Chapter 6
The Emergence of Hybrid State-Society Relations in Post-Mao China

Among the myriad changes brought about by the post-Mao economic reforms, one of the most profound has been the birth of a new business elite in the non-state sectors. The preceding chapters have elucidated the specific characteristics of two segments of this elite, foreign-sector managers and private entrepreneurs. Beyond merely describing the origin and characteristic of this new elite, this book has addressed the broader problem of the impact of economic reforms on state-society relations. Will a stratum born of the economic reforms generate direct pressures for political reform, and even be the carriers of civil society? If not, in what ways do new economic elites in fact interact with the state and what political outcomes have resulted from economic reform?

This book's examination of China's new business elite has revealed a pattern of state-society relations that diverges substantially from Maoist neo-traditionalism and the "transmission belt" mode of mass organizations. But, instead of democratization, we see in the leading-edge sectors of both foreign and private business a pattern of state-society relations that combines informal clientelism and socialist corporatism. This final chapter elaborates on this conclusion, and then proceeds to address two additional issues: the question of whether the new patterns of state-society relations that we see in China are compatible with the broader statist patterns found elsewhere in East Asia, and the implications of this study's findings for the likelihood of a future evolution toward liberal democracy or the emergence of civil society in China.

New Groups Arise from Economic Reform, But to What Political End?

The managerial elite that has emerged from the post-Mao reforms differs significantly from the predecessor elite that managed the state-owned economy during and after the "transition to socialism" of the mid-1950s. That earlier generation of managers lived almost totally under the purview of the Party-state. But the growth in the reform era of markets and the concomitant devolution of authority away from the state sector, plus the opening of the country to foreign businesses, have allowed people in some sectors to structure their lives largely outside the state-owned, neo-traditional unit (danwei ). Hence, in the foreign sector, managers are provided an alternative to the pattern of "organized dependence" that has dominated state industries.^[1] They have escaped from close supervision and from control by means of Party dossiers and are much less dependent upon the state for the provision of medical care, housing, and other social welfare benefits. They have significantly greater job mobility. In the private sector, too, entrepreneurs have become quite mobile and are more free of Party surveillance, and increasingly provide for their own welfare through the market.

Autonomy can also be seen in the ideology of foreign-sector managers. Although many of them were drawn to the foreign sector in the first place because of their more independent spirit, they have, through their overseas experiences and their contacts with international managers, developed further ideas about the desirability of changing the status quo. Compared to the reforms actually being implemented in the early 1990s, members of the business elite hold quite strong views about the need not only for further economic change but also for further political change. They favor not only full marketization and unfettered participation by China in the world economy, but also a greatly reduced role for the state and Party in the economy. They clearly have been influenced by foreign ideologies.

These signs of autonomy are not insignificant, and yet they do not tell the whole story. Despite their structural independence and their

[1] Walder (1991a, p. 337) emphasizes the lack of alternatives as central to "organized dependence."

views about the need for change, most foreign-sector managers wish to avoid politics, wanting simply to "check out" of the domain of state control. They are not, and do not perceive themselves to be, at the forefront of political change. Private entrepreneurs also arc apolitical in their behavior. Neither group has taken to the streets in protest of policies with which they disagree, nor have they extensively or regularly lobbied the government for policy change. It is true that their associations in some instances have represented business interests against those of the state, but for the most part members of the business elite rely on personal relations with officials to gain highly individualistic benefits for their businesses.

There are several reasons for the lack of activism by members of this elite. Foreign-sector managers view their anti-Party stance as based on ideology, but they often come to their belief for very practical reasons based on personal experiences. Having been forced into activism, particularly during the Cultural Revolution era when they came of age, they tend to have a strong distaste for "politics."^[2] They do not readily distinguish between activism forced by the state on behalf of the state (which constitutes the bulk of their political experience) and more spontaneous organization in their own interests; both are to be avoided. This is consistent with their "business first" orientation. In fact, their interest in avoiding politics is supported by the current business environment; they can immerse themselves in business. Brus made the point over a decade ago with regard to business elites in Eastern Europe:

[T]he very extension of the role of the market and enterprise autonomy (depoliticization of the economy) may be enough to satisfy managerial interests without generating pressures for pluralization of the polity. . . . It is true that people must feel personally less constrained when the command system gives way to the market-oriented one, but whether this fact in itself becomes a spur to political action is another matter; greater economic independence from the state may well have the opposite consequence of promoting both non-political attitudes and the pursuit of strictly private interests. ^[3]

The business elite's lack of activism derives not only from the ideology and experiences of its members, but also from their belief that they are powerless to pressure the state and are unimportant as a group. They

[2] Their lack of activity therefore cannot be said to render their reformist political views mere window-dressing. Rather, to be apolitical does not mean that managers have no political views, but that they do not wish to engage in political activity.

[3] Brus (1983), pp. 125-127.

still perceive themselves as too vulnerable to forge a new relationship. And they are correct in perceiving that they possess an alternative strategy for influencing officials—namely, personalistic ties—that is more acceptable to the state and does not require activism of the sort members of the economic elite wish to avoid.

