1China’s stunning economic transformation over the past 35 years still poses a puzzle for social scientific analyses. How could China’s obviously state-dominated development model produce such economic dynamism? Indeed, how has sustained market liberalization been combined with concerted efforts at strengthening state control over crucial areas of economy and society? And how has China undertaken far-reaching internationalization of its economy without sacrificing key elements of domestic policy autonomy?
2In this article, I argue that the puzzle of China’s political economy can serve to inform salient debates on the nature and logic of capitalism highlighted in the Comparative Capitalisms (CC) literature (Deeg and Jackson, 2007; Jackson and Deeg, 2006; 2008). So far, conceptualizations of the crucial case of China remain at odds with each other and have found little resonance in the CC literature. For sure, most analyses of China in comparative political economy and economic sociology agree that China is, in fact, developing a form of capitalism. However, how to incorporate China’s form of capitalism both comparatively and theoretically in the CC literature remains a major challenge (Fligstein and Zhang, 2011; Peck and Zhang, 2013).
3This challenge is also reflected in how CC literatures have so far faced difficulties in conceptually integrating emerging market economies. The narrow binary conception of Varieties of Capitalism (VoC) (Hall and Soskice, 2001) into Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs) never aimed to comprehensively cover emerging markets. Recent efforts within the CC literature have started to fill this conceptual gap. Much of the work has concentrated on Eastern Europe and, to a lesser extent, Latin America and East Asia (Bohle and Greskovits, 2012; Boyer et al., 2012; Hancké et al., 2007; Noelke and Vliegenthart, 2009; Noelke et al., 2014; Schneider, 2013).
4All of these works go beyond the highly seductive parsimony of a binary distribution into LMEs and CMEs espoused by mainstream CC literature. Similarly, my analysis sees China as generating a novel form of capitalism - Sino-capitalism (McNally, 2007; 2012; 2015). Sino-capitalism’s analytical framework employs an open (Becker, 2009; 2014) inductive qualitative approach that conceives of “variegated” capitalisms globally (Jessop, 2012; Peck and Theodore, 2007; Streeck, 2010) and builds directly on insights in Régulation Theory (Aglietta, 1976; Lipietz, 1992; Boyer, 1990; 1997; 2005; Boyer et al., 2012). There is accordingly no “base” model of capitalism, but rather an assemblage of unique varieties of capitalism embedded in the global capitalist system.
5I proceed by introducing the logic of Sino-capitalism, broadly conceived of as the macro-structural dynamics that define the mode of reproduction (cf. Boyer, 1990) and shape China’s contemporary political economic evolution. I then illustrate the dynamics driving Sino-capitalism’s institutional reproduction with recent policy initiatives that aim to rebalance China’s development model. Finally, the conclusion develops theoretical insights that can be generated from analyzing and conceptually extending the logic of Sino-capitalism.
6My theoretical findings incorporate a call for more open and dynamic approaches that focus on the role of the state, the international embeddedness of national capitalisms, and the existence of contradictory/symbiotic politico-economic logics driving capitalist evolution. Quite pointedly, any conception of capitalist political economies must recognize the existence of different politico-economic spheres, each with its own logic or “Eigengesetzligkeit” (Weber, 1978; cf. Oakes 2003). Interactions among these spheres can generate a multiplicity of dynamics, ranging from symbiotic, reinforcing, counterbalancing, and compensatory, to contested and in discord.
7Consequently, institutional complementarities under Sino-capitalism are not primarily conceived of as existing in a reinforcing state. Rather, compensating institutional complementarities have dominated and created dialectical dynamics of mutual adaptation and tension-ridden conditioning (cf. Evans, 1995). Sino-capitalism’s evolution thus represents an intriguing case of 35 years of extremely rapid and transformational institutional change that nevertheless exhibits a profound constant: a central dialectic of top-down state-guided capital accumulation existing side by side with bottom-up networks of entrepreneurs, market competition, and global economic integration.
8Most interpretations of China’s capitalist evolution have emphasized one dynamic shaping the process over another, giving rise to a contradictory and confused picture. Huang (2008), for example, sees the Chinese party-state as too dominant, creating an unequal form of development that represses the private sector. Conversely, others have seen the Chinese state, especially local state formations, as playing a largely positive developmental role (Oi, 1999; Oi and Walder, 1999; Unger and Chan, 1996; Beeson, 2009; Knight, 2014). A third view sees the dynamic properties of China’s political economy as characterized by bottom-up network driven forces (Tsai, 2002; 2007; Nee and Opper, 2012). Finally, a fourth interpretation stresses how China’s development processes were propelled and conditioned by the outside-in forces of globalization (Hsing, 1998; Zweig, 2002; Steinfeld, 2010).
