism, variegated capitalism, socialist state,
developmental state, Karl Polanyi
JEL classifications: P10, P17, P21
Date submitted: 24 June 2011 Date accepted: 21 November 2012
1. Introduction: capitalist variety and its limits
[E]very transition to capitalism has produced a new variety of capitalism [. . .] China may be
creating its own model of development . . . forging a new way to produce economic growth
(Fligstein and Zhang, 2011, 47, 59).
[W]hat one learns about a society presented as a negative case should always be viewed
cautiously . . . [But] what makes China China cannot be learned from a theory about Europe
(Hamilton, 1985, 188).
Adjudicating between ‘local’ forms of capitalism has long been one of economic
geography’s staple concerns. With a handful notable exceptions, however, the field has
not been especially active in the vibrant debate around ‘varieties of capitalism’ (VoC),
which has been a productive program of heterodox economic scholarship for two
ß The Author (2013). Published by Oxford University Press. All rights reserved. For Permissions, please email: [email protected]
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*Department of Geography, University of British Columbia, 1984 West Mall, Vancouver, BC V6T 1Z2,
Canada
**Department of Geography, National University of Singapore, 1st Arts Link, AS2 #03-01,
Singapore 117570
y
Corresponding author: Jamie Peck, Department of Geography, University of British Columbia,
1984 West Mall, Vancouver, BC V6T 1Z2, Canada. email [email protected]
358
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Peck and Zhang
1
Tellingly, Amable identifies five types of capitalism, according to their institutional forms and
complementarities—the market-based, the social-democratic, the continental European, the
Mediterranean and the Asian models. Given that the social-democratic model is essentially
Scandinavian, this means that: ‘Except for the market-based model . . . all other types of capitalism
have a geography-based denomination. This is for the sake of simplicity and should not be taken too
literally. It does not mean that geographical or ‘‘cultural’’ factors are the most important factors or
explain the coherence of different types of capitalism’ (Amable, 2003, 14).
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decades, despite a series of potentially productive theoretical and methodological
affinities (see Christopherson, 2002; Bathelt and Gertler, 2005; Clark and Wojcik, 2007;
Peck and Theodore, 2007; Dixon, 2011). While this conversation is now belatedly
underway, it is happening at a time when increasingly searching questions are being
asked about the explanatory reach and capacity of the VoC framework itself. Some of
this reflects endogenous analytical limits, including an apparent proclivity, within the
VoC project, for selective forms of firm-centric and parsimonious reasoning, coupled
with the continued privileging of a restricted number of institutional domains, in scalar,
functional and geographical terms. But there are also new challenges emanating from
the material and interpretive worlds within which these theories circulate. The once
orderly universe of ‘national capitalisms’ has hardly been obliterated, but it has
certainly been complicated, and maybe even transformed, by inter alia, deepening
global economic integration, coupled with intensely uneven spatial development;
hegemonic humbling, in the wake of the global financial crisis; the lurching advance,
failure and reorientation of transnational neoliberalization and divergent trajectories of
growth and restructuring in different parts of the global system. Among the most
dramatic developments has been the extraordinary economic ascendancy of China as an
economic superpower. Forecast by some to overtake USA in total GDP as soon as
2019, China has achieved what Stiglitz has called ‘probably the most remarkable
economic transformation in history’ (2006, 1).
China, however, has been a white space on the map of the VoC debate, scarcely
warranting a mention—even as an external threat—until quite recently (cf. Hall, 2007;
McNally, 2007; Witt, 2010; Fligstein and Zhang, 2011). In fact, there is a continuing
debate over whether the Chinese economy can even be considered to be functionally
capitalist (Arrighi, 2007; Meyer, 2011), let alone its own ‘variety’ or some new-found
variant of the already polycentric Asian model (cf. Amable, 2003).1 Beyond this, critical
observers remain divided over whether China should be celebrated as a bulwark against
neoliberal globalism (Silver and Arrighi, 2000) or condemned for executing an
unforgiving ‘capitalist restoration’ (Hart-Landsberg and Burkett, 2004, 9). The meaning
of the Chinese ‘model’ often lies in the eye of the beholder: while Arrighi (2007) was able
to determine post- or alt-capitalist possibilities in China, the Economist (2011, 79, 81)
was until recently dismissive of claims that the country’s development might represent an
‘object lesson in state capitalism’, in favor of an affirmation of its own worldview, that
‘China’s remarkable success [is attributable to] an odd and often unappreciated
experiment in laissez-faire capitalism’. Qin (2008), on the other hand, maintains that
‘China’s rampant state-dominated, welfare-lite capitalism could so undercut competitors
that it could threaten the social democratic traditions that underpin the West’. The
venerable defender of economic orthodoxy has since reluctantly come around to this
view. The Economist (2012b, 4) now acknowledges that what it calls ‘state capitalism is
the most formidable foe that liberal capitalism has faced to date’. The magazine
A variety of capitalism . . . with Chinese characteristics?
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359
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subsequently announced that from January 2012 it would devote a weekly section to this
inscrutable pretender—the first since it added regular coverage of USA in 1942—on the
grounds that ‘China is now an economic superpower’, even as it continues to be
‘governed by a system that it out of step with global norms’ (Economist, 2012a, 9).
Even in the monochrome world of VoC scholarship, in which varieties of capitalism
tend to cluster around the two poles of a single continuum—running from US-style
‘liberal market economies’ (LMEs) to German-style ‘coordinated market economies’
(CMEs)—recent explorations of the Chinese model have resulted in divergent
conclusions. Witt (2010) carefully weighs each of the VoC approach’s principles of
analytical pertinence before concluding that Chinese capitalism ‘looks more like a LME
than a CME’ (with the notable exception of its sui generis financial regime). Meanwhile,
Fligstein and Zhang’s version of the same thought experiment leads them to ‘safely
reject’ parallels with US-style LMEs, in favor of an historically unprecedented
configuration of CME-like ‘organized capitalism’ most closely related to. . . France!
Hence, the far-reaching challenges involved in attempting to visualize China through
the analytical lens of the VoC approach, given that this generalized framework for the
understanding of capitalist diversity was developed exclusively in the context of
‘advanced capitalist nations’ and more specifically by the contrasting post-World War
II experiences of USA, Germany and Japan (Hall and Soskice, 2001a). And since
neither capitalism nor advanced capitalism is apparently what it used to be, one might
also ask whether the framework itself has become a Eurocentric relic—maybe even
another victim of the Chinese economic ascendancy?
Taking the VoC framework to perhaps its most ill-fitting global site, that of
contemporary China, consequently represents more than an empirical exercise. It has
the potential to be theoretically generative, in the sense that the Chinese case raises
distinctive challenges for the style of methodologically nationalist, firm-oriented,
boundedly comparative political economy practiced under the VoC banner, troubling
settled understandings of both ‘variety’ and ‘capitalism’ along the way. More positively,
engagement with such cases might provide a means to further articulate emergent
approaches to ‘variegated capitalism’ in economic geography (Peck and Theodore,
2007; MacKinnon et al., 2009; Dixon, 2011). These remain somewhat inchoate, since
the label applies not so much to an alternative paradigm to the VoC tradition, more an
ongoing attempt to codify and sharpen extant methodological practices in economic
geography. Variegated capitalism approaches work with the following methodological
sensibilities: first, they embrace multiscalar rather than monoscalar forms of analysis;
second, they place more emphasis on contradiction and disjuncture than on nationally
scaled institutional coherence; third, they utilize relational perspectives, emphasizing the
mutual interdependencies between ‘local’ economies over endogenous logics and
separatist treatments; fourth, they explore cross-cutting and connective processes, such
as neoliberalization, not only as carriers of convergence tendencies but in the context of
combined and uneven development and fifth, they endeavor to reach into
more-than-capitalist worlds while at the same time confronting the ecological
dominance of neoliberal globalism (see Peck and Theodore, 2007; Sheppard, 2011;
Jessop, 2012). While this entails some divergences with VoC orthodoxy, on the other
hand, emergent approaches to variegated capitalism share with this tradition a concern
with the macro geographies of capitalist transformation, with path dependency
(understood dynamically) and with the enduring roles of institutions and institutionalization—suggesting some bases for continuing conversation.
360
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Peck and Zhang
2. Registers of capitalist variety: a Chinese exception?
Characterizing Chinese capitalism is much more than a ‘taxonomical question’, as
Szelény (2010, 208) has correctly pointed out. More than some local anomaly, the scale
and dynamism of the Chinese economy, and its complex interpenetration with
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Seen in this light, the problematic of Chinese capitalism does indeed seem to represent
not only a provocative but also a productive case. It places stress on established VoC
nostrums (such as institutional integrity at the national scale and the evaluation of
institutional forms according to the singular LME–CME yardstick), but it likewise
opens up some challenging questions concerning multi-scalar governance, communist–
capitalist hybrids and the political management of endemic contradictions, such as
those arising from uneven growth and sociospatial inequalities. After all, for three
decades after 1949, actually existing ‘Chinese capitalism’ was a strictly offshore,
extra-territorial phenomenon, more or less coterminous with the vibrant, diasporic
economies of the ‘overseas Chinese’ (see Haley et al., 1998), but entirely absent from the
People’s Republic of China itself. An historically unparalleled hybrid of reformist
Leninism and insourced capitalism has since been forged. In the process, it has been
claimed that not one, but in fact several, ‘indigenous’ capitalisms have been cultivated
in China, through a unique blend of central orchestration and local devolution
(McNally, 2006; Zhang and Peck, 2013), many of which have profited from neoliberal
globalism while at the same time spurning some of the most cherished policy
prescriptions of the Washington consensus (Arrighi, 2007; Chang, 2010; cf. Harvey,
2005). For these and other reasons, the problematic of ‘varieties of capitalism with
Chinese characteristics’ opens up some searching questions about the sociospatial
constitution and geographical (re)formation of capitalism.
Taking up these questions, this article is divided into three parts. In Section 2, we
revisit the varieties approach, placing the Chinese case in conversation with extant VoC
categories of analysis. Only sporadically, in fact, has the Chinese case been examined in
such terms, though this is beginning to change. Section 3 considers China’s
political-economic transformation in more detail, borrowing some of the problematics
of VoC analysis, but moving also to operationalize the principles of a variegated
capitalism approach. Working in a Polanyian spirit, we call particular attention to
contradictory tendencies and awkward articulations of this heterogeneous development
pattern, organizing the following exploration not according to ‘functional’ categories or
singular logics but around enduring axes of contradiction and dispute. Three such
themes are explored in this section: First, should the Chinese economy be characterized
in terms of market socialism or state capitalism? Second, has its growth trajectory been
guided by a socialist-developmental state or a unique form of party-state neoliberalism?
And third, how should political-economic power relations be characterized in China,
with reference to guanxi networking or to the notion of power-elite capitalism? These
questions facilitate a relatively ‘open’ exploration of Chinese capitalism, attentive to
VoC problematics but less constrained by its received categories and parsimonious
analytics. Instead, we attend to contradictions, paradoxes and double-movement style
adjustments. This article is concluded, in Section 4, on this latter neoPolanyian theme,
reflecting on how the ‘substantivist’ interrogation of vexing cases like Chinese
capitalism might assist in the development of variegated capitalism approaches.
A variety of capitalism . . . with Chinese characteristics?
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‘offshore’ markets, supply chains and indeed ‘other’ capitalisms, are such as to raise
searching questions about future directions (and geographies) of capitalism itself.
Likewise, the ‘profusion of competing terms’ that have been invoked in attempts to
capture the underlying character of the contemporary Chinese state form—which have
included everything from ‘socialist-developmental’ to ‘predatory’, ‘corporatist’ to
‘rent-seeking’, ‘market-Leninist’ to ‘entrepreneurial’—reflects more than differing
theoretical predilections, normative inclinations or even disputes over evidence, but a
deeper and more complex reality of fragmented, multiscalar and ‘polymorphous’ styles
of governance, improvised in the face of ‘rapid economic and institutional change and
heightened global integration’ (Howell, 2006, 282). Prior to our discussion of the
possibly confounding case of Sino-capitalism, it is therefore essential to clarify the terms
both in and of debate. We begin this process here by briefly reprising the varieties
debate.
