Pearls and Irritations

Yingyao Wang opens the black box of the Chinese bureaucracy to reveal the agency of the men and women who designed and redesigned Chinese economic policy.

The People’s Republic of China is not a monolithic entity, and here is a new book delving into the intricate world of Chinese bureaucracy, highlighting the pivotal roles played by individuals who have shaped and reshaped economic policies in the post-Mao era. By examining the often hidden efforts of these technocrats, it offers new perspectives on China’s rapid ascent and the essential contributions of policymakers to economic growth.

Uncovering the complex interplay between organisations and individuals that have influenced China’s policy shifts, Yingyao Wang, in Markets with Bureaucratic Characteristics: How Economic Bureaucrats Make Policies and Remake the Chinese State (May 2024, Columbia University Press) presents a detailed analysis of the Chinese bureaucratic system, showing it as a dynamic and diverse network shaped by various career paths, regional influences, and generational changes. This significant work enhances the understanding of economic decision-making in China’s reform and opening-up, providing a rare look into the inner mechanisms and social dynamics among technocrats in critical industrial and financial sectors. Wang’s sociological lens reveals the intricate social environment where career paths converge, networks are established and transformed, and the Chinese state continually evolves and adapts.

Description

China’s breathtaking economic development has been driven by bureaucrats. Even as the country transitioned away from socialist planning toward a market economy, the economic bureaucracy retained a striking degree of influence and control over crafting and implementing policy. Yet bureaucrats are often dismissed as faceless and inconsequential, their role neglected in favour of party leaders’ top-down rule or bottom-up initiatives.

Markets with Bureaucratic Characteristics offers a new account of economic policy making in China over the past four decades that reveals how bureaucrats have spurred large-scale transformations from within. Yingyao Wang demonstrates how competition among bureaucrats motivated by careerism has led to the emergence of new policy approaches. Second-tier economic bureaucrats instituted distinctive—and often conflicting—“policy paradigms” aimed at securing their standing and rewriting China’s long-term development plans for their own benefit. Emerging from the middle levels of the bureaucracy, these policy paradigms ultimately reorganised the Chinese economy and reshaped state-market relations. Drawing on fine-grained biographical and interview data, Wang traces how officials coalesced around shared career trajectories, generational experiences, and social networks to create new alliances and rivalries. Shedding new light on the making and trajectory of China’s ambitious economic reforms, this book also provides keen sociological insight into the relations among bureaucracy, states, and markets.

Reviews

This book opens the black box of bureaucracy to reveal the agency of the men and women who designed and redesigned Chinese economic policy in the post-Mao era. A fascinating story that tells us something new about China’s rise, as well as the role of technocrats in economic development. Sarah Babb, author of Managing Mexico: Economists from Nationalism to Neoliberalism

It’s often too easy to treat the state as a solid and coherent behemoth. Yingyao Wang’s book opens up the black box of the Chinese bureaucracy and provides a wonderful analytic narrative of how organisations and individuals shape each other. Instead of seeing only a homogeneous mass of party cadres, we can now understand the career, geographical, and generational diversity behind the shifting Chinese policy paradigms. Miguel A. Centeno, coeditor of State and Nation Making in Latin America and Spain: The Neoliberal State and Beyond

A major contribution to our knowledge of economic policymaking in post-Mao China, this book offers a rare look into the bureaucratic inner workings of the technocrats in major industrial and financial arenas. Wang uses a distinctive sociological lens to make sense of the social world in which those technocrats’ career trajectories intersect, social networks are formed and reconfigured and, in so doing, the Chinese state evolves and is remade. Xueguang Zhou, author of The Logic of Governance in China: An Organisational Approach

Prologue

In the wake of the 2008 global financial crisis, countries around the world were forced to reevaluate their assumptions about financial systems and economic development. Advanced economies needed to determine how their policies failed and revise their development priorities accordingly. Chinese officials watched the crisis closely as it transpired and continued to track its impact long afterward. As they watched not only from Zhongnanhai, the royal palace where top leaders reside and work, but also from the state ministries and departments, they contemplated how the crisis could create opportunities for them to advance the agendas that were already on their desks. Technocrats at the Ministry of Industry and Information Technology (MIIT) observed that advanced economies in North America and Europe reacted to the crisis by pivoting away from finance and dedicating resources to reindustrialisation. They believed that this shift in the West should spur China to reground itself—to strengthen manufacturing capabilities and indigenous innovation. They urged that China seize what they saw as a once-in-a-lifetime opportunity as a new wave of technological advances created shortcuts for late developers like China to join the league of economic and technological superpowers. According to the officials at the MIIT, the changes in economic development then taking place around the world were indications that the techno-industrial policy the ministry and its technocrats had been promoting was more relevant and necessary than ever.

