Oxford: Oxford University Press, 2023. US$30.00, paper. ISBN 9780197697535.
Meg Rithmire’s book provides a rich and inspiring comparative analysis of state-business relationships in Indonesia, Malaysia, and the People’s Republic of China. It features three chapters focused on China, where the developmental dynamics of reform policies are a central theme. Chapter 2 offers a comparative discussion of the early stages of these relationships from 1945 to 1970. The book includes separate chapters dedicated to Malaysia and Indonesia, while the first chapter outlines the overall argument. The chapters differ in their temporal scope, as the analysis of Indonesia is limited to the Suharto era. Although much of the historical material is well-known, the book presents significant new insights into business networks and politics, supported by comprehensive data collection and fieldwork throughout the region.
The analytical histories of the three cases are built on a theoretical framework that centers on two key causal factors: trust among business and political elites, and financial control regimes. These factors, in turn, determine two structural patterns of relationships: “mutual alignment” and “mutual endangerment.” Indonesia under Suharto is identified as a case of growing mutual endangerment, Malaysia exemplifies mutual alignment, and China demonstrates shifting regimes, starting with alignment during the initial decades of reforms and later transitioning to mutual endangerment. Mutual alignment refers to a cooperative relationship where business entities carefully avoid political claims, and politics allows space for business activities. In contrast, mutual endangerment indicates that endemic mistrust can easily lead to system disruption, accompanied by strategic actions such as weaponizing information and the accumulation of foreign assets (capital flight).
Trust is largely influenced by the political history of countries. The book’s title can be seen as slightly misleading, as Rithmire primarily focuses on Chinese business in all cases. This emphasis is justified due to the historical dominance of Chinese business in Southeast Asia. However, this creates a peculiar context for understanding the formation of trust. Violence against Chinese businesses was prevalent in all three cases discussed, notably manifested as bursts of ethnic violence in Indonesia. This situation partially motivated a more cautious political strategy in Malaysia. Violent class struggles in China have significantly impacted trust levels and behaviour (such as feigned compliance). Hence, the experience of violent conflicts has led to endemic mistrust among Chinese business communities toward the government. Furthermore, violence in China also shaped perspectives in the other two cases, especially since it limited or completely blocked the most apparent response to domestic violence, which was emigration to China.
Financial control is a key instrument for both co-opting and regulating businesses in all cases. Governments can channel credit allocation through state-owned banks and engage in public shareholding and other forms of targeted investments via government-controlled funds. However, this also means that dysfunctions, and even breakdowns, in financial regulation—such as those seen during the Asian financial crisis—can drastically affect the relationships between businesses and government.
The analytical history presents several problematic aspects. The book assumes central concepts without sufficient examination. First, one must question whether the term “authoritarianism” is more confusing than enlightening. In the case of Indonesia, it clearly exemplifies a pyramidal power structure centered around an individual, the “autocrat.” In China, however, the autocrat refers to the Chinese Communist Party (CCP) or many local autocrats in the regions, resulting in a fractal structure that lacks hierarchical and personalized integration at the center. Malaysia has evolved into an authoritarian democracy, which Rithmire identifies as “competitive clientelism” in its current form. Second, the term “capitalist” is frequently used, often more specifically referring to “capitalist elites.” However, in all cases, we observe a clear distinction between “business elites” and private entrepreneurs in the vast SME (small and medium-sized enterprises) sectors. These differences are significant, especially when considering the “alignment” stage in China during the first two decades, where private entrepreneurship emerged as the driving force of the economy. This was followed by later stages marked by the growth of a class of “high-net-worth individuals,” some of whom even joined the political class. In addition, there is no discussion of the role of executives in SOEs, who duly should be seen as members of a “capitalist class” but are not private entrepreneurs.
There are more important theoretical issues to consider. The concept of trust is not explicitly elaborated upon (e.g., personal, institutional, systemic, outside options, etc.), although such distinctions clearly permeate the analytical histories. Most importantly, the notion of “moral economy” is not systematically introduced in the first chapter; instead, it gradually assumes a key role, culminating in the title of the conclusion. This concept carries significant weight and should not be merely treated as a rhetorical figure.
Additionally, this issue relates to the underlying topic of Chinese ethnicity and culture. There is a vast literature on Chinese business culture that highlights specific forms of trust-building and strategies for dealing with uncertainty. The book clearly supports arguments that point to the endogeneity of this business culture, which could be traced back to earlier periods, at least since the mid-nineteenth century, when violence became endemic in China. However, the question remains open as to how far this is simply stabilized by politics as an exogenous determinant (Malaysia), or whether politics is endogenous to this culture (China).
The financial control factor is prominent in the analytical history of the Chinese case. This suggests that comparing the three cases may be problematic, as it insinuates growing political instability in China. Financial deregulation is often accompanied by severe disruptions and rampant fraud in non-authoritarian countries, with the US serving as a prominent example. However, this does not imply that the conditions in the financial and financialized (real estate) industries apply to the rest of the business landscape. The Chinese narrative is silent on even the major players on “Chinese Main Street,” such as the giants of the digital industries or the rapidly emerging fields related to green technology (electric vehicles, photovoltaics), not to mention emergent global brands. Given the size of China’s economy, there may be sectoral and regional regimes of mutual alignment or mutual endangerment. This implies that the “autocrat” in Beijing remains detached from the business world. There are other aspects to consider, such as the often-emphasized role of cohorts in business culture, particularly regarding business ethics. This contrast includes the generation of former Red Guards compared to the new generation of entrepreneurs born in the 1980s.
Overall, the book provides rich food for thought and is a must-read in Chinese business studies. Projections about the Chinese political future remain elusive.
Carsten Herrmann-Pillath
Erfurt University, Erfurt