9Most of these accounts stress one single aspect of China’s political economic evolution, but consequently miss the most central facet: the dialectical evolutionary dynamic of counterbalancing institutional complementarities driven by state guided forces top-down, by entrepreneurial networked forces bottom-up, and by global economic integration outside-in. In China’s emergent capitalism, state and private sector forces have mutually conditioned each other. The logic of Sino-capitalism attempts to capture these basic modalities of how China’s economic dynamism and political regime are replicated over time.
10Analytically, the logic expresses the macro-structure shaping institutional and political reproduction, which, in turn, gives rise to China’s unique accumulation regime and modes of regulation. Insights from Régulation Theory (Aglietta, 1976; Lipietz, 1992; Boyer, 1990; 1997; 2005; Boyer et al., 2012) resonate directly in this conception. Paralleling other cases of capitalist evolution, China faced a critical juncture during the aftermath of the Cultural Revolution in the late 1970s as the Maoist regime’s legitimacy was questioned. A series of major political decisions to address this crisis created a new politico-economic compromise: private capital, both foreign and domestic, was gradually welcomed in China’s economy under the continued dominance of the Chinese Communist Party (CCP). This compromise, in turn, shaped the evolution and hybridization of specific sets of institutions defining Sino-capitalism.
11In this context, the logic of Sino-capitalism can only be understood by conceptualizing China’s political economy as experiencing rapid international economic integration, especially intense participation in global value chains. Sino-capitalism forms by now an interdependent part of the neo-liberal global capitalist system. And finally, as Régulation Theory emphatically argues, capitalism does not tend towards stable equilibria, but rather is characterized by constant tensions and crises generated by its modes of reproduction. The dialectical logic of Sino-capitalism illustrates this volatile nature of capitalism strikingly.
12The manner in which different institutional spheres interact means that Sino-capitalism differs from traditional conceptions of capitalist variety in important respects. Sino-capitalism is reproduced by a contradictory or dialectical quality: state-guided capitalism is tempered and at times challenged by dispersed private entrepreneurial forces that have created one of the world’s most dynamic and globalized private sectors. Sino-capitalism’s logic of reproduction thus derives from a specific institutionally-based notion of China’s emergent capitalism. Distinct institutional spheres are conceived of as interacting and mutually conditioning each other.
13As a result, Sino-capitalism represents a distinctive institutional amalgam. Global integration, bottom-up networks of entrepreneurs, and top-down state guidance all coexist and balance each other’s dynamic elements, generating unique and diverse institutional complementarities. To illustrate, under Sino-capitalism’s eclectic policy outlook prices and market mechanisms are merely tools to an end: to develop China and make it wealthy and powerful. There is no a priori adherence to “free markets” as in a belief that fully liberalized market forces will generate the most efficient outcomes. Rather, controlled (often localized) policy experimentation is widely employed under long-term guiding principles. Most Chinese reforms have therefore constituted a work-around: they have employed measured market liberalization, though always under the condition that effective degrees of state control over the domestic economy remain intact.
14The following develops further our understanding of Sino-capitalism’s logic by concentrating on three crucial sub-logics. Firstly, the central logic of reproducing a structurally rather stable dialectic of counterbalancing institutional spheres; secondly, and following from this sub-logic, a deliberately cautious pace of change that avoids radical departures from the past and tries to assure comprehensive state control over the reform process; and, finally, the interplay of state-centric development planning with local initiatives and policy trials bottom-up, a process that has generated much needed political space for economic experimentation and institutional innovation.
15The propagation of a structurally rather stable dialectic which juxtaposes top-down state-guided capitalism with bottom-up networks of entrepreneurs, market competition, and global economic integration shapes Sino-capitalism’s logic most deeply. Although undergoing fundamental reform and massive growth, China’s political economy has continuously reproduced and recalibrated this dialectic. Chinese economic reform processes are accordingly not characterized by the dominant and stifling role of state-centric governance (Huang, 2008). Neither are they purely driven by entrepreneurial network-led accumulation from below (Nee and Opper, 2012). Counterbalancing institutional complementarities have actually conditioned, pressured, and mutually self-generated each other. These institutional spheres and their logics are sometimes in discord, but more often coexist and balance each other’s strengths and weaknesses (cf. Evans, 1995).
16Critically, the logic of Sino-capitalism depends on the continuous adaptation of the CCP and Chinese state formations (Tsai, 2007; Dickson, 2008; Shambaugh, 2008). Chinese state firms, for example, began far-reaching reforms only after the development of private and quasi-private firms eroded their monopoly profits during the 1980s (Naughton, 1992). However, rather than attempting to smother private entrepreneurship, policy makers after 1992 concentrated on more fundamental restructurings of the state sector. State firms retreated from the most competitive and least profitable sectors in the Chinese economy, but kept a tight grip on industries populating the “commanding heights.”
