Over more than thirty years of reform and opening, the Chinese Communist Party has pursued the gradual marketization of China’s economy alongside the preservation of a resiliently authoritarian political system, defying long-standing predictions that ‘transition’ to a market economy would catalyse deeper political transformation. In an era of deepening synergy between authoritarian politics and finance capitalism, Communists constructing capitalism offers a novel and important perspective on this central dilemma of contemporary Chinese development. This book challenges existing state–market paradigms of political economy and reveals the Eurocentric assumptions of liberal scepticism towards Chinese authoritarian resilience. It works with an alternative conceptual vocabulary for analysing the political economy of financial development as both the management and exploitation of socio-economic uncertainty. Drawing upon extensive fieldwork and over sixty interviews with policymakers, bankers, and former party and state officials, the book delves into the role of China’s state-owned banking system since 1989. It shows how political control over capital has been central to China’s experience of capitalist development, enabling both rapid economic growth whilst preserving macroeconomic and political stability. Communists constructing capitalism will be of academic interest to scholars and graduate students in the fields of Chinese studies, social studies of finance, and international and comparative political economy. Beyond academia, it will be essential reading for anyone interested in the evolution of Chinese capitalism and its implications for an increasingly central issue in contemporary global politics: the financial foundations of illiberal capitalism.
The first chapter identifies the central themes and puzzle animating the book: the role of finance in China’s ‘socialist market economy’ and its intertwined trajectories of deepening market reform and authoritarian resilience under Xi Jinping’s leadership. It identifies the three objectives of the book: first to embed the analysis of this paradox and contemporary Chinese political economy in deeper historical and cultural context. Second, to break down conceptual divisions between ‘state’ and ‘market’ and return to a focus on the nature of contemporary political economy as contemporary capitalist political economy. Finally, to place these investigations in the context of the longer-run evolution of the global economy.
Chapter 2 positions the current study of China’s evolving capitalism in the broader context of China’s historical politico-economic evolution, and the significance of a distinction between a ‘market economy’ and a ‘capitalist economy’ for the study of contemporary political economy. It argues that the Eurocentrism that dominated debates as to why China ‘failed’ to develop capitalism (the great divergence) is the same Eurocentrism that has reified the conceptual state and market as the definitive analytic categories of Western political economy. Thus, it is only by way of understanding contemporary capitalism as more than the various configurations of state and market institutions—as the broad literature surrounding varieties of capitalism would reduce it to—that China’s otherwise highly paradoxical path of development can begin to be made sense of. More specifically, it opens up the theoretical space for conceptualizing the role of the CCP as an integral element of this evolving capitalist enterprise.
Chapter 3 develops an analytic framework for understanding how the financial system underpins a particular path of politico-economic development. It first examines how the concept of uncertainty and its relationship to financial risk is fundamental to making socio-economic action possible, a process with both economic and political implications. The management of uncertainty not only generates the potential for economic growth, but also contains the mechanisms for structuring that growth in particular ways. The chapter thus embeds the role of the CCP in socio-cultural and historical context, reconceptualizing it as the key locus of authority around which this management and exploitation of uncertainty takes place in Chinese capitalism.
Chapter 4 focuses on the period 1990-1997. The politico-economic retrenchment following the social protest movement and events in Tiananmen Square that unfolded in June 1989 would lay the basis for economic revitalization, but along lines very different from a liberal free-market ideal. The chapter examines this legacy of neoconservative ascendancy in the aftermath of 1989, combined with Deng Xiaoping’s successful reassertion of economic growth and development as the foremost economic, political, and social priority. Together, these laid the basis for a path of reform that combined an effort to increase the commercial effectiveness and rationality of the financial system with the reconsolidation of centralized political authority, and an upgrading of the political and ideological cohesion of the most significant and critical sectors of the political economy at the time; the banks and the state-owned industrial firms. In doing so, the financial foundations were laid for two decades of stable, rapid, yet unsustainable growth.
Chapter 5 examines the process of financial reform and restructuring following the 1997 Asian financial crisis, during the process of accession to the World Trade Organization (WTO), and through to the unfolding of the 2008 financial crisis. As China transitioned from what had been a position still of (relative) international isolation to (partial) integration with the global economy, it was necessary to develop a set of financial and macroeconomic policies that would support trade and attract investment. China’s leaders therefore sought to construct an internationally oriented modern financial system, which for all appearances was now increasingly geared for competition with foreign banks both at home and eventually abroad. Yet the premise of reform during the 2000s was not to replicate a Western financial system, but to transform the banking system into a more effective tool for achieving the broader politico-economic goals of the CCP. Reform was intensified, not in order to create more independent market forces, but rather to improve the market as a tool for the CCP.
Chapter Six traces how the 2008-9 financial crisis precipitated further steps towards developing technocratic and rationalised financial regulatory institutions under the auspices of continued overarching CCP authority. The Chinese financial system was faced with the immediate economic imperatives of supporting growth and the discursive discrediting of an Anglo-American regulatory model. These combined in a crisis response that directly enmeshed financial institutions ever closer to the heart of the Chinese political economy rather than seeking to insulate the real economy and public finances from the private financial sector, and the emergence of a shadow banking system that both supported and posed risks to financial stability. At the same time, shadow banking was giving rise to new technology-driven financial institutions and channels of credit intermediation, which are now increasingly being brought under CCP control and authority, further deepening the conjoined processes of market development and political consolidation. Counterintuitively, the very forces behind deeper and broader financial liberalization are now also consolidating the CCP’s overall legitimacy and ruling capacity.
The concluding chapter considers why, in the study of the intertwined processes of evolution in the global order and China’s ongoing socio-economic transformation, it is both useful and necessary to study the role of the financial system in China’s economic development, and in turn to study the role of the CCP in China’s financial system. It points to some of the ways in which the arguments developed in the book are important to future research into the reshaping of China’s political economy and the global political economy in the aftermath of the 2008 financial crisis. Finally, it draws out some of the book’s implications for the conceptual, theoretical, and methodological ways in which we approach the ‘China question’ and the future of authoritarian capitalism in an era of flux and change in the global capitalist order.