What capitalism China has created by now

1. Capitalism with Chinese
Characteristics:
Perspective of State,
Market, and Society
ZHAO Wei
October 2012, Germany
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2. 2

5. Income Inequality in China
http://psdblog.worldbank.org/psdblog/2008/08/

6. Three China Stories : White, Red, and Black
The greatest
development
story (Stephen
Roach) :
The China model:
Danger Signs:
•
•
•
•
• Lifted 400
millions from
•
poverty
• Economic growth
•
• Infrastructure
development
•
•
Market authoritarian
One party rule
Major role for state
enterprises
Eclectic approach to
free markets
Growth without political
and economic rights
Performance-based
legitimacy
Town and Village
Enterprises
growing income inequality
– Gini coefficient 0.47
– city dwellers earning 3½
times as rural residents
•
•
•
•
Internal imbalances
(spending vs saving, city
vs rural, growth vs
environment)
External imbalances
(trade surpluses)
Environmental
degradation
Rise in public protests
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7. Need a Sociological Perspective on
State, Market, and Society in
Transformation ?
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8. Max Weber’s idea: rational social action based on
“capitalist calculation”
Ethics, laws, knowledge, values,
ideology and cultures and the
institutions for development,
maintenance, and transmission of
them: religion, family, education, and
science
Protestant ethics
evolves into capitalist
spirits
Land
Most people
most of time
behave more
and more as
All individuals with
economic
specific social
actors or even
personalities
entrepreneurs
Social order of market
economy and individual
economic action
Capital, money
Labour
Profit, surplus
value,
resources
allocation
and utilitarian
rationality
Common beliefs
with symbols and
subjective
meanings
Organization, technology
Reproduction of social
structure of economy
All kinds of social relations and informal ties of authority, conflict, trust, confidence and
solidarity constrain actions: State, social classes, status groups, ethnic groups.

9. Talcott Parsons’ idea: shared normative values
integrate the market economy into society
(Economic activities)
(Reproduction and cultural activities)
(Political activiteis)
(Social and regulatory activities)
9

10. Juergen Habermas’s idea: money and
power “colonize” the life-world of society
10

11. Karl Polanyi’s idea: embeddedness and reembeddedness
State
intervention
Market
Economy
Social
relationship
Society
11

12. The political origin of economic
transition in China (1)
• Political goal: developing a system of market economy
constructed and operated by the whole socialist political
structure (central and local governments)
• = “Socialist Market Economy” (SME): Chinese new official
ideology
• Objective of rational action: common wealth and profit
pursued and created by people led by the Party
• Means of economic action:
–
–
–
–
mobilizing abundant cheap labour supply
attracting foreign capital and technology
using huge potential domestic demand as a lever
Guangdong was one step ahead in China (Vogel)
12

13. The political origin of economic
transition in China (2)
• The affinity between SME and Chinese tradition:
1.
2.
3.
4.
The respect of established authority and ethic order : State
gives the green light
Personalism and familism: benefit the self, the relatives, the
closes, etc.
Pragmatism and formalism (face, relation, and affection):
useful and exchangeable
Materialism and economism: the Chinese cherish “make a
fortune” just as the Westerners cherish their freedom (Sun
Yatsen)
• Incrementalism rather than “big bang”:
1.
2.
Temporarily, it solves the problem of political legitimacy by
economic performance (GDP growth rate)
It solves the “social order” problem of communitary shared
value (mechanic solidarity) by market division of labor (organic
solidarity)
13

14. Sources of Chinese Industrial Take-off
1.
2.
3.
4.
5.
6.
7.
A unique system of rapid capital accumulation and mass investment
in fixed assets, whose value is double of the sales of goods in China
each year.
An unlimited supply of rural cheap labor, in the absence of cost of
social protection and job security.
An increase in the supply of skilled hands: thanks to its education
system and culture, during the last 10 years, the number of
university graduates has increased significantly.
Low institutional cost of industrial production: little trade unions, little
environmental protection, little protection of intellectual property,
etc..
Over-20-year continuous investment in large-scale infrastructure
and ecosystems of suppliers of industrial components built for 20
years.
The globalization of industrial production and standardization of
complex technologies: most technical processes have become the
"common knowledge" and the strategic positioning of the Chinese
industry is to use massively the "common knowledge“ to supply the
global value chains held by Western firms.
Finally, purchasing power and consumption demands growth on the
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domestic market.

15. The State as an Ensemble of Entrepreneurs: Micro Level
(central govt.)
(local govt.)
(consumer)
(wealth owner)
(work unit)
(entrepreneur)
(employed worker)
(unemployed labourer)
Source: Manfred Nitsch and Frank Diebel (2008) 15

16. The State as an Ensemble of Entrepreneurs: Macro Level
Source: ZHAO Wie (2009)
16

17. Capitalism and China
• If capitalism is as what Weber defined, China is definitely yes.
But…
• “Capitalist (Developmental) State”, rather than State Capitalism
– State itself as a collective actor of entrepreneurship to create
business, not just state intervention to regulate market
mechanism.
– State itself as a collective financier and banker to accumulate
foreign exchange and invest in business projects, not just as a
regulator of financial system.
– Strong socialist tradition of economic planning, not just an
emerging developmental state.
– Permanent use of Keynesian macroeconomic measures to
stimulate investment and create long-term expectations of private
entrepreneurs, not just use them shortly for crisis.
– Market competition and cooperation between State and private
firms in doing business, so-called “Guanxi” capitalism, not just
crony capitalism and government monopoly of profit appropriation.
– The State becomes a capitalist: someone owns property and
works for its own profit.
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18. Economy and China
Pragmatism and contingency: the famous saying of Deng Xiaoping is “It makes no
difference whether a cat is black or white; as long as it catches mice, it is a good cat”.
Private
firm
Free market
capitalism
State
capitalism
Property
rights
owned
by
China
State
firm
Socialist market
economy
Socialist planned
economy
Transaction coordinated by
Market
mechanism
Government
planning
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19. Chinese Society as a Market Structuring Process
Socioeconomic
status
Percentage of population
Source: LI Qiang (2005)
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20. Lifeworld Pathologies of China (1): Society Embedded in
Economy
Schooling &
education system
Social security
system
Medical and
health system
Social
stratification
Legal and juridical
system
Family
institution
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21. Lifeworld Pathologies of China (2): Impacts on Industrial Upgrading
Schooling &
education system
Social security
system
Medical and
health system
Emigration of the
rich and elites
Workers
protests
Social
stratification
Legal and juridical
system
Lack of technical
and industrial
competency
Family institution
Short of labor
Inter-firm
competition
Problem of
successors of
factories

22. Conclusion: We know better China’s society through
its economy
State as a
pragmatic political
calculator
zatio
n
Colo
ni
Contexts:
Chinese
traditions,
sources of
industrialization
s
dnes
edde
Emb
Society as market structuring
process
Market economy as form of
ideology
State as an
entrepreneur and a
capitalist
22