17The evolution of Sino-capitalism, therefore, does not represent a unilateral retreat of the state in favor of private entrepreneurial and market forces. Neither is it a story of initial liberalization followed by a full reassertion of statism (cf. Huang, 2008). The best way to understand Sino-capitalism’s dialectical logic is to focus on how private capital accumulation put pressures on the state to reform and adapt. State-initiated reforms and experimentation in turn enabled further private sector development, creating dynamic cycles of induced reforms, where each small step at restructuring created demands for further modifications (cf. Jefferson and Rawski, 1994; Naughton, 1995; Solinger, 1989).
18In this view, top-down Leninist incentives focused on economic performance prodded local governments to compete vigorously for investment capital. This inter-jurisdictional competition led to the gradual liberalization of China’s economy and triggered substantial improvements in the investment climate facing both domestic private and foreign investors. In fact, state capitalist guidance and vibrant private entrepreneurship have tended to meet at the lower levels of the state apparatus, where local cadres have played a crucial role in accommodating and supporting individual capitalist accumulation.
19The first phase of China’s reform and open door policy (1979-82) was marked by a major revolution top-down that changed incentives for CCP cadres to emphasize economic growth. The initial success of several experiments in both the state sector and the rural economy enabled a much more permissive regime for bottom-up entrepreneurship and experimentation in the 1980s. This first spurt of reform and opening, however, came to an end during 1989 as the party-state recentralized not only China’s politics, but also the economy. By 1992 reform impulses were once again unleashed by Deng Xiaoping’s “Southern Tour” (nanxun). Another phase of bottom-up capitalist accumulation then triggered by 1997 major reforms in the state sector and further privatization of local collectives, including the vast majority of Township and Village Enterprises (TVEs). By the 2000s the two process became more deeply intertwined, with both top-down (e.g., reforms triggered by China’s entry into the World Trade Organization after 2001) and bottom-up (e.g., massive inflows of foreign capital and the emergence of large Chinese private conglomerates) dynamics interacting simultaneously.
20This dialectical logic is furthermore reflected in the unique policy mix employed to advance the reform process. This second sub-logic captures how most reform initiatives in China constitute a conscious work-around. For sure, reforms always aim to generate measured market liberalizations and economic efficiencies. However, they also intend to assure continued state control over the domestic economy and reform process. Full-scale economic liberalization, as in the “Big Bang” reforms of Eastern Europe and the successor republics to the Soviet Union, was consciously eschewed. In its place, the Chinese party elite favored innovative localized experimentation, institutional tinkering, and all kinds of work-around solutions that went beyond pure and simple economic liberalization. The results of this approach were stunning. Rather than experiencing the shocks generated by “Big Bang” reforms in Eastern Europe and Russia, the Chinese economy was able to relatively smoothly and gradually “grow out of the plan” to establish a market economy (Naughton, 1995). And in a similar fashion, China’s political economy evolved from an economic system characterized by complete state ownership to incorporate large swathes of private ownership and control (Oi and Walder, 1999).
21One of the hallmarks of the policy process has been that most initiatives were cautious and gradualist. This does not mean that there were no spurts of reform, such as in 1992 after Deng Xiaoping’s “Southern Tour.” Similarly, contemporary reforms contained in the 60-point blueprint issued after the 18th Central Committee’s Third Plenum in November 2013 also hold the potential for reform breakthroughs. Top-down state coordination has consistently played a crucial role. Nonetheless, over the longer term key policy priorities have only shifted gradually in China. This has created an enduring and relatively constant policy environment, the “long-termism” of China’s “neo-etatist” planning (Heilmann, 2010).
22The logic of Sino-capitalism is finally expressed in how central state coordination and localized policy trials have deeply interacted to create a rather novel experimental approach to economic and political-administrative reform (Florini et al., 2012). Every major policy change, such as the liberalization of foreign trade and investment, State-owned Enterprise (SOE) reforms, and the privatization of TVEs, was first tested with a variety of pilot projects, experimental regulations, as well as geographically defined special economic and industrial zones. Under these decentralized experiments bottom-up entrepreneurial and market pressures often created fertile ground for nominally illegal or unsanctioned behaviors. Over time, however, some formerly illegal behaviors were incorporated into local governance systems and accepted by central state formations, leading to continuous institutional adaptation (Florini et al., 2012; Tsai, 2002; 2007; Dickson, 2008). Equally significant, these trials and experiments left ample room for local ingenuity, learning, and ad hoc tinkering to work out problems in a gradual and, on the macro-level, controlled institutional environment.
23China’s decentralized experimentalist approach to reform in a multi-layered state has created drawbacks and inefficiencies, most recently an “investment mania” in heavy industry that has generated large debt loads for industrial SOEs and local governments. Nevertheless, the dialectical interplay of state-centric development planning top-down and dispersed local initiatives bottom-up has created crucial space in an authoritarian system for institutional and policy innovation. Moreover, successful localized experiments are often scaled to provincial and national levels with strong central state guidance and efforts at standardization (Florini et al., 2012). This is “foresight maximum tinkering” – the “unusual combination of policy experimentation with long-term policy prioritization” (Heilmann, 2010: 109) that enables the pursuit of long-term priorities while leaving leeway to local ingenuity.