This vignette illustrates the origin of what is widely known as China’s most ambitious development plan in recent years—Made in China 2025. Defying the common perception that such a plan must have been top-down and tied to the paramount leaders and their geopolitical ambitions, the reality is something altogether different. Rather, it was a middle-out plan developed in the economic bureaucracy by ministry- and bureau-level economic bureaucrats who interpreted the world events around them through the lenses of their particular backgrounds, specialties, and career experiences. As this book shows, Made in China 2025 turns out to be the result of one of many times when the particularities of the economic bureaucracy gave rise to major shifts in economic practice and policy.

The approach

To trace the origin of policy paradigms, this book develops a social and dynamic understanding of the bureaucratic state. On the surface, the Chinese state consists of organisations that exist in walled buildings and mission statements. The economic bureaucracy, for instance, comprises two dozen commissions, ministries, and agencies performing policy functions associated with taxation, central banking, macroeconomic management, market regulation, agriculture, industries, construction, trade, statistics, and so on. Examined across time and through the people who staff it, however, the state is constituted of small “societies”—defined by career movements, generational shifts, and social networks—that evolve within the state and across organisational boundaries. These little societies are the flesh-and-blood manifestations of bureaucratic organisations, and as these societies change, policy areas become unstable and their boundaries fluid. Supported by a body of qualitative and quantitative biographical data, this book attends systemically to how the configuration of these social elements supplies impetus, solidarities, and entrepreneurship and gives rise to largescale changes in China’s economic policy.

The paradigms

In contrast to the narrative that China’s economic reform simply “crossed the river by feeling for the stones,” this book shows that Chinese reforms were not as ad hoc as the existing literature suggests. Instead, several major policy currents emerged and carried China’s economic reform toward the other bank of the river on currents and cascades built up over time. The most pronounced shift concerns the genesis of economic reform itself in the late 1970s, which unraveled the planned economy and introduced the market as a major mechanism for allocating resources. The socialist economy did not appear to be collapsing near the end of the Cultural Revolution. The beginning of economic reform was a function of power struggles in the state bureaucracy, and how and where these struggles started were associated with the socialist bureaucrats’ ideas about markets. Other paradigm shifts have received less attention and are less frequently recognised as such. Market reform in the 1990s, for instance, profoundly reversed the decentralisation approach to market development prevalent in the first decade of reform and reasserted the role of the central state in economic management. This round of state rebuilding and deepening market reform was associated with a technocratic movement in the Chinese state following the 1989 Tiananmen incident and a recognition of the need to advance economics and demobilise politics.

The centralisation paradigm, while resetting the stage for China’s economic policy since the mid-1990s, did not preclude other paradigms from ascending under its broad rubric. In the second half of the 1990s, economic reform made inroads into the heart of the socialist economy—the state enterprises. From the heyday of SOE reform there arose a conglomeration approach to improve enterprise efficiency, which eventually became an overarching method for rationalising industrial structures and managing the macroeconomy. This approach was instituted by the industrial managers who had experience managing local factories in the Mao period and came of age in the 1990s during additional local industrial restructuring. While the state managers understood SOE inefficacy as the result of structural and organisational problems, a group of financial reformers ascended in the same period that understood SOE problems as those of corporate control and financial discipline. They proposed the development of financial markets to enhance the performance of the state sector. They also tackled a series of other issues of this period related to underinvestment and bank restructuring through similar financial mechanisms, which then spread into a general reliance on the use of credit expansion to reformat state assets and public finance. As this financial paradigm began to pick up steam in the mid to late 2000s, the desire to increase China’s industrial competitiveness was gathering support in different corners of the state. This movement didn’t become paradigmatic until a group of industrial technocrats who were previously scattered by rounds of administrative reforms were able to reclaim their collective voice and a new ministry to push for their agenda. This industrial competitiveness paradigm, as we retrospectively refer to it, not only redefined priorities of economic development for China but also initiated a chain reaction around the world that led to a global revival of industrial policy even at the core of advanced liberal economies.

