Cambridge, UK: Cambridge University Press, 2018. xiv, 478 pp. (Tables, graphs, figures.) US$39.99, paper. ISBN 978-1-108-46157-3.
Recent scholarship in the field of Chinese political economy has shown that China has not transitioned in a unilinear manner toward Western-style capitalism, and has offered important insights and correctives to better understand contemporary China. In their first-rate book, Yongnian Zheng and Yanjie Huang join this growing literature, and add to the debate on the institutional contours and political logics of state-market relations. The authors introduce the concept of the “market-in-state” (MIS) political economy, whereby the “market is always subordinate to the state and operate[s] within boundaries set by the latter” (58). In the first part of the nearly 500-page book, Zheng and Huang distinguish “three layers” of market-state relations and trace the roots of the MIS structure to imperial China, through dynasties and different political regimes. The second half of the book applies the MIS logic to contemporary Chinese political economy from the Qing to post-Mao eras.
With the conceptualization and operationalization of the MIS system, the authors do a stellar job of explaining the varieties of state-market relations and the shift across time from a more market-tolerant set of state-society relations to what they describe as state domination of market activities. The bottom layer of the MIS system comprises local-market grassroots networks, which operate without much state intervention and without much state-private partnership and are “formed spontaneously from the bottom up” (124). “Early sprouts of capitalism” (250) began with small-scale market activities, took root outside of state boundaries, and became incorporated into state-led market formation in the late 1990s.
The grassroots activities, however, needed the blessings of high politics as the “top-down linkage,” which has become the modus operandi for China’s market reform (252). The private sector and town and village enterprises that emerged have “hit a growth ceiling” as the state has emerged as a major promoter and engine of economic growth (254). The heterogeneous players in this layer have weaved a network of interests between the state and the market.
The scale of the market denotes its political significance, which invites state cooptation and is the causal mechanism of the shift from the grassroots layer to the intermediary layer. The “mutual interpenetration” (256) and constant negotiation between state and politically significant private entrepreneurs and large private business groups mark the momentous shift from market-based to state-controlled efficiency in Zheng and Huang’s story. State-sponsor and state-agency models, with the state retaining structural domination of the market, characterize the variety of state-market relations in this middle ground.
At the pinnacle of the MIS is the “mini political economy” (385). In Zheng and Huang’s depiction, the top layer appears disconnected from the other layers and is less state dominated. The authors liken the uppermost layer’s internal logic to the Mao era’s “family plot system.” The analogy characterizes the principal-agent issues that arise when agents of the state-owned economy seek to satisfy their own vested interests rather than the state’s interests (386). The farmer is replaced with the party-state and its management of state-owned enterprises (SOEs). In this layer, the SOEs are delinked from the state through corporatization during the reform era and subordinated under the State Assets Supervision and Administration Commission.
The endogenous nature of the MIS system deemphasizes exogenous factors, such as reverberations of the global economy and technological and context-specific characteristics of industrial sectors, which shape the interpenetration of the state in market governance. Extant research shows that sectoral attributes interact with state priorities, such as information control and infrastructural development, to shape varying degrees of state incorporation and global market competition. For example, state-owned telecommunications carriers, which manage the state-owned backbone infrastructure, and the predominantly privately owned value-added service providers and equipment makers, which operate on and supply the networks, are governed by the same sector-specific institutional landscape of centralized and deliberate regulation of market entry, business scope, ownership, and standards setting.
In other words, which “centrally managed SOEs have largely left the orbit of the government’s macroeconomic and social management” (415) and which ones the state continues to exercise limited resources and regulatory capacity to strictly regulate depend on the sector’s contribution to the national technology base and the competitiveness of the domestic economy and application for national security. Corporatized SOEs in nonstrategic sectors do not experience the same deliberate regulation experienced by the state grids, central banks, and telecommunications operators. However, privately owned businesses in strategic industries, such as the Internet service providers, must comply with rules and regulations and tolerate state intervention, which promote indigenous technological development and global competitiveness, in addition to safeguarding social and political stability.
The three layers of state-market relations identified by Zheng and Huang operate in political logics that differ from existing comparative sectoral analysis of the Chinese political economy, which shows the varieties of interpenetration operating in conjunction in sector-specific ways as China integrates into the global economy. Notwithstanding the different interpretation, Zheng and Huang’s market-in-state political economy and the book’s “historicity of market-state relations” in China (24) constitute an important and excellent contribution to prevailing debates on the Chinese political economy.
Roselyn Hsueh
Temple University, Philadelphia