24These three aspects of the logic of Sino-capitalism illustrate vividly how this emergent form of capitalism represents a complex new global capitalist force that falls outside dominant conceptualizations in CC. State-guided capitalism is balanced by entrepreneurially networked modes of capital accumulation that depend on the savvy of individual entrepreneurs exposed to market pressures. A cautious pace of change has avoided radical departures from the past and assured overall state control over the reform process. And the interplay of state-centric development planning with local initiatives and policy experiments opened up significant space for institutional innovation.
25The propagation of Sino-capitalism’s unique dialectic is ultimately based on continuous processes of institutional learning, adaptation, and hybridization. The intermingling of market-oriented rules-based, flexible network-driven, as well as more purely statist governing approaches are all part of this reproduction. As a result, rapid and transformational institutional change has occurred under a rather constant framework of gradualism, retention of state economic guiding capacities, and the interplay of top-down planning with innovative localized experiments.
26Over more than three decades China’s economic development relied on exploiting factors of production relatively abundant within the country. These included low wage labor, cheap land, and some mining resources. As capital accumulated, large savings in the state banking system were channeled into investment-driven growth during the 2000s, emphasizing large-scale investments in urban infrastructure, power generation, producer goods sectors such as steel, aluminum and cement, and export industries. This emphasis on investment- and export-driven development catapulted China to upper-middle income status, but by now is showing immense strains. Returns on investment are declining, while indebtedness is facing declining productivity and corporate profitability.
27Consequentially, China’s investment- and export-driven development model was already around 2010 perceived to have reached the end of its sustainability (Naughton, 2010; Kroeber, 2009). In fact, both the 10th and 11th Five-Year Plans advocated a change to a more balanced and domestic consumption-driven development model. The 12th Five-Year Plan for 2011-2015 and the sweeping 60-point blueprint for economic, social, and legal reforms announced in late 2013 further amplify the policy foci outlined in these earlier pronouncements: the aim is to steer the Chinese political economy away from a concentration on growth above all else to balanced development.
28Rebalancing China’s political economy implies a new growth model driven by consumption, innovation, and market forces with the overall aim of improving the Chinese people’s livelihood. The 60-point blueprint in particular outlines a host of reforms in the social, economic, and political-administrative spheres. However, interpretations of how exactly this shift will unfold are still prone to conceptual confusion. The 60-point blueprint has been looked at as far more ambitious and market-friendly than earlier reform efforts (Wharton School, 2013). It is seen as responding to various criticisms of China’s hitherto state-guided development model. These critiques stress that reforms should redefine the role of government, restructure state enterprises and banks, develop the private sector, promote competition, and deepen market reforms (World Bank and Development Research Center of the State Council, 2012: xv; cf. Kroeber, 2009).
29In the view of liberally inclined Chinese economists, distorted resource allocations in China are mainly due to the continued dominance of SOEs in many crucial infrastructure and producer goods sectors. Since these sectors are often characterized by monopolistic or oligopolistic competitive environments, SOEs have become a major drag on efficiency. Assuring future economic growth must thus focus on the reorganization and privatization of large swaths of the Chinese state sector (Personal communication with researchers of the Development Research Center, October 2012).
30Clearly, market liberalization and measured privatization enjoys potential support among segments of China’s economic policy-making community, including some top leaders. And strengthening market forces undoubtedly represents an important component of any rebalancing of the Chinese political economy. Nonetheless, envisioning that China will simply opt for full-out economic liberalization and privatization neglects a deeper understanding of the dynamics driving China’s political economy: the logic of Sino-capitalism. As before, the Chinese party-state is unlikely to pursue a full-blown policy of free-market reform. The emphasis continues to rest on avoiding economic liberalization’s potential dangers. The 60-point blueprint and more recent policy pronouncements make clear that there will be no radical departures from the past.
31The sweeping blueprint announced in late 2013 covers a wide range of issues. Its 60 points or aspects include about 330 individual measures. Everything from changes in the one-child policy, car emissions standards, reforms to the hukou residency system, to interest rate liberalization is covered. The central objectives, though, reflect the dynamic qualities of Sino-capitalism. At first, substantial plans for economic and social liberalization stand out. According to the blueprint, the market should start to play the “decisive function in resource allocation” (Wharton School, 2013). Both academic and business analysts have thus seen it as ushering in significant market-oriented reforms. Avery Goldstein notes that the blueprint turned out to be “far more detailed, far more ambitious, far more unreservedly pro-market reform than many outsiders expected” (Wharton School, 2013; cf. Naughton, 2014).
32One of the most prominent areas of liberalization that is highlighted in the blueprint concerns financial reform. Interest rates are to be fully liberalized but not before a deposit insurance system is set up. Similarly, capital account liberalization and with it the internationalization of the Chinese Yuan are to proceed, but again at first limited in scope, such as in the experiments being undertaken in China’s four newly established Free Trade Zones in Shanghai, Tianjin, Shenzhen, and Fujian Province.