VoC scholars, like most economic geographers, are typically skeptical about
‘hyperglobalization’ rhetoric and its associated convergence theses. Taking inspiration
from Polanyi and complementary strands of heterodox economics, they contend that
economic structures and relations are politically enabled, institutionally mediated and
socially embedded. This duly informs an analytical commitment to the identification
(and comparison) of distinctive, ‘national’ forms of contemporary capitalism and
trajectories of economic restructuring. Here, the principal drivers of institutional
and spatial variety are seen to reside in heterogeneous combinations of market and
non-market modes of coordination, in the historically and geographically distinctive
blending of hierarchies, networks and markets (Peck and Theodore, 2007). The
distinctiveness of national capitalisms, in practice, is seen to reside in the
‘complementarities’ between a complex of institutions with remits in financial and
corporate regulation, education and training, and industrial relations and the labor
market—which fuse and adapt to evolving patterns of economic behavior.
Notable for its theoretical eclecticism (at least in its 1990s formulations), work in the
VoC field has converged on the kind of firm-centric analysis associated with Hall and
Soskice (Witt, 2010, 3). Hall and Soskice (2001b) seek to build bridges between the
macro-characteristics of national political economies and the microeconomics of firm
behavior, enabling connections between the competitiveness of the firm and the
‘institutional comparative advantage’ of national economies. Their approach is centered
on the divergent responses of national political economies to endemic ‘coordination
problems’ across the interlinked spheres of industrial relations, education and training,
corporate governance and inter-firm relations. Patterned solutions to these problems
are seen to cluster around two dominant forms. While US-style LMEs deal with
coordination problems largely through hierarchical and competitive market arrangements, the CMEs have much greater recourse to non-market modes of coordination,
such as networks and collaborative relations. While in German-style CMEs, the
strategies of employers are shaped by dense regulatory networks and long-term,
structural relationships, in LMEs economic relations and contracts tend to be
decentralized and short term. Hall and Soskice (2001a, 21) emphasize that neither of
these institutionally polarized types of capitalism is intrinsically superior to the other,
both being capable of sustaining high levels of economic performance. It is argued that
LMEs are especially conducive to radical innovation and specializations in
price-sensitive mass production, while CMEs have distinctive strengths in incremental
innovation and quality-oriented flexible specialization.
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For Hall and Soskice (2001a), the architecture of national ‘comparative advantage’ is
portrayed in terms of key institutional complementarities (cf. Boyer, 2005). In effect,
capitalist regimes are seen to ‘gel’ at the national scale. Conversely, underperformance is
associated with hybridized or mixed models of capitalism in which there is friction or
contradiction between non-cohesive institutions (Carney et al., 2009). This produces a
fish-or-fowl sorting process, capitalisms being seen to cluster around one of the two
poles—the basis of the claim that system-specific institutional configurations are
durable and resistant to convergence. LMEs and CMEs are both understood to be
relatively cohesive systems characterized by high levels of enduring complementarity
among mutually supportive, interconnected institutions, particularly in capital and
labor markets, social-welfare policies, industrial relations as well as patterns of
inter-firm coordination. Accordingly, each variety of capitalism is typically associated
with an emblematic firm (Boyer, 2005; Carney et al., 2009), an organizational form that
‘fits’, or is best adapted to, the opportunities provided by its institutional environment.
The principal critiques of the VoC approach have emphasized the limitations
following from its near-exclusive focus on nationally scaled formal institutions and
economic dynamics, the object of what some consider to be a quasi-functionalist gaze;
its relatively rigid conceptions of cross-sectional difference and path-dependent
institutional change; its (growing) predilection for sparse, parsimonious, firm-centric
analysis; its reliance on comparative statics, systematically underplaying cross-case
tendencies in regulatory adjustment and the interpenetration (or mutual dependence) of
institutional forms and growth logics and its tendency to privilege typological
classification over causal explanation (see Deeg and Jackson, 2007; Peck and
Theodore, 2007; Streeck, 2011). This said, while more effort may have been applied
to the task of critiquing, rather than applying, the VoC framework in recent years, it is
nevertheless the case that its stylized models of CME and LME systems have been
remarkably provocative and potent, earning an important place in mainstream
political-economic imaginaries.
If the routines and terminology of the VoC approach are adopted at face value, it is
certainly possible to generate a stylized rendering of the Chinese ‘model’, which as a first
approximation can be quite revealing. As a point of departure, Table 1 provides a
heuristic reading of Chinese capitalism according to such orthodox VoC criteria.
Stretching VoC conventions somewhat, we position the Chinese model in a ‘triangular’
relationship with the two established ideal types, in order to explore how such a sketch of
the Chinese variety of capitalism might be shaded in LME and CME terms. Here, the
quasi-CME face of the Chinese model is revealed in the extensive reach of the All China
Federation of Trade Unions (ACFTU), which has a membership footprint extending
across half of the workforce; a reliance on bank-based financing; continuing dominance
of state-owned enterprises (SOEs), especially in the strategically significant ‘pillar’
sectors, which account for around one-third of GDP; state prescription of minimum
wages and a post-2008 labor contract law that offers de jure employment protections
sometimes even exceeding CME norms (Witt, 2010; Fligstein and Zhang, 2011). In
practice, however, the ACFTU functions in more of a bipartite than a tripartite fashion;
as a political instrument of the Chinese Communist Party (CCP), it aligns with the
interests of management rather than workers (Witt, 2010). Likewise, de facto employment protections, and provisions for unemployed and marginalized workers, remain
only minimal (Solinger, 2005; Deyo and Agartan, 2007). The enforcement of Chinese
labor law, like its intellectual property laws, has been notoriously loose and arbitrary
Interfirm relations
Education and
training
Industrial relations
business associations and research/education institutions in technology development
Mitigation of competition in domestic
markets; open competition in export
markets
Business associations regulate relational
contracting
Consensus-based standard setting
Close relations between
limited company involvement
Strong post-compulsory/
higher education
Substantial doctoral programs in basic
sciences and engineering, but with weak
links to employers and industry
technologies
Weakly regulated relational contracting
work for technology diffusion
Market-based standard setting
Strong anti-collusion policies
Underdeveloped institutional frame-
Weak systems of vocational training;
training; significant involvement of industry organizations and unions
Limited post-compulsory/
higher education
Substantial doctoral
programs in basic sciences and engineering,
with close links to large employers
bargaining
Limited workplace roles for unions
Company-based, uncoordinated wage
Liberal market economies
Strong systems of vocational education and
determination across key industries
Employer associations and unions play
major roles in wage determination
Employee-elected bodies and representative
bodies play key roles in company
decision-making
Formal or informal coordination of wage
Coordinated market economies
Established varieties of capitalism and the Chinese ‘model’
(continued)
‘managed competition’ in strategic
technological sectors favoring ‘national
champions’
Foreign dominance and opencompetition in export-oriented sectors
Dominance of family and guanxi networks, plus patron–client ties, in private
economic coordination
Weak legal enforcement and limited
protection of intellectual property rights
State-dominated standard setting and
enrollment rates in further and higher
education
Emphasis on general skills, weak vocational training; skills mismatches
Superiority in labor-intensive sectors;
limited technological innovation
Brain drain and emerging brain
circulation
Relatively high literacy rate but low
bargaining beyond state-stipulated
minimum wage standards
Urban–rural divide, dualized citizenship
and deeply segmented labor markets
Company-based, uncoordinated wage
involvement
Party-controlled unions; limited worker
A Chinese model?
.
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Table 1.
A variety of capitalism . . . with Chinese characteristics?
363
with
the Netherlands, Denmark, Sweden, South
Korea
Germany as the paradigmatic case
Japan, Austria, Switzerland, Italy, Belgium,
Hostile takeovers difficult
and technologies
Stable shareholder arrangements,
banks playing monitoring role
Industry-based monitoring
Reluctance to finance higher risk ventures
Coordinated market economies
case
UK, Canada, Australia, New Zealand
USA as the paradigmatic
markets
Unstable shareholder arrangements
Hostile takeovers permitted
Orientation to higher risk capital
Liberal market economies
in various offshore and diasporic
communities
China as the extra-paradigmatic case
Beyond China, echoes and connections
technologically advanced sectors
Large-scale foreign direct investment in
domestic firms, both state and non-state
Soaring overseas stock market listing of
with spoiled state-owned enterprises
Financially starved private firms coexist
state-owned banks
Corporate financing dominated by
A Chinese model?
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Source: Authors; developed from Hall and Soskice (2001a), Peck and Theodore (2007), Witt (2010).
Examples
Corporate financing
and governance
Continued
.
Table 1.
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Peck and Zhang
A variety of capitalism . . . with Chinese characteristics?
.
365
2
By comparison, UK, Germany, USA, Russia and Japan passed the historical threshold of 40%
urbanization, in their respective transitions from agricultural to industrial societies, in circa 1840, 1865,
1900, 1950 and 1955, respectively (cf. Davis, 1955).
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(OECD, 2010, 153; Peerenboom, 2002). The challenges of achieving meaningful business
accountability, in a legal sense, also hinder collective coordination and the formation of
horizontal linkages for employers and workers alike (Steinfeld, 2004; Wilson, 2007; Witt,
2010). However, partly as an imperfect substitute in this regulatory vacuum, the use of
family and kinship ties (guanxi) to coordinate intra- and inter-firm relations is
widespread, especially among China’s small, private firms (Whyte, 1995, 1996; Gold
et al., 2002). It is these deficits in actually existing, CME-style non-market coordination
that prompted Witt (2010) to locate China in the family of LMEs.
The divergent interpretation presented by Fligstein and Zhang (2011), who define
China as an idiosyncratic CME, conceptually nearer to France than USA, raises the
possibility that the Chinese case may not even be located on the LME–CME
continuum. Obviously, China’s economic and institutional structures diverge considerably from the prototypes advanced in the VoC approach. State-led industrialization
and export-oriented production, commonly found in China and other Asian economies
at various stages of emergence and transition, are difficult to shoehorn into the LME–
CME dichotomy (Lane, 2007; Hancké et al., 2008; Carney et al., 2009). China’s
marketization project has been paradoxically prosecuted by a communist party-state,
largely on the basis of unevenly applied policy directives. As in other (post-)communist
economies, it is the state, rather than the firm, that defines the principal locus of
coordination, while the party-state also performs crucial (though always flawed and
partial) roles as a transformative agent (Popov, 2007; McGregor, 2010). Given the
transitional and hybrid nature of the Chinese economy, one would search in vain for a
singular, emblematic firm. The country’s mixed industrial system is characterized by the
co-presence of monopolistic SOEs, with ready access to finance, arrayed across the
‘commanding heights’ of the so-called pillar sectors; foreign-owned firms with
dominant positions in many export-oriented manufacturing sectors and a plethora of
township and village enterprises (TVEs) and small family-run private firms (cf. Brandt
et al., 2008; Witt, 2010). It has been observed that China’s financial markets have not
been effective in supplying investment capital, improving performance or signaling
information (Shirai, 2004). However, with the soaring number of overseas initial public
offerings, foreign financial markets have been increasingly used to ‘govern’ China’s
domestic firms, private and public alike (Tobin and Sun, 2009). Ironically, ‘managers of
Chinese pillar industry state-owned firms [may be] more accountable to the U.S.
Securities and Exchange Commission than to the Chinese central government’
(Steinfeld, 2010, 35).
More striking still, many argue that China’s most pressing challenges have little to do
with enterprise coordination issues, being focused instead on the so-called ‘three rural
problems’ (sannong wenti) of agriculture, peasants and village economies (Wen, 2005).
When China embarked on its capitalist transformation, in the late 1970s, 80% of its
population resided in rural areas, being primarily engaged in agriculture.
Record-breaking rates of growth were achieved from this low base. Modern China
remains a low-income country in many ways, with more than half of its population yet
to be ‘urbanized’.2 Correspondingly, although the literacy rate is relatively high for a
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developing country, even by 2007,57% of China’s workers were qualified at the college
level (Ma, 2010). Among the 780 million strong workforce in 2009, only about one-third
were permanent city residents working in urban sectors; one-third were still toiling on
farms and the remainder were rural residents either doing off-farm work locally or
‘floating’ back and forth to the cities, as a domestic category of ‘temporary migrant
workers’ (cf. Whyte, 2010). This deeply segmented labor market, constructed around a
sharp and intractable urban–rural divide, has been institutionalized through the hukou
regime (the household registration system), creating the basis for a dualized form of
economic citizenship (Solinger, 1999; Naughton, 2007; Chan, 2009). The 150 million or
so rural-hukou holders who work in cities continue to be treated as second-class citizens,
being denied political rights and welfare benefits to which only urban-hukou holders are
entitled.
