China Beat Archive


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January 23, 2009 in The China Beat


Copyright January 23, 2009 Eric Setzekorn. Used by permission.


A Review of Yasheng Huang’s Capitalism with Chinese Characteristics: Entrepreneurship and the State (Cambridge University Press, 2008)

With China’s export-centered economy looking increasingly unbalanced and unsustainable, there has been growing public support for state involvement in the interests of rural development.Yasheng Huang, of MIT’s Sloan School of Management, provides a powerful economic rationale to this emerging movement with his new book Capitalism with Chinese Characteristics. Huang argues that urban biased government policies over the past fifteen years are the cause of skewed proportions of China’s economy and have tremendously hindered stable private sector growth. Huang debunks the consensus view that China’s economy has become increasingly open to private enterprise during the thirty year of the reform period, suggesting an alternative narrative of a resurgent state sector sidelining the vibrant, sustainable and equitable development pattern of the 1980s.

Huang centers his analysis of China’s reform period on the often neglected rural economy of the 1980s, a period he dubs the “The Entrepreneurial Decade.” To Huang, the 80s pattern of rural development of private sector labor intensive production offered the possibility of a “virtuous” development based on a trajectory commonly seen in other East Asian developing nations. The beating heart of this decade’s growth is the dynamic role played by the Township and Village Enterprises (TVE), which provide both mass employment and management opportunities for poor but entrepreneurial residents. To get TVEs off the ground, aspiring entrepreneurs either pooled capital informally or were able to access official sources due to lenient credit policies encouraged by senior party leadership.

In contrast to many observers, of which Huang singles out Joseph Stiglitz as the main offender, these organizations are shown to be functionally private operations cloaking themselves in the necessary legal fiction that they are collective entities in order to register with the government. One of the recurring themes of the book is the extent to which foreign observers continue to grossly misunderstand cultural and administrative terminology and functional differences between China and other nations, in this case misunderstanding TVEs as an organizational identifier rather than merely denoting locality.