33Upon closer analysis, therefore, it becomes clear that the Chinese party-state is nowhere close to pursuing a pure free-market platform. The leadership under Xi Jinping, as its predecessors, is attempting to avoid the pitfalls that often accompany economic liberalization, especially the risks underlying financial liberalization. A deliberate, cautious pace of change is preferred that aims to avoid at all costs major mistakes that could destabilize society and threaten CCP rule. Moreover, many of the reform measures in urbanization, social welfare provision, and the environment will ultimately necessitate more effective state regulation and guidance, not just liberalization and deregulation.
34The blueprint reflects this fine balancing act in its call for a new role for government and a new relationship between government and market. Reforms ultimately follow the essence of Sino-capitalism’s logic: a cautious pace of change that employs work-around solutions and avoids radical departures; the interplay of state-guided development planning with local initiatives and policy experiments; and the dialectic quality of Sino-capitalism that calibrates relations between top-down state-centric modes of governance and bottom-up global-, network-, and market-driven modes.
35From the leadership’s points of view this approach is seen as politically necessary, since powerful political interests that could see new reforms as threats to their power and well-being will have to be contained, co-opted, or sidelined. These interests, many of which have benefited immensely from the old system, include the leaders of many large state and private firms, as well as various professional classes including the state technocratic elite itself. Conversely, socio-political interest groups who are likely to see benefits remain politically weak in China, in particular farmers and urban workers.
36So the CCP moves gradually and cautiously to avoid the risk that economic reforms could get out of hand and create a political backlash. Economic and market liberalization measures are fine tuned with concerted efforts to sustain and strengthen state control over society and economy, including focused learning, adaptation, institution building, and social reform. I briefly highlight one policy arena that stands at the center of these dynamics: state sector reforms.
37China’s domestic imbalances are in part due to an overemphasis on the state sector, especially heavy industry. Although most state firms have been corporatized and listed on stock markets, they continue to act as quasi-monopolies or operate in managed oligopolies. Due to their strategic role in the economy, they receive enormous support from government agencies and the state-owned financial system.
38The blueprint’s economic reform proposals clearly adopt a pro-market rhetoric and are supportive of private enterprise. Private firms should be given more room, equal property rights protection, and gain access to markets and sectors hitherto dominated by the state sector. However, the continued centrality of the state sector in the economy is reiterated as well: “adhere to the principal position of the public ownership system, give play to the dominant role of the public sector economy, and continually strengthen the vitality, control and influence of the public sector” (China Copyright and Media, 2013). The proposals, in broad brushstrokes, display efforts at encouraging private sector development and innovation, but focus equally on restructuring the state-owned economy.
39Many of the SOE governance reforms suggested in the blueprint represent ongoing initiatives that have, in some cases, been in place for over a decade: price reforms should be continued in some basic infrastructure sectors, such as power and energy; more public disclosure of SOE finances be made available; the enterprise bankruptcy system improved; and long-standing attempts to fully separate government agencies from operational SOEs and their assets, especially in the remaining monopoly sectors, implemented. In this context, SOEs should complete their conversion into “modern enterprises” – joint-stock companies with up-to-date corporate governance. These conversions can include movements towards mixed-ownership systems, where in some exceptional cases private interests could take controlling stakes in existing SOEs. But overall the state should change the way it exercises its ownership, transitioning from “asset management” to “capital management.” New state-owned investment funds should be established, and some equity stakes in existing SOEs transferred to them, thus bringing specialized (state-owned) financial managers into the fold (Naughton, 2014).
40Reforms thus include opportunities for private parties to gain ownership shares in some SOEs and enter into sectors so far controlled by SOEs. Several initiatives, for instance, attempt to separate infrastructure management from the actual operation of infrastructure services. The services can then be opened to private firms that can enter as service providers and create more competitive pressures. These reforms are similar in conception to reforms being implemented after breaking up the Railway Ministry in March 2013.
41Perhaps one of the biggest changes on Chinese SOE performance could emanate from financial sector reforms. So far, SOEs have benefited substantially from financial repression in China’s domestic economy and the dominance of large state banks. Under these conditions most SOEs have access to plentiful and cheap credit, providing them with a competitive advantage both domestically and internationally. Building on the 60-point blueprint, financial reforms implemented in recent years encompass fully liberalizing interest rates and opening up the banking sector to more competition. This could subject borrowing by both SOEs and private entities to a more market-driven financing environment. Reform proposals also include permission for companies to launch initial public offerings without official approval, under a new “share issuance registration system.” However, much of these reform proposals remain a work in progress.
