Dancing with the Devil: The Political Economy of Privatization in China

ISBN : 9780190682828

Yi-min Lin
288 Pages
156 x 235 mm
Pub date
Jul 2017
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From 1978 through the turn of the century, China was transformed from a state-owned economy into a predominantly private economy. This fundamental change took place under the Chinese Communist Party (CCP), which is ideologically mandated and politically predisposed to suppress private ownership. In Dancing with the Devil, Yi-min Lin explains how and why such an ironic and puzzling reality came about. The central thesis is that private ownership became a necessary evil for the CCP because the public sector was increasingly unable to address two essential concerns for regime survival: employment and revenue. Focusing on political actors as a major group of change agents, the book examines how their self-interested behavior led to the decline of public ownership. Demographics and the state's fiscal system provide the analytical coordinates for revealing the changing incentives and constraints faced by political actors and for investigating their responses and strategies. These factors help explain CCP leaders' initial decision to allow limited private economic activities at the outset of reform. They also shed light on the subsequent growth of opportunism in the behavior of lower level officials, which undermined the vitality of public enterprises. Furthermore, they hold a key to understanding the timing of the massive privatization in the late 1990s, as well as its tempo and spread thereafter. Dancing with the Devil illustrates how the driving forces developed and played out in these intertwined episodes of the story. In so doing, it offers new insights into the mechanisms of China's economic transformation and enriches theories of institutional change.


Privatization and Institutional Change: Toward an Eclectic Perspective
Driving Forces of Privatization
Political Actors as Change Agents: The Main Storyline
Note on Statistical Analyses, Data Sources and Chinese Materials
1. The Changing Fate of Private Ownership since 1949
Socialist Transformation and the Mao Era
From Getihu to Equal Protection of Public and Private Property Rights
Reversal or Moderation of Privatization?
Broad Trends of Change
Summary and Questions
2. Demographic Pressures
Structure and Change of the Post-1949 Population
Buildup of Employment Pressures
Labor Market: Occupational and Spatial Movements
Ageing and Old Age Support
3. The Evolving Structure of Public Finance
Unified Revenue and Spending
Fiscal Contracts
Revenue Partitioning
4. Careerism and Moral Hazard in Early Marketization
Large Is Beautiful: Political Performance Assessment under Economic Decentralization
The TVE Spectacle
The SOE Sideshow
5. Rule Bending for the Necessary Evil
Uneven Paces of Early Privatization
The Wenzhou Story Retold
Beyond Wenzhou
6. FDI and Privatization
Centrally Imposed Constraints and Local Rule Bending
FDI Entry Mode and Resource Dependence
Bi-polar Concentration of Risk Taking
7. The Tipping Point and Beyond
The Triggers
The Political Bandwagon
From Industrial Development to Urbanization
Asset Stripping and Insider Control
The End Game: SASAC and the Remaining SOEs
Institutional Stability and Unintended Consequences of Rule Compliance
Non-compliance and Political Risk Management
Path Dependence in Endogenous Institutional Change

About the author: 

Yi-min Lin is Associate Professor in the Social Science Division, Hong Kong University of Science and Technology. His research interests include political economy, organizations and institutions. He is also the author of Between Politics and Markets: Firms, Competition, and Institutional Change in Post-Mao China, published by Cambridge University Press.

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