Preface

On 8 November 2008 in the heart of Beijing’s ‘financial street’ [金融街], an executive at one of China’s ‘big five’ state-owned commercial banks (SOCBs) received a phone call from the head of one of the bank’s offices in a city in Shandong province. The provincial bank head had dined the night before with a local Party official, and one topic dominated discussion: how they could maintain confidence in the financial system, free up liquidity and investment capital, and stimulate domestic demand. Three days previously, the Central Committee of the Communist Party of China (CCP) had issued Document No. 18, laying out ten policies to ‘further expand domestic demand and assure stable rapid growth’ in the midst of global economic downturn, and cadres across the country were tripping over themselves to gear up plans and projects for investment (Liu Zebang 2008). One dilemma presented itself, however: since its establishment in 2003 the China Banking Regulatory Commission (CBRC) had also been leading the ‘modernization’ of China’s banking sector in macro-prudential regulation, corporate governance, and financial supervision, aspects of which were at risk of being ridden over roughshod in the frenetic drive to shore up growth. The Beijing executive’s opinion was clear: the Party centre was under no illusions as to the need for clear macroeconomic direction, and if those at lower levels started second-guessing, ‘no-one would know what to do and economic disorder would ensue’. Unity [团结] was the order of the day, and the CBRC would also do what the Party required of it.¹

When I sat down with this executive in late 2012, sipping green tea in a corner office, the financial crisis had brought Western economies to their knees, and the triumphalism that had accompanied China’s much-feted stimulus package and 8.7 per cent gross domestic product (GDP) growth in 2009 had begun to fade amidst growing awareness of wasteful investment projects, a further consolidation of economic power within the largest state-owned enterprises (SOEs), and a perception that ordinary households were amongst the last beneficiaries of the stimulus spending. We talked about this concept of economic disorder [jingji hunluan经济混乱] – what it means, what causes it, and its implications. I asked about the lessons he drew from the 2008 financial crisis, and he said interesting but not entirely unexpected things about reducing inefficient state bureaucracy, about managing moral hazard, about limiting the innovation of complex financial products; but then he surprised me. He mentioned a different word for disorder [dongluan动乱], and said that neither the state nor the market were capable of managing this kind of disorder. This is a political word, not an economic one, and it connotes turmoil, unrest, upheaval. As China was accelerating financial reform, as the ‘transformation of the state’ was gathering pace, the lesson that this banker took from the crisis was that it was neither the regulatory state nor the free market that prevented dongluan. It was the Party.

This vignette highlights three puzzling aspects of China’s reform-era trajectory of development: (1) the embrace of ‘the market’; (2) the rationalization of ‘the state’; and (3) the undisputed political-economic authority of the CCP. As Xi Jinping’s administration now confronts the mounting pressures of global economic turbulence and uncharted domestic economic terrain, important questions remain unanswered about how these features of China’s political economy are connected, and how they are likely to evolve in the years to come. Simplifying somewhat, the core argument I develop in this book is that to understand these trends we have to look beyond the concepts of the state and the market as we have understood them in the liberal tradition of political economy, and instead theorize the politico-economic agency of the CCP itself, and in particular the ideas and conceptions of order that underpin this agency. Such factors have been largely neglected in existing accounts of China’s financial development and reform, which remain focused on the more micro-level dynamics of political contestation within the state and market environments, without pausing to consider more broadly how these political and economic logics have interacted so as to produce a remarkably stable, if unbalanced and as yet potentially unsustainable, set of mechanisms for economic growth and the accumulation of capital. As I argue in this book, without accounting for the ideational cohesion that generated a powerful basis for CCP authority and control over the flow of capital throughout the economy, it becomes very difficult to understand both the resiliency of Party control and the commitment to market-based institutional reform. Although Chinese financial policymaking and development since the early 1990s has embodied a capitalist logic of economic growth and accumulation, the manifestation of this logic elides the traditional analytical dichotomy between the state and the market. Rather, this logic manifests in the CCP constituting the central feature of a system of socio-economic risk management that has functioned both to support economic growth, at the same time as a mechanism of political control. That is to say, the process of financial reform involved the construction of a system that would enable state-regulated and market-based economic growth at the same time as preserve CCP authority over the nature and structure of that growth.

The motivation for probing the sociological role of the CCP arose inductively from numerous discussions in the field amongst academics and bankers in Beijing, where it rapidly became apparent that in order to understand the role of the financial system in China, one must look beyond traditional notions of market liberalization and state regulation. In the wake of the 2008–09 crisis, it was an opportune time not just to consider how China’s development was affecting global finance, but perhaps more importantly, to reflect more deeply and critically upon some of the axiomatic assumptions that underpinned the development of Western finance. Interrogating these conceptual and theoretical underpinnings of Western political economy in turn would provoke a reassessment of how these intellectual lineages had informed – and indeed tainted – resulting perspectives on Chinese economic development. What I discovered during two years of residence and fieldwork in Beijing was not just that Chinese finance was subject to state intervention, the politics of which obstructed market liberalization. Rather, my findings would reveal that the Chinese path of financial development was the product of an understanding of the relationship between market competition, bureaucratic regulation, and political authority that was fundamentally different to that which had led Western economies to financial near-meltdown. This itself was no normative judgement – China’s financial capitalism is unsustainable and crisis-prone just like any other – however it raised important questions for how we understand contemporary capitalism in comparative context. In contrast to a complex intertwining of socio-political rights with both the redistributive and regulative function of the state as well as the liberating competition of the market mechanism, Chinese political economy embodied such rights in the relationship between society and the CCP itself, whilst the social institutions enabling state regulation and market competition constituted tools – to be directed and shaped towards political ends but which give rise to little normative authority themselves. From this perspective, Xi Jinping’s consolidation of the CCP’s ideological and organizational authority is far from a rupture with the course of reform and opening but rather marks a deepening of a political tradition deeply embedded in Chinese history and society. It represents a determined effort to construct a viable authoritarian capitalism – one that harnesses the power of both state and market in pursuit of the deeper political objectives of CCP-led socio-economic development and national rejuvenation.