These and other myriad complexities lead Fligstein and Zhang (2011, 41) to conclude
that it is impossible to ‘discover what is going on in China through a bottom-up
empiricist approach’; for all the theory-defying and concept-confounding features of the
Chinese model, the necessary-but-difficult path forward, they conclude, must be by way
of a ‘more theoretical and conceptual [research] agenda’. In this respect, the frictions
caused by importing the VoC framework can be potentially productive, in that they
shed light on new axes of differentiation, new institutional formations, telling silences,
pragmatic ‘workarounds’ and so forth. This means actively confronting China’s
square-peg idiosyncrasies, relative to the round holes fashioned by VoC scholars.
China’s institutional matrix, which has enabled blistering economic growth for over
three decades, alongside (new and old) forms of sharply uneven development, has
hardly displayed any significant degree of system-level complementarity. Meanwhile,
the country’s ‘institutional comparative advantage’ has yet to be translated into
sustained technological innovation, either radically or incrementally. China’s global
competitiveness has been constructed through a feat of self-transformation into a new
‘workshop of the world’, on the basis of a labor-intensive, export-oriented production
system, deeply integrated through global value chains into offshore economies (Hu and
Mathews, 2008). The Chinese model has been forged as a profitable, ‘external’
complement to extant varieties of Western capitalism, with which it has been fashioned
not only to coexist but also to compete. It is not simply a new model, additively
introduced to a level playing field occupied by discrete, ‘horizontally’ competing
capitalisms.
No matter whether the analytical preference is for two, four, five or more varieties of
capitalism (cf. Hollingsworth and Boyer, 1997; Whitley, 1999; Coates, 2000; Hall and
Soskice, 2001b; Amable, 2003; Boyer, 2008; Fligstein and Zhang 2011), the fact remains
that existing VoC formulations have not made space for the Chinese variant of
capitalism, notwithstanding its global significance. McNally (2006, 10, 16; 2007, 179),
having noted the potential utility of the VoC approach as a framework emphasizing
‘marked differences amongst capitalist institutions on the national level’, is ultimately
unsure how to handle the ‘odd case’ of China, opting ‘consciously [to] eschew a map of
institutional variations among capitalisms, especially since in China capitalist institutions are merely in the process of forming’. And, as we have noted, Witt (2010) and
Fligstein and Zhang (2011) reach diametrically opposed conclusions concerning the
Chinese case, having intelligently operationalized the ‘same’ VoC framework.
Napoleoni (2011) has provocatively argued that China has created its own mode of
‘capi-communism’, a variety of capitalism sui generis—effectively a social form unto
A variety of capitalism . . . with Chinese characteristics?
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itself. Can this really be a case that exhausts conceptual classification—capitalism hors
cate´gorie?
3. Sino-capitalism: the confounding case?
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It was only 25 years ago that noted Sinologist, Gary Hamilton (1985), posed what for a
long time had been one of the most demanding negative questions in historical
sociology and comparative political economy: How could it be that a country that had
been a driver of world development for millennia—and which had played pioneering
roles in the early evolution of trade, finance and technological innovation—had been
reduced to the status of a capitalist backwater by the beginning of the 20th century
(Weber, 1951; Arrighi, 2007; Whyte, 2009)? Historically, discourses of absentee
capitalism revealed more about the presumptions of Western observers than they did
about China itself, Hamilton averred. As he knew full well, however, the tide had
recently been turning in China, most markedly since the inauguration of Deng
Xiaoping’s ‘second revolution’, its economy being progressively ‘opened up’ after 1978.
Setting aside the question of whether China might one day be ‘officially’ designated
as a capitalist country—highly unlikely, as long as the CCP retains its grip on power—
the contention that it is even functionally capitalist continues to exercise controversy
(McGregor, 2010). While many Asian neighbors now recognize China as a fellow
‘market economy’, USA, Europe and Japan pointedly do not—nominally on the
grounds of the weight and character of the state’s presence in economic life (McNally,
2006). Arrighi (2007, 24) preferred to leave open the question of whether there might be
another form of socialism, as opposed to capitalism, at the end of China’s long
transformation: the (decisive?) fact that private control over the means of production
remains far from fully secured in China implies that, ‘despite the spread of market
exchanges in the pursuit of profit . . . the nature of development in China is not
necessarily capitalist’.
This, however, is now a minority view. There is a growing consensus that China has
become functionally capitalist—albeit far from comprehensively or unambiguously and
certainly not either ‘classically’ or officially. Yet profound differences remain over just
about every aspect of the qualitative form, and the ultimate destination, of this great
transformation. Among the many flashpoints in these debates, there are questions
around whether the Chinese state should be characterized as socialist–developmentalist,
tendentially neoliberal or something else altogether, with Baum and Shevchenko (1999)
counting no less than 17 contending labels in the literature.
Bearing in mind the ambiguities and contradictions of the Chinese development path,
we proceed here not by attempting to fix (or to force) a singular reading of
Sino-capitalism, but instead by exploring some of the principal fields of contention in
the contemporary debate around the form and indeed the fact of ‘capitalism in the
dragon’s lair’ (McNally, 2008a). The following discussion focuses on three themes, each
of which has been a locus for divergent interpretations: first, the oxymoronic formation
of China’s ‘socialist market economy’ is problematized (market socialism or state
capitalism?); second, we turn to the character of the Chinese state and its variegated
mode of governance (socialist-developmental or neoliberal state?) and finally, the power
circuits of ‘Chinese capitalism’ are explored (guanxi transnationalism or power-elite
capitalism?). It is no accident, as we will see, that these are posed as questions. They are
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posed in the spirit of a variegated capitalist approach: interrogating cases through their
ingrained contradictions rather than (necessarily) searching for incipient complementarities; privileging causal explanation over taxonomic classification and probing sources
of institutional disjuncture as well as coherence.
3.1. Market socialism or state capitalism?
3
4
Unnamed Chinese commentator, quoted in McNally (2008a, 235).
The socialist road, the dictatorship of the proletariat, the leadership of the CCP and Marxism–Leninism–
Maoism, as articulated by Deng in 1979.
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It has been enigmatically stated that ‘China is both far away from socialism and far
away from capitalism’.3 While this may be somewhat representative of the kind of
double-speak that pervades official economic discourse in China today, where the CCP
can apparently embrace capitalism in deed but never in word, it sheds little light on the
actual character of transformative change in the country. The winding path from
Maoist state socialism has been navigated with incremental caution (and more than a
few reversals), in the interest of maintaining social stability while averting political
crisis. Continuing intolerance of public dissent, or even society-wide debate, has meant
that the reform process has taken the form of a protracted, and ongoing, intra-party
struggle. While the ‘leftists’, led by Chen Yun, have insisted on the preservation of
socialist ideology and the primacy of planned economy, ‘rightists’ have pushed for
‘bourgeois liberalization’, in the shape of the joint unfolding market economy and
political democracy. Deng Xiaoping famously strove to find a middle way, confronting
the leftists with ‘reform and opening up’ while evoking the ‘four cardinal principles’
against the rightists (Fewsmith, 2008, 29).4 This, however, defined a terrain of struggle,
not a fixed path.
Correspondingly, the enabling concept of the ‘socialist market economy’ has been
assembled only gradually. Chen Yun’s opinion that ‘planned economy is primary, the
market economy supplementary’ had been enshrined at the Party’s 1980 Central Work
Conference. But this was rejected at the Third Plenum of 1984, where the ‘Decision on
the Reform of the Economic Structure’ endorsed an official conception of the
‘commodity economy’, in contrast to the ‘planned economy’—a significant ideological
breakthrough that served to justify further liberalization (Fewsmith 2008, 38). In 1987,
Zhao Ziyang, then the General Secretary of the CCP, reaffirmed that China remained
in the ‘initial stage of socialism’, facing a decades long challenge of improving material
living standards for the majority of the population. Zhao also proposed a dramatic
curtailment of central planning, advocating the further development of labor and
financial markets, while putting both pricing policies and political reform on agenda
(Saich, 2010, 78–79).
The Tiananmen incident, however, resulted in the purge of Zhao and other liberal
leaders and Deng’s status within the Party plummeted. Chen Yun’s interpretation of
socialist economics was restored as orthodoxy, being powerfully reaffirmed by the new
General Secretary Jiang Zemin. In 1992, however, the 88-year-old Deng began to fight
back. His famous southern tour of market-oriented hotspots, married with robust
rhetoric and a willingness to deploy the military in the service of intra-party struggle
were indications of a new determination. Deng’s ultimate victory was proclaimed by the
Fourteenth Party Congress in 1992, where ‘the chief architect of our socialist reform’
A variety of capitalism . . . with Chinese characteristics?
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369
was credited with the historically fateful ‘theory of building socialism with Chinese
characteristics’ (Saich, 2010, 87–88). The congress adopted the most liberal economic
document in CCP history, sanctioning sweeping economic reforms under the rubric of
the ‘socialist market economy’, although a more liberal stance on economic affairs was
matched with an undiluted commitment to political control. Nevertheless, socialism
remained the official ideology, the CCP continuing to claim legitimacy under the sign of
Marxism–Leninism, with far from trivial political consequences (Fewsmith, 2008, 5).
A long suppressed interview with Deng Xiaping, conducted in 1979, revealed some of
the intentionality here, which was to appropriate the methods of the (capitalist) market
economy, though not its ethic. As Deng rhetorically asked,
During the early years of China’s reforms, the device of the market (or commodity)
economy was adopted as a means of complementing, rather than a substituting for, the
plan. For example, the CCP’s 1984 Resolution on Economic Reform rather tortuously
stated that while China possessed a ‘planned commodity economy [this was] not the
market economy which is completely regulated by the market’ (quoted in Yu, 2005, 37).
This characteristically abstruse party line therefore carried an unintended Polanyian
irony. As a principle of economic coordination, markets would be formally
subordinated to the logics of the socialist state and to the long-run goals of
revolutionary transformation; the market would not rule, it would be embedded
within a socialist-state integument (cf. Polanyi, 1944).5
It follows that state socialism remains a defining feature of the Chinese model, even if
the point has long since passed where China can be considered to be functionally
socialist, at least in terms of actually existing political–economic structures and
priorities (Kornai, 2009). Affirming at least one VoC axiom, China’s transformation
has been a profoundly path-dependent one, such that its unique experience of
‘capi-communism’ has been effectively co-constituted not only with ‘external’ forms of
globalizing capitalism but also with a unique state-socialist trajectory, in an extended
and reciprocal process of recombination (cf. Stark, 1996; Eyal et al., 1997). If there is a
fire-and-water quality to this contradictory hybrid, then this perhaps explains how it is
that interpretations of contemporary China tend to be so ideologically polarizing,
between those neoliberal treatments that seek to expunge any positive functions of the
state, as the supposed anathema to growth and dynamism, and those radical accounts
that heroically valorize remnant traces of socialism in the face of deepening
marketization (see Arrighi, 2007; Huang, 2008; Economist, 2012b). For these reasons,
it may be more appropriate to define Chinese capitalism in terms of its long-lasting
contradictions, rather than search for some submerged source of logical coherence and
5
This can be seen as a critical case illustration of the argument that market economies display no singular
form and that invocations of the ‘law’ of supply and demand are grounded in a particular (Western)
conception of ‘free’ markets (Hamilton, 1985; Hann, 2009; Peck, 2012).
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Why can’t we develop a market economy under socialism? . . . Taking advantage of the useful
aspects of capitalist countries, including their methods of operation and management, does not
mean that we will adopt capitalism. Instead, we use those methods in order to develop the
productive forces under socialism. As long as learning from capitalism is regarded as no more
than a means to an end, it will not change the structure of socialism or bring China back to
capitalism (Deng, 1994, 232–233).
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6
For example, a constitutional amendment was enacted in 1999 to protect the private economy, while
further guarantees of private property rights were enshrined in the Property Law of 2008.
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through its paradoxical admixtures rather than in terms of some purified essence
(cf. Whyte, 2009; Fligstein and Zhang, 2011; Zhang and Peck, 2013).
