Leading political economist Victor Shih reviews five books he recommends on China’s economy for The Browser. Number one is Huang Yasheng‘s Capitalism with Chinese Characteristics: Entrepreneurship and the State.
The biggest misperception about China is that it’s a dynamic market economy – it isn’t. It’s a fast-growing, state-dominated economy with some dynamic, private-market aspects. If you look at investment, a main driver of growth, much of it is going to state-owned enterprises (SOEs) or shareholding companies dominated by state entities. Or it’s going directly to government investments carried out at a central or local level. The misperception has abated recently following Richard McGregor’s book on the Chinese Communist Party. People are realising that the party is still behind much of what happens in China.
And on Huang’s book:
Victor Shih by Fantake via Flickr
I think Yasheng goes a little too far with some of his claims. But the broad outline is correct. There was a period of healthy organic growth in the 80s, driven by the de facto private sector. Many township and village enterprises were collectives or owned by the local government. But in reality they were private enterprises. This changed in the mid-90s, especially with the adoption of the ‘grasping the large and letting the small go’ policy that circumvented the special interests in the state sector. When Deng Xiaoping was alive, his executive vice premier, Zhu Rongji, wanted to bankrupt or merge many of the smaller state-owned enterprises into larger ones. It was a political tactic to further reform. And it worked.