Why do some authoritarian regimes transform their political and economic systems? China’s leaders are reshaping the country’s politics and economy through massive efforts on anti-corruption, centralization, and official calls for governing according to Chinese moral traditions. In this paper, I provide a theoretical framework arising from authoritarian information problems for the rise of the new normal and analyze its causes using policy statements and data on anti-corruption cases. The paper explicates two modes of Reform Era governance: a technocratic mode and a neopolitical mode. The former, which dominated until 2012, fostered growth via decentralization and relatively weak monitoring of local officials, producing tremendous economic vitality as officials accepted the tradeoff between total control under the prior planned economy to partial control of a larger pie and side payments with the emergence of markets. The accumulating costs of the technocratic mode’s economic and political pathologies have motivated a decision to alter course, increasing monitoring of locals and promoting official morality among the officers of the party-state.
State Advance and Retreat:
China’s State-Owned Enterprises after the Global Financial Crisis
State capitalism remains a crucial piece of China’s economic development and broader political economy. How have China’s state-owned enterprises (SOEs) fared in the wake of the Global Financial Crisis? The recent rise and fall of SOEs in the wake of the global financial crisis illustrates political benefits and costs of China’s economic model. In its immediate aftermath, SOEs advanced their political and economic importance domestically and globally and engaged in a massive—and often wasteful—investment binge, in large part funded by loans and other policy favors associated with China’s stimulus package. Case studies of state-owned Yanzhou Coal’s investment binge and the court-ordered bankruptcy of privately-held East Star Airlines in 2009 highlight the preferences that connected firms following the loosening of credit associated with China’s stimulus package. Yet the moment of “state advance, private retreat” (guojin mintui) was fleeting with significant movement towards market-orientation since the 18th Party Congress.