Such a strategy is plainly at odds with the overriding emphasis that is placed, in the
VoC literature, on (national) institutional complementarities, on medium-term equilibrium and on relatively orderly rationalities. Instead, we argue that the improbable
combination of socialism and capitalism in China is simultaneously contradictory and
complementary. Its ‘productivity’ very much depends on how the reform process is
phased, paced and channeled and how its attendant contradictions and externalities are
managed. This out-of-equilibrium hybrid is clearly on a transformative path of some
kind, but this should not be construed as a simple, linear transition from one system to
another. ‘China’s economic development has not followed any predetermined economic
strategy’, McNally (2006, 20–21) has argued, ‘but might be more appropriately
conceptualized as a process of upward spiraling virtuous cycles of induced reforms’.
Such diachronic and open-ended dynamics are hardly alien to capitalism, of course,
which exists in a perpetual state of disequilibrium. Rather than proceeding in an orderly
fashion to some ultimate form, ‘capitalism develops more in a spiral’, Boyer (2000, 293)
has maintained, ‘never passing the same point twice’. If China has been oscillating in the
social space somewhere between socialism and capitalism for more than three decades,
how might its shape-shifting position be calibrated? Might it even be improvising as
Fligstein and Zhang (2011) have suggested, its own developmental form?
A first cut at these questions must consider the enduring residues of China’s socialist
formation. According to Szelény (2010), there are three fields in which the socialist
legacy is most strongly evident in the contemporary Chinese setting. First, unambiguous (private) property rights, while conventionally regarded as an essential precondition
for capitalist development (Walder and Oi, 1999), are anything but typical in China. In
marked contrast to the post-socialist countries of Eastern and Central Europe, where
abrupt transfers from public to private ownership were prioritized in the earliest
applications of ‘shock treatment’, gradualist China has steadfastly ignored Washington
advice on the question of property rights. Initially, the legally permissible zone of
private (and typically foreign) ownership was strictly circumscribed, and reports of
‘discrimination’ against private and corporate interests have been commonplace (see
Popov, 2007). Most analysts, with the notable exception of Huang (2008), agree that the
direction of reform has, however, been toward increasingly privatized and regularized
property rights,6 even as the legal system remains underdeveloped and opaque, as SOEs
retain a significant presence, as land and natural resources are not yet privatized, and as
both party functionaries and labyrinthine rules (many unwritten) continue to extend
significantly into the (sometimes only nominally) ‘private sector’ (McNally, 2008c;
Szelény, 2010; Economist, 2012b).
Second, the Chinese state retains a massive presence in the national economy, with a
reach into increasingly global spheres too, far beyond the question of control over
property rights. Extensive bureaucratic and party involvement in corporate governance—the defining feature of Victor Nee’s concept of ‘politicized capitalism’—has been
presented as a peculiarly Chinese hybrid, marked by the extensive ‘overlap of political
and economic markets and the absence of clearly defined state-firm boundaries’,
A variety of capitalism . . . with Chinese characteristics?
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7
8
9
Eighteen of the 20 largest banks are under state control and, at the end of 2009, accounting for 73% of
total bank assets (Deng et al., 2011). In 2005, 78% of funds raised in the Chinese domestic market came
from state banks (Naughton, 2007).
The 2008 Economic Census classifies only 3% of all enterprises as SOEs, but these accounted for 30% of
total enterprise assets (Deng et al., 2011) and a yet larger share of political-economic clout.
Available at: http://money.cnn.com/magazines/fortune/global500/2010/countries/China.html.
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together with ‘institutional arrangements patched together in ad hoc improvisations to
address the needs and demands arising from rapid market-oriented economic growth’
(Nee and Opper, 2007, 94). For Naughton (2008), retaining, reinventing and
redistributing patronage resources, partly through state-dominated sectors and staterun corporations, are crucial to the continual survival of the authoritarian regime.
Today, the official list of strategic sectors and pillar industries that are monopolized (or
at least dominated) by SOEs includes the following: banking; power generation and
distribution, oil, coal, petrochemicals and natural gas; telecommunications; armaments;
aviation and shipping; machinery and automobile production; information technologies; construction; railroads; insurance; grain distribution and the production of iron,
steel and non-ferrous metals (cf. Deng et al., 2011). State-owned banks are especially
dominant, with economy-wide implications, a situation that recent reforms have done
little to change.7
Although the number of SOEs has been dramatically reduced, particularly in the
wake of the CCP’s post-1997 policy of ‘grasping the big, letting go the small’ (zhua da
fang xiao), the remaining SOE giants occupy central (and sometimes overbearing)
positions in both their industries and the national economy.8 Among the 43 Chinese
companies (excluding Hong Kong) listed on the 2010 Fortune 500, 42 are SOEs,
boasting an aggregate total of 10.7 million employees, $1.6 trillion revenues and $9.2
trillion assets.9 Official figures almost certainly greatly understate the true scope of
party-state influence over nominally private sector and listed firms, because many SOEs
control their own business groups. In fact, triggered by China’s massive investment in
infrastructure projects (as part of its post-financial crisis stimulus plan), there has been
rising anxiety around the phenomenon of guojin mintui or ‘the state advances and the
private sector retreats’ (Naughton, 2009; Scissors, 2009).
Third, the CCP remains a deeply secretive body, sitting outside and above the law,
which continues to exercise a far-reaching form of political monopoly (McGregor, 2010).
Private entrepreneurs have been welcomed as party members since the inauguration of
the ‘Three Representatives’ policy in 2001, an option that approaching half of all CEOs
is estimated to have exercised, while in practically every sphere of life the CCP remains ‘a
major force shaping national, local, and firm-level policies and through the nomenklatura system, controls appointments to crucial positions even in the business world’
(Liew, 2005; Landry, 2008; Szelény, 2010, 207). For example, after decades of
supposedly pro-market reform, the career prospects of SOE executives continue to
depend on decisions by the Organization Department of the CCP, which is charged with
the task of maintaining party discipline (Deng et al., 2011). In this regard, as Ma (2009)
has remarked, ‘Chinese capitalism is on a strong but flexible leash. The leash can be
tightened by the top leadership any time as political and economic needs arise’.
If it is impossible, then, to dismiss Chinese socialism as an inert historical force, what
can be said about the country’s tendential form of capitalism-with-no-name?
Notwithstanding the important qualification that received understandings of capitalist
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development reflect distinctly Eurocentric histories (Hamilton, 1985; Blaut, 1993;
Amin, 2010), which of course have strong echoes in the VoC literature itself (Yeung,
2004; McNally, 2007), the question of the degree of ‘fit’ between capitalism-asabstraction and the presently existing Chinese conjuncture is clearly a crucial one. One
of the most rigorous responses to this question has been provided by McNally (2006,
2008c), drawing on the generic model of capitalism elaborated by Heilbroner (1985,
1993). The defining features of capitalism, in these terms, are essentially 3-fold. First,
what might be called the Marxian face of capitalism is the driving force of the
accumulation process, wherein the profit motive and the extraction of surplus value
represent both fundamental dynamics and organizational principles of the system.
Here, the picture is uneven, at least spatially. Deng’s incremental reforms rested heavily
on the principles of devolution and experimentation, opening up selected enclaves for
profit-driven accumulation at the local level, often in conjunction with ‘overseas’
Chinese capital and deploying ‘zoning technologies’ like special economic zones (SEZs)
as means for trialing new business arrangements and governance models (Ong, 2004;
Zhang, 2012). According to Gallagher (2005, 14), SEZs have served as localized
‘laboratories for capitalism, introducing new and destabilizing reforms of employment,
social welfare and enterprise management’. Although Huang (2008) is a contrarian
outlier, most analyses confirm that the private-sector contribution to overall economic
growth in China has risen markedly over time, accounting for 50–70% of GDP
according to most recent estimates and that the profit-oriented segment of the economy
has also been the most dynamic (OECD, 2003; Wang, 2004; McNally, 2008c; Kornai,
2009). These logics also permeate the state itself, as SOE executive bonuses are tied to
financial performance, while inter-local competition and ‘GDPism’ increasingly
constitute the foundations both for resource allocations and party advancement
(Deans, 2004; Meyer, 2011).
A second dimension of capitalism, which might be considered its Polanyian face,
concerns the rise of the market as the dominant regime of economic coordination and
cultural identity. In China, the once-elaborate system of price controls has been almost
completely dismantled, enabling market pricing on everything from rice to Rolexes (see
Wederman, 2003). Exceptions to this general rule are those aforementioned strategic
sectors still dominated by SOEs—although market impulses and pressures are
increasingly important here too. The most decisive Polanyian move, of course, is the
commodification of labor and land (Polanyi, 1944). Since 1986, there has been a
progressive shift in the direction of labor contracts; a 1988 bankruptcy law terminated
the guarantee of lifelong employment, while a 1994 labor law normalized the status of
wage labor, partially decoupling welfare from the state, although the socialist hukou
regime continues to segment the labor market (Cai et al., 2008). In a parallel process,
the Shenzhen SEZ’s pursuit of foreign investment led to the establishment of an
inventive model of quasi-privatized land-use rights, managed under a nominally
socialist tenure regime (Zhang, 2012). By separating usage rights from ownership,
pragmatic leaders effectively legitimized the transfer of land for commercial uses in the
absence of de jure privatization. Furthermore, China seems to be spawning its own
version of a ‘market culture’, according to some accounts often more vulgar and
unvarnished than its counterparts in the West, but certainly with highly distinctive
features (Rofel, 2007; cf. Wu, 2008; Ku, 2010).
The third and final dimension of capitalism is its Gramscian face: this concerns the
advance of capitalist class interests, incorporating yet at the same time exceeding those
A variety of capitalism . . . with Chinese characteristics?
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10
A study conducted by Wang (2010), deputy director of China’s National Economic Research Institute,
confirms this pattern of extreme polarization. The income ratio between China’s richest and poorest
10% households was 65:1 in 2008, up from 55:1 in 2005, yielding a Gini coefficient for household income
significantly higher than the 0.47–0.50 level typically acknowledged. The top 10% of Chinese households
control 86% of wealth and account for 56% of household income (Gan, 2012).
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of the (capitalist) state. Although McNally (2008c, 31) is generally convinced that
‘China is generating a form of capitalism’, he emphasizes that this is most clearly
expressed in the first two of Heilbroner’s criteria, the dominance of profit motives and
market relations; when it comes to the third, ‘the bifurcation of secular authority’, the
situation is considerably more mixed, since pro-capitalist developments are more
embryonic. While the Chinese bourgeoisie has acquired some degree of ‘independent’
influence, the extent to which this is meaningfully autonomous from the party-state is
highly debatable (Liew, 2005; Tsai, 2007). In fact, it has been argued that the political
power of capital in China remains fundamentally embedded in, and interlaced with, the
sprawling institutional machinery of the party-state and the political tentacles of the
CCP (Dickson, 2003, 2008). While there has been considerable growth in business
associations and chambers of commerce, most of these exist in the shadow of the
party-state. Dickson’s (2003, 164) conclusion is that it ‘may be more appropriate to see
red capitalists as a symptom of changes underway in China, rather than their cause’.
If McNally’s argument is extended to the question of class structures, however, the
story is unequivocal. Perhaps the strongest evidence of China’s post-socialist form is the
spiraling level of inequality. In the space of a few decades, the Chinese social structure
has lurched from one of the world’s most egalitarian to one of its most polarized
(cf. Benjamin et al., 2008; Gustafsson et al., 2008). Li (2005) has marshaled evidence to
suggest that the Chinese social structure now resembles that of feudal or early-capitalist
Europe, taking the form of an inverted T-shaped distribution. On this calculation,
nearly two-thirds of the population is located in the lowest socioeconomic stratum,
while fully 88% of workers aged between 16 and 64 are classified as the ‘lower class’.
The elite, meanwhile, is thinly arrayed across the pole of the inverted T-shaped
structure, with no intermediate classes of any numerical significance.10 Deng (1993, 172)
once reasoned that ‘[w]e permit some people and some regions to become prosperous
first, for the purpose of achieving common prosperity faster. That is why our policy will
not lead to polarization, to a situation where the rich get richer while the poor get
poorer. [We] shall not permit the emergence of a new bourgeoisie’. But three decades of
market reforms have indisputably led to the rise of an economic elite, deeply interwoven
with the party-state nomenklatura system, while the degree of socioeconomic polarization has reached alarming levels.