42Another important reform initiative aims to increase the dividend payout ratio for SOEs from the current 5-15 percent to 30 percent by 2020. Already begun around 2007, this policy attempts to extract a larger share of state sector profits into the state treasury. It rests on the implementation of a “state capital management budget” (guoyou ziben jingying yusuan) that aims to steadily raise the dividend payout ratio of SOEs, thus lessening the leeway for SOEs to engage in overinvestment, a fact that has generated large industrial overcapacities (Naughton, 2006).
43The blueprint’s objective of a roughly 30 percent dividend pay-out ratio from post-tax profits would put Chinese SOEs in line with common international norms. However, it is not clear at present if the Chinese government will be successful in exercising this aspect of its property rights. SOEs have shown a reticence to follow central guidelines and been characterized by various governance gaps. They are thus one of the main targets of Xi Jinping’s massive anti-corruption campaign. Undoubtedly, since Xi came to power in 2012 the hallmark of his leadership and greatest source of his popularity has been the relentless anti-corruption campaign. The campaign has deeply influenced SOE governance and targeted in particular SOEs in sectors that are seen as “fiefdoms” onto their own, not fully under the control of the CCP party-state.
44The anti-corruption campaign demonstrates the prominence of party-state centralization in China’s dialectical reform dynamics. While some aspects of state sector reform are clearly aimed at introducing competitive market pressures, others aim to reassert state authority. Proposed pay-cuts to SOE executive salaries that the CCP Politburo approved in September 2014 represent one intriguing example. The new policy specifies that SOE executives who were appointed by the CCP Organization Department with a bureaucratic rank carrying substantial benefits and perks could face deep pay cuts of about 60 percent (Zhang, 2014). After implementation, such executive would again be treated as pure bureaucrats, since they have opportunities for career advancement in the party-state hierarchy. Conversely, those executives appointed competitively from outside the party-state hierarchy, who do not carry a bureaucratic rank, and who often have generous pay packets, would see no change.
45The policy aims to make SOE executives choose between "working for the government" and working for "the enterprise” (Zhang, 2014). Interestingly, most SOE executives with bureaucratic rank are intent on keeping it and thus taking a pay-cut. They continue to see themselves and their SOEs as part of the larger CCP party-state hierarchy, and often have ambitions beyond any particular SOE to advance into the top levels of party- or state-administrative leadership (Personal communication with Kjeld Erik Brødsgaard, April 2016). This reform proposal marks a step away from market-based pay packages and hiring in the Chinese state sector, and, consequently, looks retrograde. However, it forms part of wider SOE reforms that aim to distinguish among state firms situated in monopoly industries and in public welfare, which are to be recentralized under closer scrutiny from the government, and those in competitive fields, which face further commercialization and exposure to market forces.
46One good example that sums up China’s cautious and quiet reform approach regards the large oil and gas corporations: CNPC, CNOOC, and Sinopec. A series of experimental, incremental, and seemingly fragmented steps, including several pilot-based reforms aim to gradually transform the operating environment of these three giants. For example, oil import licenses have been granted to private firms, thus enabling them to compete with state-owned refiners. The Chinese government also has approved the first privately-led mega-refinery in Zhoushan, Zhejiang, which will compete head-to-head with Sinopec in that region. And a low-profile pilot-restructuring of Sinopec’s overseas exploration unit, SIPC, does not aim to privatize it, but rather to bring state-owned investment vehicles, such as Chengtong Holdings Group and China Reform Holdings, on board as strategic investors. These two state-owned investors will hold a combined shareholding of 70 percent of SIPC (Chen and Meng, 2016). This reform pilot reflects one of the central planks of contemporary SOE reform: state-owned investment corporations are being formed and tasked with employing their financial specialists to craft market-oriented strategies that can change management behaviors and capital structures.
47In the end, the large oil and gas SOEs are seen as key economic stabilizers for the national economy. Following the logic of Sino-capitalism, the CCP party-state wants to maintain strong control over them and only implement moderate changes after conducting experiments and localized trials. This fundamental thrust of reforms is also apparent in China’s newest reform slogan: supply-side reforms.
48So far it is unclear what exactly this new reform initiative will encompass and what specific policies fall under the supply-side banner (Wong, 2016). Some argue for tax cuts for private businesses and reducing the government burden on investors. This clearly echoes the tax cut and deregulation policies advocated by conservative Western leaders in the 1980s. But the most important thrust seems to be efforts at diminishing overcapacity in industries such as steel, cement, aluminum, coal, and others. Mines and factories in sectors producing far more than the market demands should be shut down or merged.
49As Xi Jinping put it when arguing for the importance of this reform for the long-term well-being of the Chinese economy, "The main direction (of the reform) is to reduce ineffective supply, increase effective supply, and make the supply structure more fitting to the demand structure" (Wang and Xin, 2016). However, closing down inefficient “zombie” corporations, many of them SOEs, will carry substantial economic, social, and political costs. More than three million people in the steel, coal, and similar industries could lose their jobs if proposed restructurings go through. On February 29, 2016 government sources announced a potential of 1.8 million steel and coal worker lay-offs, around 15 percent of the work force in those industries. However, no exact time frame was given for implementing this capacity reduction (Yao and Meng, 2016).