The majority of the book was then written in Oxford under the astute guidance of Andrew Hurrell, whose advice and support throughout was invaluable in establishing the core intellectual concerns and tone of the project. At Oxford, I was the beneficiary of a deep and diverse intellectual community stretching across the fields of international relations and Chinese Studies. In particular Shaun Breslin, Sarah Eaton, Kalypso Nicolaïdis, and Eric Thun provided insightful and invaluable feedback at various stages, improving the final manuscript considerably. St Antony’s College itself was not just a vibrant and multi-faceted hub of intellectual activity that I was fortunate to be a member of, but also provided financial support via the Wai Seng Senior Research Scholarship in Asia-Pacific Studies for which I am particularly indebted. Beyond St Antony’s I have received financial support from many sources, but in particular I am also extremely grateful to the Chiang Ching-Kuo Foundation for funding the latter stages of the project, to the University of California at Berkeley for funding language studies in Beijing at the Inter-University Program for Chinese Studies, and to the Department of Politics and International Relations for funding fieldwork throughout the project. The receipt of a Future Research Leaders Fellowship from the UK Economic and Social Research Council (ES/N001982/1) also made further research and revisions possible on the manuscript.

Beyond Oxford, a number of institutions and individuals were instrumental in enabling the course of research. My discussions and seminars in Cologne whilst visiting the Max Planck Institute for the Study of Societies were particularly valuable in establishing the theoretical parameters of the project and opening up new lines of inquiry to me, and I would like to thank the staff and researchers at the institute not only for their financial support, but also for making my time in Cologne such an enjoyable one. In the course of revisions, I benefited considerably from the manuscript development sessions held at the University of Warwick, and the valuable feedback and support provided by those attending. It has also been a pleasure to work with Manchester University Press, and I am particularly grateful also to the two reviewers whose comments on the text helped improve it considerably. Since I began working on this project, a number of scholars and practitioners have generously shared their insights, networks, and suggestions with me. Amongst others still, Jamil Anderlini, Bilal Baloch, Quentin Bruneau, Tobias ten Brink, Greg Chin, Martin Chorzempa, Jerry Cohen, Rogier Creemers, Claire Du, Matt Ferchen, Rosemary Foot, Thomas Gold, Sandra Heep, Sebastian Heilmann, Huang Wei, Scott Kennedy, Chris Kutarna, Wendy Leutert, Tracy Li, Vic Li, LJ Liu, Kun-Chin Lin, Anton Malkin, Christopher McNally, Miguel Otero-Iglesias, Lou Pauly, Simon Rabinovitch, Chris Sampson, Henry Sanderson, Vivienne Shue, Wolfgang Streeck, Marc Szepan, Carl Walter, Ann Wang, Logan Wright, Wang Jue, Wang Yingyao, Wang Yong, Xiao Geng, Xu Jiajun, Xu Qiyuan, and Lea Yu all did their part in shaping the course of the research.

My lengthy stint of fieldwork in China was possible only with the help of a number of people. Zhu Tianbiao at the Peking University School of Government and Gao Haihong and Zhang Ming at the Chinese Academy of Social Sciences all provided invaluable institutional support and intellectual guidance, and their efforts were complemented by many others at both institutions. This extends especially to all those within the various institutions and organizations of China’s financial ecosystem who shared their time, opinions, and hospitality with me during those months of talking, not just in airless meeting rooms but also over tennis, hotpot, or baijiu, sometimes all three. Some I now count as friends as well as spirited interlocutors, but to all of them I can only say that this research would not have been possible without you, and I want to express my heartfelt gratitude. My teachers at the Inter-University Program at Tsinghua University were all wonderful, especially 许老师 who was an endless source of motivation and support. The inestimable Peter Knaack also arrived in my life at this time as both a wonderful friend and inspiring colleague. My Beijing existence proved full of surprises, and Kirie Stromberg and Rosalyn Shih were especially treasured companions along this path. I’m grateful to them and many other friends for making my life in Beijing the enriching experience that it was.

Finally, I thank my family – Rick, Yeats, and Adrian – for shaping, supporting, and surviving my intellectual career in too many ways to describe with any eloquence here. Above all, they encouraged me always to follow my own path and provided the love and support with which I was able to do this. Despite the distances across which the Gruins are now dispersed around the world, they are always close to my heart.

Note

1Interview 14 December 2012, Beijing – Bank of China.

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