If the choice is between oxymoronic formulations, the Chinese model is closer to state
capitalism than market socialism, though its distinctive contemporary form remains
heavily predicated on its socialist past, the CCP having steered the path of gradual,
uneven integration with globalizing capitalism that the country has followed since the
late 1970s. ‘The defining battle of the 21st century will not be between capitalism and
socialism’, the Economist (2012b, 18) recently declared, ‘but between different versions
of capitalism. And since [Chinese-style] state capitalism is likely to be around for some
time yet, Western investors, managers and policymakers need to start thinking seriously
about how to deal with it’. The same might be said of Western analysts of capitalist
variety.
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[Instead of] the classic Soviet-derived perception of the gradual triumph of planned economy
over markets, of state over cooperative or individual forms of production, another model of
transition has arisen which to some extent returns to Marx’s original position that true
socialism could only be built on the basis of an advanced commodity economy developed by
capitalism. In effect, the reform project envisages a ‘replay’ of the original Marxian analysis of
the transition from pre-capitalist modes of production to capitalism to socialism within a
socialist integument [. . .] What the reforms represent, at their deepest level, is an attempt to
reproduce, within a socialist framework, the social, economic and psychological dynamics
advanced commodity production which have been achieved elsewhere within a capitalist
framework (White and Wade, 1988, 19, original emphasis).
This active, developmentalist posture positioned China as an outlier among the
post-socialist ‘transition’ states, since it was not bounced into radical regime change in
the context of systemic ideological-institutional rupture or externally administered
‘shock treatment’, as was the case in the Soviet sphere (Lane, 2007; Popov, 2007). While
in the former Soviet bloc, ‘reform-economics was [rapidly] replaced by transitology’ and
the saturating ideology of inevitable (but painful) capitalist modernization, in ‘China
the reconstruction of economic institutions was not labeled as either transition or
transformation [just as] the meaning of reform changed slowly and gradually’ (Szelény,
2010, 201–202).
China’s socialist developmental-statist path toward capitalism has been negotiated
more on its own terms—albeit within the opportunity structure of globalizing
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3.2. Socialist-developmental state or state neoliberalism?
Some of the most intractable paradoxes of China’s monumental economic transformation concern the role of the state, which manages, at the same time, to be a source of
near-ubiquitous power and daunting opacity. The apparent success with which the CCP
has fabricated a unique style of transformative market-Leninism—balancing the
imperatives of globalizing capitalism and the demands of explosive, market-led growth
with the maintenance of virtually total political control—has continued to confound
academic analysts and political commentators far and wide. Irrespective of whether the
VoC framework is embraced or spurned, the regulatory form and orientation of the
state remains a key concern. VoC debates sometimes slide into wrongheaded
discussions of capitalism with ‘more or less’ of the state—one that the CME/LME
polarity may inadvertently sustain (Peck and Theodore, 2007), while the popular notion
of ‘state capitalism’ (Economist, 2012b) likewise recycles the red-herring question of the
state’s absence/presence (as if zero-state capitalisms were something other than a
libertarian utopia). On the face of it, China might be located in the Asian family of
‘strong states’ (see Johnson, 1982; Wade, 1990; Evans, 1995; Whitley, 1999), but its
trajectory can hardly be reduced to a (mere) variant of those exhibited, for example, by
Japan, Singapore or South Korea. At issue, clearly, is not the quantitative ‘weight’ of
the state, but its qualitative form, role and posture.
An influential line of work in the 1980s portrayed China as an exemplar
socialist-developmental state, animated by the failures of Maoism and by the
imperatives of political self-preservation, which embraced strategically targeted
market measures—not as a preconceived path to capitalism or indeed to neoliberalism
(Breslin, 2006), but as an historically unprecedented experiment in socialist
modernization:
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capitalism—being typical neither of the post-socialist pattern nor for that matter of the
trajectories of the classic developmental states of Asia. The latter was grounded in a
productive nexus between technocratic expertise and bureaucratic rationality, exploiting connections between government and leading industrial sectors in the context of an
all-consuming (often nationalist) ‘will to develop’ (cf. Evans, 1995; Weiss, 2000; Deans,
2004). While China’s economic development may have been state-led, or at least
significantly state facilitated, it can hardly be said to have been ‘plan rational’ in the
manner of the earlier generation of (Asian) developmental states (Deans, 2004). Again,
it would appear that the Chinese case is ‘just too different’ to be shoehorned into extant
state-theoretic categories, as Deans (2004, 134) puts it; having rapidly evolved ‘from a
socialist-developmental state into a hybrid system which is no longer socialist but which
cannot be properly understood as capitalist either: a post-socialist developmental state’.
This said, the pattern of China’s policymaking practice across its state-dominated
strategic and technological sectors—including cultivating national champions, fostering
indigenous innovation and forging national technological leadership through largescale science and engineering projects or what Suttmeier and Yao (2004) dub ‘neotechno-nationalism’—bears a resemblance to those pursued by East Asian developmental states. Beyond the narrow concern with the national state and industrial policies
in the developmental state literature, China scholars typically call attention to the
crucial significance of central–local relations and the wide array of roles assumed by
localized state agencies under the guiding influence of the local revenue generation
regime. For example, Qian, Weingast and colleagues have documented the rise of what
they term ‘market-preserving federalism’ with Chinese characteristics (Montinola et al.,
1995; Weingast, 1995; Jin et al., 2005), arguing that the fiscal decentralization and intergovernmental resource-sharing system introduced in the 1980s effectively bound the
center and the provinces into long-term and relatively stable fiscal relations, generating
strong (but bounded) incentives for inter-jurisdictional competition at the local level.
Likewise, what have been labeled as ‘promotion tournaments’ now pervade the CCP’s
nomenklatura system, rewarding those local officials most successful in facilitating
local economic growth (Li and Zhou, 2005) and melding the calculus of the party state
with a style of centrally incentivized local entrepreneurialism known as GDPism.
In a similar vein, Xu (2011) argues that the Chinese reform and development project
is being driven by a regionally decentralized authoritarian (RDA) system, combining
political centralization with economic regionalization. On the one hand, centralized
political control remains substantial, in that subnational government officials continue
to be appointed, evaluated and disciplined from above. On the other hand, subnational
governments effectively manage much of the economy through their multifaceted roles
in initiating, negotiating, implementing, diverting and resisting various reforms,
policies, rules and laws. This style of decentralized governance seems to alleviate the
degree of exposure to economy-wide coordination failures resulting from external
macroeconomic shocks, while also fostering a decentralized ecology of ongoing
institutional experimentation, at least partly insulated from internal political opposition
or macroeconomic risks (see Gallagher, 2005). The RDA system also facilitates the
CCP’s adaptive rebuilding of the political hierarchy, with promotion opportunities and
patronage resources flowing from the top, reciprocated with allegiance and loyalty to
the leadership from below (Naughton, 2008). Nevertheless, Xu (2011) also points out
that China’s RDA system is by no means immune from the intrinsic deficiencies of an
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authoritarian regime, such as the lack of an independent judiciary, rent-seeking
behaviors and indifference to citizens’ needs and preferences.
A very particular form of authoritarian decentralization, fusing political and
economic interests across the state system, has animated Chinese growth during the
reform era. Notable here has been the rise and retasking of the TVEs, which were in
various analyses taken as emblematic of the Chinese model, in its early 1980s vintage.
The developmental enthusiasm of local states was enabled/encouraged by fiscal
decentralization, which selectively devolved decision-making power to local governments, tying revenue growth to the career progression of local officials and spawning a
unique form of ‘local state corporatism’ (Oi, 1992, 1995, 1999). TVEs, known as
commune and brigade enterprises during the Mao era, were originally managed by local
governments, concentrating on the production of fertilizers, iron and steel, agricultural
tools and cement. Redesignated as TVEs during the first decade of the reform era, this
sector soon experienced explosive growth, accounting at its peak (in the mid-1990s) for
almost one-third of national GDP growth (Oi, 1995; Naughton, 2007)—significantly
beyond the initial expectations of central planners (Huang, 2008). Indeed, Arrighi
(2007, 363) goes as far as to speculate that, ‘TVEs may well turn out to have played as
crucial a role in the Chinese economic ascent as vertically integrated bureaucratically
managed corporations did in the US ascent a century earlier’. The rapid growth of
TVEs occurred effectively outside the state planning process (Naughton, 1995),
fortuitously sidestepping the challenge of a big-bang downsizing of the state sector, as
in the former Soviet bloc, while generating both positive momentum and the financial
means for subsequent rounds of reform.
The political and institutional environment favored these ‘public’ enterprises during
the early years of reform, since private businesses faced severe restrictions and indeed
discrimination in terms of access to resources and favorable regulations. The problem
of soft budget constraints (Kornai, 1986) was partly sidestepped by virtue of China’s
massive size, because each township or village would be forced to compete with
thousands of counterparts (Naughton, 2007, 281). As local governments rushed to
develop their own enterprises, however, regional protectionism resulted in duplication,
fomenting serious problems of industrial overcapacity and mounting pressure for
restructuring (Bai et al., 2004; Xu, 2011). With rising competition from the urban
sector, official discrimination against TVEs and a growing preference for foreign-owned
enterprises, the dynamism and profitability of the TVE sector declined markedly after
the mid-1990s, causing many enterprises to be privatized or converted into shareholding
cooperatives (Naughton, 2007).
Long-running struggles over taxation powers and revenue sharing between Beijing
and the provinces eventually resulted in the fiscal reform of 1994, which substantially
reduced the subnational government share of national tax revenues, from 70% to 40%,
while further decentralizing public-expenditure responsibilities (Tsui and Wang, 2004).
While augmenting the budgetary and patronage resources of the center, this fiscal
reversal made TVEs immediately less attractive as cash cows for local states, but it duly
spawned a new form of real estate developmentalism. Local governments were
compensated for revenue losses with new rights over land sales within their
jurisdictions, together with monopoly control over the conversion of farmland to
commercial uses. As a result, the primary role of local states shifted from that of
shareholder of state-owned firms, including TVEs, to that of a land developer and tax
collector, competing for mobile private and foreign investment, with the aid of heavily
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subsidized infrastructure and a broad (but substantially concealed) capacity to strike
‘deals’ (Yang and Wang, 2008; Tao et al., 2010). According to You-tien Hsing (2010,
5–6), it was the rise of land rent as a primary source of local capital accumulation and
political leverage that inaugurated a far-reaching ‘urbanization’ of the Chinese state:
‘urban modernity, more than industrial modernity, now captures the political
imagination of local state leaders’.
This ‘land-infrastructure-leverage paradigm’ rests on a specific kind of institutional
complementarity (Tsui, 2011). First, the enduring ‘socialist’ land tenure system,
together with the huge gap between land acquisition costs and leasing prices, allowed
local governments to exploit lucrative, simultaneous roles as land owner, regulator,
planner and developer, capturing windfalls from land conversion and development
typically at the expense of farmers (Lin, 2009; Naughton, 2009). In the process, land
became a key instrument in the interjurisdictional competition for mobile investment
and the basis for new ‘zoning technologies’. Second, the windfall land revenues that
have become lifeblood of local public finance were predicated on the renegotiation of
central–local fiscal arrangements and the scalar redivision of the tax-and-revenue pie.
Third, the demand for massive, upfront financing to defray the initial costs of land
requisition and site preparation continues to be met by the half-reformed,
state-controlled bank system. Under the current corporate-governance structure,
state-dominated banks are predisposed to such ‘politically safe’ deals with SOEs and
quasi-governmental agencies, channeling massive capital flows in the direction of
ever-more extravagant infrastructure projects. Fourth, the nomenklatura system and
‘promotion tournaments’ drive local party-state leaders to propagate development
megaprojects, like high-tech parks, enterprise zones and even ‘new cities’, as visible
affirmations of political prowess (Hsing, 2010).
