Empowering State Capitalism in China: The Revival, Legitimization and Development of Private Enterprises

Abstract Empowering State Capitalism in China: The Revival, Legitimizationand Development of Private EnterprisesbyZongshi ChenDoctor of Philosophy in SociologyUniversity of California, BerkeleyProfessor Thomas Gold, ChairMy research explores the interplay between the state and market in the formation of the market, and how this in turn leads to the transformation or reproduction of such structures. This is a historical examination of the revival of private enterprise in China since the late 1970s against the contemporary hostile political environment and of the current development of private enterprise. It explores three main issues: (1) how private enterprise, and generally the market economy, a political taboo under Mao's regime, became legitimized; (2) how the state transformed in response to the development of private enterprise; (3) how private enterprise performed under such market institutions.My findings suggest that Wenzhou's marginal position in socialist economy, culture and administration enabled Wenzhou to become the first place for experimenting with private enterprise. The findings imply that marginalized areas had great potential for engendering new institutions; this advances the theory of institutional change. My archival study also shows that three categories of people were the earliest to engage in private enterprise: those who had some work experience in a collective or state entity;those who had done business individually elsewhere; and some cadres.The findings of my project reject the prevalent decentralization model in explaining China's institutional transition and lend partial support to the factional struggle theory. The findings suggest that the alliance between the local market model and central market-oriented leaders enhanced the legitimization of private economy. My findings also show that intellectual framing, which was rarely examined about China's transition, enhanced the gradual transition of institutional logic, the establishment of market institutions and, finally, market hegemony. In response to the development of private enterprise in the past three decades, Wenzhou transformed from a laissez faire state into a regulatory state, and then into an interventionist state. The findings reject a static view of state-society relations and advocate for an interactive approach to examining China's transition. This study also shows that institutional isomorphism drove the convergence of developmental models among four coastal cities and suggests an empowering state capitalism in these regions.The analysis of the nation-wide survey indicate that an entrepreneur's political connection is crucial for an enterprise's performance in both areas, and it contributed more to the performance of coastal enterprises than to that of inland enterprises. This gap may imply a stronger state intervention in the market on the coast than that in the inland and demonstrate the development of private enterprise may empower a strong state capitalism