Varieties of Socialist Market Economy: Categories, Cases, and Explanations

• In Event: Chinese Politics Mini-Conference: Firms, Industries, and China's (International) Political Economy

Abstract

This paper delves into the longstanding debate surrounding China's rapid economic growth, examining whether it is driven primarily by market forces or state intervention. By adopting the
perspective of regional developmental models, it aims to unravel the complex interplay between state and market roles in the economic development of Chinese provinces since 1978. The analysis utilizes a novel panel dataset featuring over 30 macroeconomic variables that reflect institutional changes in Chinese provinces. Employing machine learning algorithms such as time-series hierarchical clustering and Uniform Manifold Approximation and Projection (UMAP), the study discerns two primary dimensions for categorizing provincial developmental models: state ownership/investment (prevalent or diminished) and market infrastructure (prototyped or underdeveloped). Four distinct socialist market economy types in China emerge: dual-market (strong state and market, e.g., Beijing and Tianjin), coordinated-market (weak state, strong market, e.g., Guangdong and Zhejiang), state-dominating (strong state, weak market, e.g., Guizhou and Shannxi), and state-retreating (weak state and market, e.g., Guangxi and Anhui).

In-depth interviews with over 100 government officials, approximately 50 state enterprise managers (including state bankers), and over 50 entrepreneurs from these eight provinces provided insights into how different agents interact in these economies. The study identifies four economic states corresponding to the developmental models: the service state (in coordinated-market economies) fosters market rules and leverages private capital with limited state involvement, actively resolving coordination issues among government departments to support private enterprise growth. The regulatory state (in dual-market economies) predominantly hosts state enterprise headquarters and regularly formulates regulations to maintain non-competitive conditions for state enterprises, while deliberatively leaving the private sector in a competitive market environment. The paper concludes with a cross-case comparison and within-case process tracing, aimed at elucidating the reasons behind the divergent developmental models and their respective balances of market and state forces. It underscores that the capacity of central and provincial leaders to develop market infrastructure is constrained by historical contingencies and natural endowments.

Author

• Qin Huang