Correspondingly, China’s industrial relations ‘system’ is also riddled with contradictions. Authentic forms of labor-union mobilization continue to be suppressed, under
the disguise of the nominally socialist ACFTU. The industrial relations regime remains
predicated on a regressive and piecemeal welfare system and on the political deprivation
of workers, especially the peasantry. The land seized for newly built industrial parks,
enterprise zones and new cities is largely requisitioned from the peasants. The migrating
peasantry is the principal labor supply for urban megaprojects, as well as for the
fast-growing manufacturing and service sectors of the cities. The socialist hukoucum-land regime renders this ‘floating’ workforce exceptionally vulnerable to workplace exploitation and social discrimination. In the countryside, this same hukou system,
while offering rudimentary protection against the extremes of deprivation, exposes
disenfranchised farmers to the arbitrary power of local officials, developers and
managers. A tidal wave of land grabs has dispossessed 450 million farmers, evoking
comparisons with the enclosure movement of 18th-century England; land-related
disputes now represent the principal cause of rural grievances and social unrest
(Fewsmith, 2009; Hsing, 2010). In this respect, the ‘socialist-developmental state’,
following a unique path toward the commodification of land and labor, has been
instrumental both in the country’s spectacular economic growth and in its most
profound problems (Xu, 2011).
But even if this might be considered a characteristic state form, it is not a singular
one. Heterogeneous local-state configurations and strategies have proliferated in an
environment marked by deep (but inherent) contradictions in the country’s ‘transitional’ institutional system, the enormous regional disparities that have characterized all
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stages of the reform process and high levels of devolution, decentralization and
interjurisdictional competition across this unevenly developed, continental-scale economy (Oi, 1995; Segal and Thun, 2001; Remick, 2002). In turn, these unevenly developed
state structures have been interdigitated with an equally wide array of regionalized
varieties of statist capitalism, dirigiste developmentism and market socialism (Zhang
and Peck, 2013). China’s vast interregional differences in historical legacies, resource
endowments, leadership capacities and local politics significantly shape both local-state
behavior and economic-development models more generally. While localities along the
coast have generally enjoyed better circumstances for economic development, reflected
in localized state forms like ‘market-preserving federalism’ and ‘local state corporatism’, local states in resource-stressed and more agriculture-based regions have tended
toward predation (Saich, 2002; Tao and Yang, 2008). Saich (2002) suggests that there
are, in fact, multiple models of state–society relations operating at the same time both
within and between administrative jurisdictions, yielding distinctive socio-political
outcomes. Predatory and developmental state behaviors therefore coexist, even at the
local scale.
The combined outcome of these conditions is a Chinese state formation that is not
only heterogeneous in form but in some ways both doggedly effective and perpetually
on the cusp of crisis (see Pei, 2006; Dickson, 2008; Xu, 2011). For Howell (2006, 291),
‘what remains of the socialist developmental state is an increasingly isolated central
policy elite’, confronted by formidable implementation constraints and a range of
‘fragmenting, eroding and hyper-rivalistic pressures’. These pressures ‘in turn lead to an
increasingly complex tapestry of local state formations, exhibiting overlapping and
contradictory features of developmentalism and predation; of relative autonomy and
clientelism; of efficiency and inefficiency; of regulation and anarchy; of facilitation of
and excessive interference in the private sector’ (Howell, 2006, 291). The ‘multiorganizational’ (Chu and So, 2010) or ‘polymorphous’ (Howell, 2006) Chinese state
seems to be moving in several, contradictory directions at the same time.
If there has been a successor concept to the (socialist) developmental state, it has been
that of neoliberalism, although again this term has been only cautiously deployed by
China scholars—often more as a foil than a framework. The best-known account is
David Harvey’s, where the Chinese case is handled as a contradictory instantiation of
globalizing neoliberalism (as a state-assisted project for the restoration of capitalist
class rule), shaped by conjunctural opportunism and pervasive inconsistencies: ‘While
there are several aspects of Communist Party policy that were designed to frustrate
capitalist class formation, the party has also acceded to the massive proletarianization
of China’s workforce, the breaking of the ‘‘iron rice bowl,’’ the evisceration of social
protections, the imposition of user fees, the creation of a flexible labour market regime,
and the privatization of assets formerly held in common’ (Harvey, 2005, 150). So (2007)
largely affirms Harvey’s account, at least for the 1990s. During that time, while
spurning unpalatable features of the ‘neoliberal internationalism’ advocated by
Washington-consensus agencies (Liew, 2005), China was moving decisively toward
the deeper neoliberalization of its domestic sphere.
While the Chinese state has been offloading its welfare and social services, including
pensions, healthcare, housing and education, to households and to the private sector, it
has not been downsized or weakened, as prescribed by face-value interpretations of
neoliberal orthodoxy. According to Chen’s (2008) calculations, the total disposable
income of the Chinese government in 2007 was US$2.1 trillion, the rate of growth of
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state revenues (at 16% per annum) having exceeded even the 10% GDP growth rate
between 1995 and 2007. Consequently, dramatic reductions in welfare coverage have
occurred against the backdrop of rapid economic growth and swelling government
revenues. An historically consistent feature of China’s welfare system, in fact, is its
socially regressive character (Solinger, 2005; Li and Zhong, 2009; Frazier, 2010; Gao,
2010). Nowhere is this ‘tendency to privilege the stronger [while] marginalizing the
disadvantaged’ (Solinger, 2005, 88) revealed more clearly than in the rural–urban divide
(cf. Whyte, 2010). The redistribution of rural social benefits was both minimal and
consistently regressive during the 1988–2002 period, accounting for only 1% of total
rural household income (Li and Zhong, 2009). In contrast, some 11 million state and
Communist-party cadres, most of whom are securely ensconced in China’s urban
middle- or upper class, continue to enjoy generous benefits, ranging from free
healthcare to full pensions, financed entirely from state budgets. And, if anything, the
wealthy seem to have become increasingly averse to the notion of social redistribution
in favor of the poor (Solinger, 2005; Frazier, 2010).
In some respects, this Chinese version/vision of neoliberalism may be even bleaker
than its Western counterparts. As Qin (2008, 2010) has argued, the Chinese population
has less welfare than those in LMEs and less freedom than those in CMEs; yet
ironically, these very miseries constitute the foundations upon which China has secured
its formidable competitiveness in low value-added, labor intensive activities—what Qin
calls the ‘low human rights advantage’. But does this represent an evolution from state
socialism, through the transitional stage of the socialist-developmental state, to
‘neoliberalism with Chinese characteristics’? Not according to So (2009, 53–57), who
contends that a pattern of development since the late 1990s—prompted by the costs of
soaring inequality and by a groundswell of social protests across the country—has led
to a series of double movement-like ‘departures from neoliberalism’. These arguments
remain controversial, but So seeks to sustain his case by reference to a series of recent
developments: the strengthening of state capacity (and local control) through a more
elaborated cadre performance evaluation system and through redistributive tax
reforms; a redoubling of Keynesian-style infrastructure spending (which would surge
again after the global economic crisis); a renewed emphasis on ‘harmonious’
development, including rural reinvestment and transfers to the ‘new socialist countryside’; economic upgrading, away from low-road, low-skill and low-wage production in
favor of value adding; the continued subordination, or ‘dependency’, of the capitalist
class to the state; the carefully calibrated reconstruction of nationalist sentiments and a
steadfast refusal on the part of Beijing to accede to the dictates of international finance
capital, manifest in continued restrictions on investment and banking.
On these grounds, So (2009, 57, 61, emphasis added) draws the conclusion that China
has now ‘moved beyond the neoliberal mode and closer to the pattern of state
developmentalism in East Asia’, a transformation that (characteristically) has been an
‘adaptive process without a clear blueprint [accomplished through] trial and error, with
frequent midcourse corrections and reversals of policy’. Deyo and Agartan (2007)
likewise observe a benign Polanyian turn in favor of the social re-embedding of the
Chinese system, in the form of a socioinstitutional reflex against excessive marketization. But this represents a one-sided reading of Polanyi, as well as of the Chinese case.
Marketization may indeed be a process endemically prone to crisis and ‘overflow’,
resulting in social responses of various kinds, but Polanyi offered no guarantees that
these would be progressive. Politically mediated, they can trigger authoritarian
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3.3. Guanxi transnationalism or power-elite capitalism?
The fact that China’s market transition was never technocratically prescribed from the
center, according to some fixed developmental blueprint and neither was it unilaterally
imposed from outside, Washington-consensus style, but instead progressed, in Deng’s
memorable phrase, by ‘feeling for stones’, seems also to have proved to be fortuitous in
the longer run—at least for economic growth. Crucially, it has meant that endogenous
state capacities and centralized party control have been maintained through China’s
developmental transformation. In contrast with other post-socialist states, China has
not had to contend with systemic institutional failure; it has preserved formidable
powers in the ‘steering’ and sequencing of the reform process, while propagating a
diverse ecosystem of subnational economic-governance regimes through orchestrated
experimentation. In this socialist market economy, the state’s hand is nearly always
visible (or failing that, palpable), sometimes ‘guiding’ and sometimes ‘grabbing’
(Huang, 2008).
This gradualist transformation was initially enabled by the presence of ‘offshore’ cells
of Chinese capitalism, notably in Hong Kong and Taiwan, prior to the reform era
(Zhang and Peck, 2013). The Chinese party-state therefore had hands to hold as it felt
for stones. The reform process was initiated by a business-like marriage of convenience
between the CCP and overseas networks of guanxi capitalists, which has been
enormously profitable for both parties (see Lever-Tracy et al., 1996; Weidenbaum and
Hughes, 1996; Hsing, 1998; Zhang, 2005). Between 1982 and 1994, Hong Kong and
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responses too—an interpretation that arguably more suited to the contemporary
Chinese situation, in which neoliberalization has retained its status as a party-state
project, while continuing social unrest is being met with a combination of police
repression and political management. ‘Consolationist’ readings of Polanyi do not seem
appropriate here. Unchecked neoliberalization would necessarily erode the CCP’s
capacity to manage those patronage resources necessary to the maintenance of political
security (Naughton 2008). Selective concessions in favor of weaker and excluded groups
can be considered politically rational, in the face of roiling social unrest, although
managing the conflicts between ruling elites and the social masses within the framework
of the Leninist regime remains an ‘astonishing high wire act’ (Naughton 2008, 130).
The country’s oscillations between market-led and state-led development and its
attendant transformative multiplexity, seem repeatedly to frustrate even the most
sophisticated attempts at conceptual categorization. As a result, there is increasing
resort to what might appear to be openly oxymoronic (not to say willfully
contradictory) formulations like ‘neoliberal developmentalism’ (Ji, 2006) and ‘state
neoliberalism’ (Chu and So, 2010), while others prefer to dissent from the trope of
neoliberalism altogether (Kipnis, 2007; Nonini, 2008). Whether or not ‘neoliberalism’ is
the most appropriate way to characterize the coexistence of these evolving state (and
party) forms with endemic, uneven and conflictive processes of deepening marketization
will no doubt remain a hotly contested question among Sinologists and comparative
political economists. This represents yet another way in which Chinese capitalism is
more appropriately defined through its dynamic contradictions and certainly not as
some static social form or institutional matrix. It displays little functional coherence,
either as a socialist-developmental or as a neoliberal state and neither does it display a
tidy transition between the two. Instead, China combines contradictory forms.
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The overseas Chinese . . . could bypass most regulations, thanks to familiarity with local
customs, habits, and language, to the manipulation of kinship and community ties—which
they strengthened through generous donations to local institutions—and to the preferential
treatment that they received from CCP officials. Thus, while foreign corporations kept
complaining about the ‘investment climate’, Chinese entrepreneurs began moving from Hong
Kong to Guandong almost as fast (and far more massively than) they had moved from
Shanghai to Hong Kong forty years earlier (Arrighi, 2007, 352; cf. Hsing, 1998).
The influx of Hong Kong capital into Shenzhen, Dongguan and other parts of the Pearl
River Delta led to their rapid ‘Hongkongization’ after the early 1980s (Smart and
Smart, 1991; Cartier, 2001). Similarly, a decade later in Suzhou—the heartland of the
once-famous Sunan model, based on collectively owned TVEs in the countryside and
SOEs in the cities—became ‘Singaporized’ through its integration into global production networks, based on longstanding ethnic ties and initiatives like the China
Singapore Suzhou Industrial Park (Wei et al., 2009). To take a further example,
Kunshan city and zones within Shanghai’s suburbia have been transformed into ‘little
Taipeis’, dominated by a new breed of Taiwanese TNCs, networking across local-state
agencies, indigenous business communities and offshore investors (Wei, 2010).
