Between Developmental and Clientelist States: Local State-Business Relationships in China

The changing nature of state-business relations in China can be analyzed in light of recent privatization experiences. Drawing on an analytical framework based on statist literature, the pervasive governance problems occurring during the privatization of local government-owned firms can be explained by two contributing factors. These are the state's declining capacity to regulate the market and its reduced autonomy from emerging elites. Consequently, local states were transformed from those in which there was “embedded autonomy” to those with a “clientelistic” form. Thus, the conventional wisdom that local states have played a positive role in China's economic development is subject to question. A more nuanced understanding of cronyism helps explain the relationship between the Chinese Communist Party and capitalists.