50Certain provinces, like Shanxi and Hebei with large coal and steel industries, could face particular hardship. Shanxi, China’s largest coal mining province, has already been the focus of economic restructuring to reduce overcapacity. Annual GDP growth has declined by half since 2014, to reach a low of 3.1 percent in 2015. And the debt accumulated by the seven major state-owned coal firms in the province reached the size of the province’s entire GDP in 2015 (Ye and Marro, 2016). Nevertheless, Shanxi province plans to cut its coal production even further, by some 258 million tons by 2020. Similarly, Hebei province aims to contain its steel and cement capacities to 200 million tons each by that time. Evidently, the reforms will necessitate large fiscal transfers to cushion the concentrated burdens that fall on particular regions and industries.
51Another major plank of supply-side reforms involves mega-mergers among large SOEs to gain international market share and competitive heft. The most prominent example so far has been the merger of China’s two state-owned train makers, China CNR Corp. and CSR Corp., in mid-2015. The Chinese government is also planning or implementing mergers of the country’s major metals companies, nuclear technology firms, and the two largest shipping lines (Yu, 2016).
52This reflects once more the dialectical qualities of Sino-capitalism. Mega-mergers are intended to form national champions that can better compete abroad. However, they are also likely to reduce competition domestically and continue inefficiencies, especially if strong SOEs are forced to merge with weaker ones. Similarly, state sector reforms aim to give private investors bigger stakes in a wider range of SOEs, but they clearly rule out full privatization. And more generally, Xi Jinping has shown a distinct penchant for centralizing power, but simultaneously his government has put forward many reform proposals that aim to restrain the reach of the state.
53In the final analysis, the sweeping 60-point blueprint and recent supply-side reform initiatives continue the search by China’s leadership for policy solutions that can effectively reform the economy while retaining crucial elements of central state control. They reflect the dialectical structure of Sino-capitalism: various state-centric endeavors and concerted efforts to augment state power are juxtaposed with circumscribed economic liberalization and the active encouragement of private entrepreneurship and technology innovation.
54The rebalancing reforms proposed under Xi Jinping thus conform to the basic evolutionary logic of Sino-capitalism. Experimental, circumscribed, and cautious measures exemplify the intricate interplay of state-centric development planning with local initiatives and policy experiments. Over time, they are likely to reproduce the dialectic of Sino-capitalism while rebalancing China’s development model. In a recalibrated form top-down state-guided capitalism is likely to continue its dialectical relationship with capital accumulation based on private entrepreneurship and innovation, market competition, institutional learning, and global integration.
55As the above illustrated, recent reform proposals in China do not indicate a full-blown turn towards a liberal market economy. Quite to the contrary, they seek to retain and strengthen state control over crucial areas of socio-economic governance. The Xi Jinping leadership is thus pursuing a policy package that seeks to strengthen the private sector, domestic consumption, and indigenous innovation all the while refurbishing the CCP party-state’s governing capacity.
56Therefore, in the task of rebalancing China’s development model there is no indication of efforts to directly supersede the dialectical dynamics of Sino-capitalism. For sure, measured steps at economic liberalization are planned. But these form efforts to refurbish state-coordination and its interactions with other institutional spheres, not to fundamentally destabilize Sino-capitalism’s chronic re-composition and recalibration of institutional spheres via top-down/bottom-up dialectics.
57The theoretical comparative implications of this mode of capitalist reproduction for the CC literature are substantial. The logic of Sino-capitalism underlines that our understanding of capitalist evolution must be opened up to incorporate the central role of the state, the international embeddedness of national capitalisms, and the existence of contradictory/symbiotic politico-economic logics. It ardently stresses insights from Régulation Theory and its related approaches (Becker, 2009; 2014; Jessop, 2012; Peck and Theodore, 2007; Aglietta, 1976; Lipietz, 1992; Boyer, 1990; 1997; 2005; Boyer et al., 2012).
58The logic of Sino-capitalism peals away the veneer of capitalist stability and institutional coherence seemingly prevalent in the already developed political economies. Capitalism is at base unruly. For Régulation Theory capitalism does not tend towards equilibrium but rather towards crisis in the longer term (Boyer, 2005). It must perpetually reinvent itself, creating ultimately disruptive change. This is evidenced by the empirical literature, which shows that capitalisms are “institutionally fragmented, internally diverse, and display greater ‘plasticity’” (Deeg and Jackson, 2007: 157) than the parsimonious dichotomy of LMEs and CMEs implies.