The conspicuous role played by overseas Chinese capitalists has prompted some to
resume the search for a cultural essence of Chinese capitalism, grounded in supposedly
transcendent values and common practices (as opposed to structural capacities and
conjunctural conditions). Some formulations of guanxi (or family-kinship) capitalism
have been fashioned in these terms (Redding, 1993; Boisot and Child, 1996) and they are
echoed in Jacques’ (2009) reading of China as a culturally distinct ‘civilization-state’.
Whyte (1995, 1996) believes that familialism and kinship loyalty constitute the social
roots of a geographically unique economic-development model, perhaps the most
important distinguishing factor between the successful Chinese reform project and the
protracted problems of its Soviet counterpart. He goes on to wryly observe, however, that
many of the same cultural traits that were once portrayed as obstacles to development
(such as enduring kinship ties; the embrace of non-scientific rationalities; reverence for
tradition, stability and harmony . . .) have since been rediscovered, in revisionist histories
of the Chinese-capitalist present, as supposed secrets of growth (Whyte, 2009).
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Taiwan investors contributed 470% of the $107.4 billion total of realized foreign
capital inflows to China (Hsing, 1998, 8). The subsequent proliferation of diasporic
networks enabled what Arrighi (2007, 351) portrays as a ‘matchmaker’ function, an
historic ‘encounter of foreign capital and Chinese labor, entrepreneurs and government
officials’. In this respect, the (re)formation of Chinese capitalism was a cross-border and
in some senses extra-territorial phenomenon from the start, as diasporic capital
exploited a range of localized (and liberalized) openings, mostly in coastal enclaves,
subsequently to spawn not so much transplanted replicas of Hong Kong, Taiwanese or
Singaporean capitalism (cf. Carney et al., 2009), but substantially new hybrids of
state-facilitated, ‘insourced’ capitalism—actively predicated on the exploitation of
massive and highly disciplined internal labor reserves by ‘repatriated’ Chinese capital.
The availability of pre-existing kinship and friendship relations and the exercise of
reciprocal gift exchanges played a key role in enabling and facilitating these investments
(Smart and Smart, 1991), lubricated by government appeals to the latent loyalties of
émigrés.
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The emphasis that is placed, in VoC scholarship, on formal state structures and
institutional logics, almost exclusively at the national scale, is ill suited to the challenge
of understanding the complex, multi-scalar and deeply networked constitution of
political-economic power in China. Endogenous institutional capacities at the national
scale certainly have a role here, but it is crucial also to attend to those diverse
‘relationalities’ that exceed this singular frame, for example between those onshore and
offshore Chinese capitalisms marked by mutual dependency; between those more liberal
and more coordinated regional models that exist within China, not as islands but as
conjunctures within a wider pattern of uneven spatial development and between local
economic-development strategies on the one hand and the shifting matrix of
opportunities/constraints presented by globalizing supply networks and overseas
markets. Perhaps most notably, among these relational characteristics, is what many
consider to be the essence of Chinese relationality, the distinctive network capacities of
guanxi capitalism (see Yeung, 2004; McNally, 2008b). These are difficult, if not
impossible, to explain according to the monochrome distinction between market and
coordinated relations, since they are different in kind.
In fact, several varieties of ‘network capitalism’, which draw in various ways on
long-term, reciprocal relations between kinship groups, have been identified in Asia (see
Yeung, 2004); although it should be noted that networks barely figure in Amable’s
(2003) seriously underdeveloped construction of the ‘Asian variety of capitalism’. For
McNally (2006), Wenzhou City represents the ‘quintessential capital’ of this pattern of
development, where the density of network ties across small, family enterprises has been
such as to generate an economically functional form of social capital, propelling an
almost entirely private network of family enterprises into the realm of world markets
and globalized supply chains. Registering twice the national rate of GDP growth for
much of the reform period, what became known as the ‘Wenzhou model’ was soon
attracting the attention of prominent analysts and senior party officials (Tsai, 2007).
None of these regional models are static, however (Zhang and Peck, 2013). Recently,
Wenzhou’s growth has faltered, degrading into an inauspicious development path based
on the exploitation of family labor and low-tech manufacturing (Wei et al., 2007). While
a rigid web of interpersonal relations centered on kinship and place has excluded
external collaborators, calcifying state-business networks have spawned rent seeking
and local protectionism. Moreover, the reliance of Wenzhou firms on extended families,
social networks and ‘underground banks’ for financing could be just as easily read as a
reflection of the weakness of China’s financial system, rather than a functional
component of guanxi capitalism (Tsai, 2002).
Proponents of network capitalism maintain that, in an environment characterized by
weak legal infrastructures, limited property-rights protections, deficient capital-market
structures and extreme institutional uncertainty (none of which, it should be noted, are
conditions remotely typical of mainstream varieties of capitalism), social-network ties
have effectively filled some of the attendant institutional voids, working around some of
the obstacles of the old command system in making critical information, resources and
opportunities accessible to firms and entrepreneurs (Xin and Pearce, 1996; Peng, 2004).
Significantly, however, these same culturally charged social-network ties have also been
instrumental in the development of a more malign pattern of reciprocal exchange
between commercial wealth with bureaucratic power in the post-Mao economy,
between private entrepreneurs and state cadres. This combination of concentrated
power and weak accountability has meant that party officials at all levels have been in a
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11
12
For an expose of the vast wealth accumulated by the family of Premier Wen, see Barboza (2012).
At least one-quarter of private firms were originally part of SOEs (Dickson, 2008).
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unique position to parlay professional relationships into personal connections and
indeed financial gain. The rampant commodification and capitalization of political
power, manifest in the growth of power-for-money deals among elites, has fueled a form
of ‘power-elite capitalism’ or ‘crony communism’, according to some observers (Wank,
1996, 1999; Pearson, 1997; Wu, 2007; Dickson, 2008).11
Systemic conditions of distorted public–private reciprocity have also transformed
many SOEs into de facto fiefdoms (Saich, 2010). Members of this unique ‘state
capitalist class’ tend to be both consummate party insiders and avid readers of the
Chinese edition of the Harvard Business Review (Economist, 2012b). State cadres and a
new breed of ‘red capitalists’ (former party and government officials who defected into
private business, xiahai, often following the ‘insider privatization’ of SOEs), have been
(ab)using their connections to convert political privilege into economic wealth
(Dickson, 2003, 2008).12 Capitalizing on personal and familial ties, many such cadres
(along with their kin and protégés) have succeeded in amassing private fortunes,
morphing into what has been characterized as a first-generation ‘cadre-capitalist class’
(So, 2003; Sun, 2004). The so-called ‘princeling party’, comprising the sons and
daughters (and increasingly the grandchildren) of China’s revolutionaries, continue to
dominate the country’s political and economic markets (Andreas, 2009). This other face
of guanxi yields significant and continuing distributional consequences, while also
shaping China’s distinctive class structure, as disparities grow between those ‘inside’
and ‘outside’ the system.
The political foundations of China’s power-elite capitalism are also rooted in the
nomenklatura cadre management system. This weaves formal hierarchies with guanxi
networks, vesting in so-called commanders-in-chief (yibashou) enormous discretionary
power—to appoint lower-level state officials and SOE managers and to approve
projects or contracts—with very little external scrutiny (Sun, 2004). For example, land
development across China has become a key instrument of discretion for local cadres,
enabling the construction of durable political coalitions, while enriching friends and
relatives, through the manipulation of lucrative business opportunities (Naughton,
2010). This, in turn, has become a major force behind the maintenance of high property
prices, fueling the country’s ongoing construction boom. According to Wang (2010),
economic inequalities are further stretched by related flows of unreported, hidden or
‘gray’ income (amounting to 30% of China’s GDP), which primarily accrues to the
wealthiest decile of urban households in the form of bribes, kickbacks and other
monopolistic rents associated with guanxi-mediated land and financial deals and other
abuses of state power.
Economic growth, rather than facilitating the emergence of democracy, has instead
spawned exclusionary networks of vested interests, based on patronage, cooptation and
the appropriation of economic resources (Pei, 2006, 88–90; Fewsmith, 2008, 274). This
is neither a desirable nor stable configuration. The disproportionate enrichment of
those with privileged backgrounds and connections, coupled with flagrant acts of
political repression directed at dissenters, has not only been disincentivizing
productivity-enhancing innovations but is fueling widespread resentment on the part
of deprived workers and farmers (O’Brien and Li, 2006; Dickson, 2008). It probably
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remains true that, on balance, the political incentive structure confronting Chinese
citizens continues to favor the maintenance of authoritarian rule, as long as economic
growth can be sustained (Wright, 2010). Yet the fact that government spending on
internal security (policing and domestic surveillance) now exceeds the size of the
country’s defense budget calls attention to the costs and challenges of ‘stability
maintenance’ (Buckley, 2011; Fewsmith, 2012). The persistence of power-elite capitalism has nevertheless been facilitated, so far, by its decentralized and diffuse form and
its expansive web of beneficiaries, in a manner that echoes the mode of reproduction of
Chinese-style decentralized authoritarianism (Dickson, 2008). Its symbiotic nature
creates a strong, self-perpetuating tendency, as the parties capture mutual gains;
meanwhile, incentives to challenge the rules of the game are generally weak. The
regime’s success in co-opting the population in one historical period, however, does not
preclude quite different outcomes in subsequent phases, the seemingly ‘fixed, fast-frozen
relations’ of the society may prove to be more transitory and fragile than is commonly
assumed (Wright, 2010, 179).
The pervasiveness of guanxi ties in structuring exchange relations in China’s
burgeoning political-economy affirms the Polanyian lesson that the many faces of
reciprocity are more than mere vestiges of primitive societies. Personal and particularistic connections, coupled with informal norms governing trust and authority
relations, are crucial in all economies, especially in situations where trust- and
contract-guaranteeing formal institutions are weak or unreliable (Hamilton and
Biggart, 1988; Redding, 1993; Whitley, 1999). These irreducibly social relations may
sometimes substitute for, but can also hinder the growth of, those exchange
relationships normally governed by formal procedures and institutions. China is
indeed making significant efforts to reform its legal system, but judicial independence
remains hobbled by the ruling party’s determination to maintain political supremacy.
These efforts are also compromised by pernicious forms of local-government influence
over the courts, courtesy of local control over judicial appointments and court-system
financing (Peerenboom, 2002). Whitley (1999), in his discussion of capitalist variety
beyond the West, has highlighted the analytical importance of the overall cohesion,
prestige and autonomy of the state executive and bureaucracy and its ‘strength’ vis-à-vis
social-interest groups and economic elites. From this perspective, it must be concluded
that China’s mode of networked, power-elite capitalism marries prodigious capacities
with fatal flaws. In this, as in other spheres, its achievements in economic development
and growth have been secured in the face of deeply contradictory circumstances.
Apparently, the merits and demerits of China’s gradualist transformation represent
two sides of the same coin. The gradualist transformation, artfully managed by the old
regime, conferred overwhelming advantages on the ruling elites relative to potential
sources of opposition. As political and economic power fused ever more deeply, party
elites would come to read any opening up of the political system as a threat to their
accumulating privileges and benefits (Saich, 2010, 390–391; Pei, 2006, 18), effectively
reinforcing the primary circuits of power. As Sun Liping has recently put it, this class of
reformers has become ‘so addicted to feeling for stones [that has lost any] desire to cross
the river’ (China Youth Daily, 2012). While political monopoly affords party elites
tremendous advantages in the rapid mobilization of resources and policy capacities for
favored projects, the unseemly mélange of GDPism, rent-seeking, corruption and
unchecked tendencies for overproduction represent ever-present threats to whatever
‘integrity’ this system possesses. As the sustainability of the China model is increasingly
A variety of capitalism . . . with Chinese characteristics?
.
385
called into question, not least due to its alarming contemporary combination of market
bubbles, audacious cronyism and simmering dissent, there are many who are beginning
to wonder whether the elite-based ruling coalition that has—so far—managed this
unprecedented marriage of a single-party Leninist state and an escalating program of
market reforms can keep all of the plates spinning. Should they stop, the
interdependencies of the global system are such that the reverberations will certainly
overspill far beyond this unparalleled new ‘variety’ of capitalism.