A quick guide to the book

While the emergence of each paradigm is not exactly the same, they share similar patterns that warrant synthesis into a heuristic model. I summarise the stages of progression: what I term stages of convergence, concentration, and expansion. The first stage, convergence, involves the alignment of novel social elements—new locations, career trajectories, and networks—to form bureaucratic collectivities. In the second stage, concentration, bureaucrats seize an organisational platform to advance their key initiatives. In the third stage, expansion, the moments of paradigm formation are defined. Signs that policies have obtained paradigmatic status include the growth of programmatic initiatives in one policy domain into an approach to economic development that affects multiple policy domains, the explicit support of central leaders for further expansion of the approach, and the incorporation of the approach into local development agendas by local governments. Although not every paradigm contains all three evenly developed stages, often shortening certain stages and lengthening others, in general this pattern is widely observed, signalling what it takes to build long-lasting policy influence in the institutional environment in which the Chinese economic bureaucrats find themselves.

This book is divided into three parts. Part I, “Genesis,” addresses the origin of China’s economic reform and its association with bureaucratic experiences in the socialist era. This part comes to terms with the fact that China’s economic reform was led by bureaucratic incumbents who were well entrenched in high-ranking positions in the socialist government. It shows that the way in which bureaucrats ran the socialist economy significantly informed their ideas about how to build markets. More than one group of bureaucrats was able to envision alternatives to central planning, nurturing these ideas on the margins of the planning-industrial core. To the extent that these unorthodox career experiences already differed in the socialist period, these differences carried over into the reform period and escalated into conflicts about how to approach market reform. Interbureaucratic competition in this period significantly shaped the dynamics of the reform government.

Part II, “Consolidation,” characterises the technocratic era, the 1990s, which saw a significant reordering of state-market relations. A new force arrived on the political landscape in this era, a generation of technocrats with engineering degrees and a commitment to push China further toward a market order. Their goals of installing market efficiency and administrative rationality significantly altered the playing field of the economic bureaucracy. While market building undermined the dominance of the State Planning Commission and opened up space needed for other ministries and modes of economic management to flourish, state building simultaneously armed those ambitious bidders with newfound resources and authority, leading to the ascendance of the ministries. As a result, centralised technocraticism breathed new life into the economic bureaucracy, turned it into a contested zone of power and ideas, and increased the ability of the central economic bureaucracy to absorb local interests and knowledge into forms of economic statecraft.

Part III, “Effervescence,” examines this transformative stage. As the central economic bureaucracy gained power over localities and authority over the economy, various groups of bureaucrats, then maturing in diverse career trajectories, came of age and looked to advance their policy visions and bid for ministerial power. This part investigates two distinct policy approaches—financialisation and industrial competitiveness—that are often considered incompatible with one another in other development settings. Chapter 5 focuses on the emergence of the financial approach to economic management. This approach defined economic efficiency in financial terms and devised a range of financial solutions to solve governance problems. I show that the origin of this paradigm is associated with the development of a joint force of two intellectual movements in the research wings of the economic bureaucracy—the Wudaokou and the Comprehensive Reform Schools. Their influence grew as they developed credit-based solutions to solve problems related to public revenue constraints. Through overlapping career paths and networks, this new generation of financial reformers was able to mount a collective takeover of ministry-level positions in key agencies such as the Ministry of Finance and the Central Bank, significantly revamping the ways in which public revenues, state ownership, and local development were financed. Chapter 6 analyses the causes and processes that led to the emergence of a completely different agenda from that of financialisation. The industrial competitiveness approach to development defined a country’s economic might in terms of the quality of its manufacturing sectors. I explain that the late recognition of the centrality of this agenda was related to the absence of bureaucratic forces that could acquire autonomy and jurisdiction for industrial policy. The qualitative shift happened when bureaucrats with similar backgrounds in high-tech sectors concentrated in a new industrial policy agency, the Ministry of Industry and Information Technology, and fused their policy thinking with the new agency’s ambition to establish a footing in the emergent and competitive field of industrial policy.

Excerpted from Markets with Bureaucratic Characteristics: How Economic Bureaucrats Make Policies and Remake the Chinese State by Yingyao Wang Copyright (c) 2024 Yingyao Wang. Used by arrangement with the Publisher. All rights reserved.

Table of Contents

Introduction
Part I. Genesis
1. The Socialist Circulators and the Bureaucratic Origin of China’s Economic Reform
2. Balanced Development or Decentralised Growth? Elite Reformers in the 1980s
Part II. Consolidation
3. The Rise of Technocrats: Market Rationalisation and the Macrocontrol Paradigm
4. National Champions and the Organisational Approach to Enterprises and Markets
Part III. Effervescence
5. The Remaking of Public Finance in China and the Financial Approach to Economic Control
6. The Ascent of the Industrial View: Industrial Policy for Making a Manufacturing Superpower
Conclusion
List of Abbreviations
Acknowledgments
Notes
References
Index

Republished from Pekingnology, Substack. July 28, 2024

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