59The logic of Sino-capitalism further highlights how capitalist political economies are constituted by different politico-economic spheres, each with its own logic or “Eigengesetzligkeit” (Weber 1978; cf. Oakes 2003). A multiplicity of potential interactions is possible among these spheres, ranging from symbiotic, reinforcing, counterbalancing, and compensatory, to tension-ridden and contested. In such a perspective, the unruly, effervescent nature of how capitalism reproduces itself – the system’s need for perpetual expansion, disruption, and reinvention – stands front and center.
60Among these spheres, that of the state looms large. Early CC approaches, especially the Variety of Capitalisms perspective (Hall and Soskice, 2001), granted little autonomy to the state. These analyses thus lost sight of the state’s inherent macro-structuring role. Boyer (1997; 2005) in his conception of capitalist diversity incorporates “statist capitalism” and “state-directed capitalism.” Greater attention is paid to the degree of stateness, a theme echoed by Vivien Schmidt (2012) when she conceptualizes “state-influenced market economies” with reference to Italy, France, and Spain.
61Recent literature on emerging capitalisms develops this theme further (Boyer et al., 2012; Bohle and Greskovits, 2012; Schneider, 2013). As with Sino-capitalism, the inherent diversity of these capitalisms is stressed, in particular the state’s different roles. Vivien Schmidt (2009; 2012) pointedly suggests that the state must be treated as an autonomous political-economic actor, deviating from many other CC approaches. Rather than disaggregating the state into its historical institutional components or the strategic actions of state elites, it must be viewed as architectonic, incorporating political struggles over ideas, policies, and power that fundamentally structure each variety of capitalism (cf. Amable, 2003; Streeck, 2009).
62The Chinese state under Sino-capitalism crystallizes such an architectonic structuring role remarkably well. In practically every sphere of the economy the Chinese state remains a major force structuring national, local, and firm-level policies (Szelenyi, 2010). Sino-capitalism also exemplifies the importance of state adaptability, social accommodation, and a multitude of regulatory modes ranging from dirigiste to liberal laissez-faire, creating in turn several distinct regimes of production in the Chinese political economy (Luthje, 2013). One of the most interesting aspects relates to the Chinese state’s compensating role in reproducing the institutional and power relations sustaining Sino-capitalism.
63The logic of Sino-capitalism relies, as other varieties of capitalism, on unique institutional complementarities. These create interlocking institutional isomorphisms sustaining competitive advantages and stabilities in the Chinese accumulation regime. They also imbue Sino-capitalism’s distinct dialectical structure and dynamics with a certain path-dependency. However, Sino-capitalism’s institutional complementarities differ from the mainstream conception of reinforcing complementarities (Hall and Soskice, 2001; cf. Amable, 2003).
64Under Sino-capitalism, the balancing of institutional spheres relies on the amalgamation of state-led coordination top-down with flexible and entrepreneurial network capitalism bottom-up. This means that complementarities are characterized by constant tensions, power struggles, as well as adaptation and experimentation. As Deeg and Jackson (2007) note, many types of capitalism are characterized by tensions among different institutional spheres, since each sphere follows different logics. Indeed, Boyer (2005) and Crouch (2005) hold that true complementarity connotes institutions following different structural logics, “where components of a whole mutually compensate for each other’s deficiencies” (Crouch, 2005: 359).
65Sino-capitalism is ultimately co-determined by unlike institutional logics that balance each other’s strengths and weaknesses. Actors have diverse options and capacities that facilitate cross-fertilization, creating openings for institutional learning, tinkering, experimentation, and transformation. Sino-capitalism’s tension-ridden dialectic complementarity should therefore be seen as contributing to, rather than undermining, the overall competitiveness and developmental sustainability of China’s political economy. Hybridization and messiness may hold distinct advantages.
66Naturally, the hybrid, complex, and dialectical aspects of Sino-capitalism express fundamental contradictions that could someday come to the fore, destabilizing the system, and triggering a fundamental crisis of the political economy. All cases of capitalist evolution are historically indeterminate. Present political and economic dissonances in China already are an indication of increasing strains. Under the scenario of a major politico-economic crisis, Sino-capitalism could face a critical juncture at which point a new logic of capitalism supersedes it. It is therefore absolutely conceivable that Sino-capitalism could face a rupturing in coming years.
67Nonetheless, the various policies announced to rebalance China’s political economy so far show that without major political upheaval the dialectical dynamics of Sino-capitalism are likely to be reproduced over time. Continuous gradual reforms in the realms of economic liberalization and institution-building, especially to establish a more effective regulatory state, do not imply a fundamental change. Sino-capitalism’s evolutionary logic could be replicated well into the future.
68Regardless of the potential outlook for Sino-capitalism, explorations of its logic open up new avenues for theoretical inquiry in CC. The aspects of the logic analyzed in the foregoing expand our understanding of capitalist evolution to include state-capital dynamics and compensatory institutional complementarities. Perhaps most importantly, the dialectical evolutionary quality of Sino-capitalism contrasts with the more static comparative approaches in most of the CC literature, obliging us to recognize capitalism as in a perpetual state of disequilibrium and tension.
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