4 Conclusion: Karl Polanyi in Beijing
The question of contemporary China’s transformation, it has been suggested here,
presents a serious (and potentially monumental) challenge to extant theories of
capitalist development, growth and variety. Rising to global prominence largely outside
the field of visibility defined by the VoC literature, the Chinese case in many ways
echoes the earlier, category-contesting ascendancy of Japanese capitalism, located as it
was in a distinctly ‘offshore’ position relative to the regulation-theoretic heartlands of
Atlantic Fordism (Peck and Miyamachi, 1994). Maybe every historical form of capitalism is destined to generate its own gravediggers, though not always in the form of
a revolutionary working class. If the Fordist variant of capitalism was dealt a decisive
blow by an earlier manifestation of Asian capitalism, post-Fordist Japan, perhaps
the rise of China marks the demise of the US-centric variant of the neoliberal model?
By the same token, the orthogonal case of China calls into question not only supposedly
universal accounts of global capitalism but also of those theories of capitalist
variety that have been tending toward parsimonious forms of firm-centric political
economy and bipolar readings of the LME–CME continuum. If the awkward
formulation of ‘state capitalism’ reveals anything, it is that the recombinant Chinese
state, which somehow holds together an unlikely marriage of entrepreneurial
developmentalism with Leninist party discipline, remains the principal orchestrator
of the country’s development path. In doing so, it is not behaving in the fashion of
either the American or the German state, but instead is carving its own path, with
the assistance of an historically shrewd reading of the opportunities afforded by
globalizing capitalism.
Rather than attempting, once more, to hammer Chinese empirical pegs into Western
theoretical holes (Saich, 2002), this presents a constructive opportunity both to realize
and operationalize notions of variegated, polymorphic capitalism (cf. Peck and
Theodore, 2007; Jessop, 2012). The apparent inability of the conventional VoC
framework to digest the Chinese model should not be taken as an excuse for theoretical
defeatism or as a license for retreat into atheoretical, sui generis exceptionalism. Rather,
as Fligstein and Zhang (2011) have emphasized, it can be an occasion for the
open-ended exploration of extant theory claims in a challenging but significant context,
possibly extending to their reevaluation and reconstruction. At first blush, it might be
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China is not a mirror image of the West. Rather it is an independent vision of how a society
can be put together, and must be understood in its own terms. Cross-cultural comparisons are
an important means to fashion such independent understandings, but China should be treated
as a positive case [and] accordingly, the concepts and the theories of analysis should take their
meaning from China’s historical experience (Hamilton, 1985, 207).
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observed that the Chinese model of capitalism continues to defy most attempts at
positioning along the singular LME–CME axis, perhaps suggesting the need for a
tripartite or even 3D conception of capitalist variety (cf. Table 1).
There is no need, however, to adhere slavishly to the orthodox, rational-choice
version of the VoC framework (see Hall and Sockice, 2001b), which today seems to be
invoked as often in critique as in application, to derive constructive insights from its
comparative, macroinstitutional sensibility. The Chinese model may indeed frustrate
and exceed the off-the-shelf version of the VoC framework, as it does many ‘imported’
theories. But this can also be seen as an opportunity for more reflexive explorations.
This is the path we have pursued here, as part of an attempt to articulate, in practice,
some of the potential of ‘variegated capitalism’ approaches. Building on the resources
of ‘geographical political economy’ (Peck and Theodore, 2007; MacKinnon et al., 2009;
Sheppard, 2011), these share common ground with heterodox VoC approaches in terms
of motivating questions, but seek to answer these in a fashion more attentive to uneven
spatial development, to macroeconomic and macroinstitutional relationality, to
cross-case connectivities and multiscalarity and to the rising significance and durable
distinctiveness of economies located outside the (still largely hegemonic) transatlantic
frame. They also favor the ‘substantivist’ analysis, to borrow a term from Polanyian
economics, of actually existing economic formations, rather than logical deductivism,
an approach we have adopted in this exploration of the Chinese model or pathway, of
development.
We have suggested that if this is indeed a ‘model’, it is a complex and heterogeneous
one and one that is maybe better appreciated by way of its paradoxes and
contradictions than by reference to some singular logic or form of institutionalized
equilibrium. China’s internal heterogeneity and its profoundly constitutive, mutual
relations with other capitalisms, far and near (see Zhang and Peck, 2013), speak to the
futility of searches for an ‘essential’ form of institutional-cum-macroeconomic
coherence at the national scale. Its idiosyncratic ‘socialist market economy’, moreover,
is quite clearly an ‘instituted’ market, to invoke another Polanyian concept (Polanyi,
1957; cf. Wu, 2008) and it is one with few peers, even among the near-relatives of the
post-socialist and developmental states. The role of a comparative methodology, in this
context, is not to grant ‘exceptional’ status willy-nilly, but instead to position such cases
in relation to their others (Peck, 2012). Chinese capitalism may indeed display a ‘hybrid’
or ‘alloyed’ form, but some of its constitutive elements (like guanxi) are absent from the
mainstream varieties of capitalism. This, however, is no excuse for atheoretical,
case-by-case explanation: there is much to be gained, in explanatory terms, from placing
capitalisms among their others—even, or perhaps especially, the rogue cases. This
stands as a challenge radically to rethink received readings of ‘variety’, to continue to
extend the registers of what Polanyi called ‘comparative economy’ and to position both
anomalies and affirmative cases within a reflexive and relational explanatory frame.
This is the promise of variegated capitalism approaches.
Crucially, these theorizations of capitalism must remain in a state of reconstruction,
always being available for empirical ‘stress-testing’ (see Burawoy, 2003). This implies
that a special place is reserved for ostensibly discrepant or disruptive cases in particular
and for economic-geographical investigations more generally. Some degree of common
cause (or critical dialogue) might be forged with VoC scholars here. The Chinese
experience can be seen to affirm at least one of the central tenets of VoC scholarship,
concerning the entrenched nature of institutional path-dependence, even if it does so in
A variety of capitalism . . . with Chinese characteristics?
.
387
Today, in China, markets are . . . creating a dynamic if unstable society, leading in as yet
unclear directions—a new form of socialism, or more likely a new form of capitalism (state
capitalism)? This reflects China’s specific strategy of transition in which markets were
incubated by the party state—so different from Russia’s strategy of shock therapy. Indeed, one
might say that Russia replicated the Bolshevik strategy of War of Movement, which aimed to
destroy the old socialist order as the precondition for the spontaneous growth of a new
capitalist order. The Chinese strategy, on the other hand, has been a War of Position from
above, a passive revolution—transformation as a way to avoid revolution (Burawoy, 2003, 52).
Given the soaring economic inequalities and seething undercurrents of social unrest
that are characteristic of contemporary China, however, whether it is a revolution
avoided or just delayed, must remain a radically open question. Nevertheless,
Burawoy’s inventive melding of Gramscian and Polanyian concepts here can be seen
as a necessary corrective to the relatively narrow analytical bandwidth of more
conventional VoC approaches and the constrained institutionalism that this has
engendered. It also calls to mind Arrighi’s (2007) provocative reinterpretation of
Chinese economic development in Adam Smith in Beijing.
We would aver, however, that perhaps Karl Polanyi may be more urgently needed in
Beijing. It may be going too far to conclude, as some neoPolanyian readings of
contemporary China have been doing, that the country’s ‘reform variant’ should be
seen as a stalwart member of the dwindling family of ‘embedded socialisms’ (Hann,
2009), or that the recent, crisis-driven turn to sociospatial redistribution, in the face
of rising political discontent and massive economic strains, represents an historic
‘double movement’ in favor of social re-embedding (Deyo and Agartan, 2007), but on
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a way that overflows the usual tolerances of VoC analysis. The path dependencies of the
Chinese case plainly transcend capitalism itself. The success of post-1978 reforms was
partly predicated on prior achievements in social development under Mao, while even
the excesses of the Cultural Revolution generated spaces of political opportunity for
reform elements in the CCP—to experiment with, rather than hold doggedly onto,
Maoist–Leninist doctrines (Arrighi, 2007; Whyte, 2009). This is not, however, to
simplistically glorify or demonize China’s socialist past: during the Maoist era, the state
effectively stripped the underprivileged of their political agency, under the sign of
socialism (Qin, 2010). The peasantry was sacrificed by Mao to support the country’s
historic urban–industrial catch up, thereby institutionalizating an urban–rural divide
that to this day is profoundly constitutive of the unevenly developed Chinese ‘model’
(Wu, 2008). This comprises more than an array of sub-varieties of capitalism, since the
islands of dynamic development in China remain in a sea of relative under-development
(Zhang and Peck, 2013).
The chances of China fulfilling a 21st Century destiny as a variety of socialism seem
to be receding, historically speaking. Yet one of the many paradoxes of the country’s
distinctive development path—even as it has become increasingly engaged with
capitalist logics in general and by the imperatives of neoliberal globalism in particular—
is that the origins, the productivity and possibly even the sustainability of its ‘model’
must be understood to be substantially anchored in its state-socialist past. Furthermore,
the Chinese experience raises the question of whether it is possible for some (socialist)
states to engage selectively with capitalist development, rather than buy the full
‘package’ (cf. Kornai, 2009; Szelény, 2010).
388
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Acknowledgements
Paper presented at the Third Global Conference on Economic Geography, Seoul, Korea, 28
June–2 July 2011. We thank Eric Sheppard, Nik Theodore, Jun Wang, Michael Webber and
Henry Yeung for advice and discussions relating to this article, and to Neil Wrigley and the
anonymous referees at the Journal of Economic Geography for their constructive engagement.
The financial support of the Social Sciences and Humanities Research Council of Canada
(award # 410-2009-1172) is gratefully acknowledged. This article was written while J.P. was Lim
Chong Yah Professor at the National University of Singapore.
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the other hand the Chinese case certainly does call to mind the injunctions of
Polanyi-the-comparative-economist (Peck, 2012). What if, instead of positioning the
principle of market coordination in a sequential and historical relationship with social
regulation and institutional embeddedness, in a temporal reading of the
double-movement metaphor (as if marketization and socialization only see-saw against
one another through time), this was replaced with a simultaneous and geographical
conception of the contradictory coexistence of the integrative principles of market
exchange, reciprocity and redistribution within fundamentally heterogeneous economies? This conception, in which variegated capitalisms necessarily (co)exist with their
others, in contradictory and often crisis-prone hybrids and in webs of mutually
constitutive relations, might enable a critical but theoretically ‘positive’ understanding
of China’s development path. Rather than flatten out this model’s Janus-faced
complexities, contradictions and countertendencies, different kinds of explanations
might be generated by confronting these disjunctures more directly.
Moreover, it would be patently insufficient simply to ‘add’ China to the existing
catalogue of VoC cases, as if these were merely self-contained, mostly independent
systems engaged in ‘pacific’ forms of lateral competition (see Jessop, 2012), because
they each represent conjunctural locations within an unevenly developed global system.
If nothing else, China’s globally proportioned square-peg case has rightly earned the
status of exhibit A in a far-reaching reconsideration of the singular development
blueprint associated with the Washington consensus (see Ramo, 2004; Serra and
Stiglitz, 2008; Napoleoni, 2011), though arguably more as a negative lesson or
corrective, than as a source of unambiguous, ‘positive’ alternatives. At the very least, it
can be said that the distinctiveness of China’s transformation conclusively demonstrates
that ‘there is no single development strategy or set of institutions that have to be
adopted everywhere to foster’ economic growth (Whyte, 2009, 388). Whether or not
Beijing has become a driver of an alternative form of neoliberalization, for example,
depends crucially on whether neoliberalism itself is defined in the static terms of the
Washington-consensus policy package or in a more expansive, processual manner (cf.
Brenner et al., 2009; Peck, 2010). From the latter perspective, while Beijing may have
spurned a great deal of Washington advice, on the other hand it has clearly fashioned its
alternative socioeconomic development model very much through the market nexus.
China’s mode of residually socialist market-developmental statism might be considered,
in this context, not so much an alternative to market rule but an alternative modality of
market rule. And like all forms of marketization, it is prone to overreach, to overflow
and to overheat, since marketization defines a direction, not a destination. Whether this
ultimately takes us back into or beyond, the Polanyian territory of transnationally
scaled double-movement style crises must remain to be seen.
A variety of capitalism . . . with Chinese characteristics?
.
389
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