Many characteristics of the foreign-sector business elite have a familiar ring. They are characteristics of the broader international managerial bourgeoisie. Like their overseas counterparts, China's foreign-sector managers have in particular a cosmopolitan, even internationalist, outlook when it comes to economics. They are imbued with "modern" technocratic values of efficiency and rational management. Their lifestyle, too, is cosmopolitan when judged by Chinese standards. Their apolitical nature and lack of revolutionary zeal are typical of comprador elites, as is the tendency to rely on clientelist strategies. Their subordination to the state through state corporatist structures also is relatively common.^[4] Yet China's elite appears weaker vis-à-vis the state than comparable groups in most developing capitalist countries—particularly Latin America and, as we shall see below, East Asia—that have a longer, uninterrupted history of a private sector and international business ties.^[5] It is weaker than China's own bourgeoisie of the "golden age." It is even weaker than the very new business elite that has emerged at the pinnacle of Russia's new power structure, a group that has gained considerable control over the executive and legislative arenas of that post-socialist state.^[6] In other words, although China's business elite is a clearly defined group, it lacks horizontal ties that bind the members of the group together and facilitate collective consciousness and collective action. The weakness of this group's associations and its members' sense of powerlessness to effect changes that would help foster policies they favor reflect the absence of such horizontal ties.^[7] Thus, China's new

[4] On the pragmatism, subjection to corporatist structures, and reliance on clientelism among members of the Latin American business elite, sec Payne (1994).

[5] Even so, the business elite in developing capitalist countries often is portrayed as relatively weak; it is seen as internally fragmented and dependent on the state to protect its interests. (This is the picture drawn in the literatures on bureaucratic authoritarianism and dependency. See O'Donnell [1973] and Evans [1979].) Payne (1994) argues that, although it faces great challenges in engaging in collective action, the business elite in Latin America has at times overcome these challenges to mobilize to support military coups as well as to support moves toward democratization.

[6] Journalistic accounts of this group in Russia include Erlanger (1995) and Stanley (1995).

[7] The ability to formulate its strategy on a national level is a hallmark of the "new bourgeoisie." See Becker (1987), p. 97 n. 15.

business elite cannot, at least yet, be conceived of as a "class for itself." In part this circumstance occurs because China's managerial elite is new. It also has few direct and personal ties to others who previously had played a similar role in China. The nationalization of property that was completed in 1956 and the elimination of managerial and private interests as legitimate interests cut the links of such a group with the past.^[8] The disadvantage posed by the group's relative youth has been magnified by the state's efforts to pre-empt the process of class formation.^[9]

New (Old) State-Society Relations in the Leading-Edge Economic Sectors

Returning to the question of the link between economic and political change, it is clear that the economic reform's creation of a new elite with structural and ideological autonomy is insufficient to produce democratization or civil society in the short term, or in a direct manner. Yet while the outcome of the link between economic reform and change in state-society relations is neither simple nor foreordained, change nevertheless can occur. Economic reform does indeed loosen old (in this case, Leninist) structures, but this loosening process interacts with other variables which exert a powerful and often decisive influence over what shape political change actually takes. In post-Mao China, three intervening factors have shaped the manner in which state-society relations have evolved in the leading-edge sectors of the economy. The first factor, discussed previously, is the concrete interests and ideology of foreign-sector managers; the practical ideology of managers translates into a freedom not to be involved in politics and, concretely, an interest in avoiding politics so that they can focus on business. The second element is the continuing use of personal ties to effect influence. The final intervening factor, and arguably the most important, is the effort of the state to create channels of interaction between state and society, specif-

[8] An exception is Rong Yiren, who comes from what was arguably Shanghai's most prominent capitalist family of the 1930s and who has risen to prominence under the Deng regime. Most former capitalists fled during the revolution.

[9] Another way to think about the class situation of China's new business elite is to see them as holding what Erik Olin Wright (1985, esp. pp. 25, 43-44, and 89) has called a "contradictory location" in socialist society—it simultaneously is subordinate to the state and dominant over local employees and "the masses." I thank an anonymous reader for this insight.

ically to attempt to co-opt members of the business elite before they have a chance to engage in independent action on their own behalf. Thus, in contrast to the "golden age" of the 1920s, when the bourgeoisie failed to seize state power because the state was too weak to be worth seizing, China's post-Mao business elite has failed to transform its economic position into political power because it is uninterested in doing so, because there is a viable clientelist option, and because the socialist corporatist strategy of the state is designed to prevent it.

These three factors together have created a new form of state-society relations in China's leading economic sectors. This new pattern is far from pristine. There are inklings of civil society. But while these inklings are clearly part of the picture of post-Mao state-society relations, to report them alone or exaggerate their importance would render the picture woefully incomplete. The structural and ideological autonomy of these elites has failed thus far to provide a decisive basis for coordinated behavior independent of the state. Seeds of civil society represent the weakest part of the emerging pattern of state-society relations.

Instead of civil society, the dominant pattern consists of a combination of socialist corporatism and clientelism. In their actual behavior (as opposed to their ideology), China's new business elites choose safe, well-established, and effective clientelist strategies to maneuver their way vis-à-vis the state bureaucracy. For even though the formal institutions of neo-traditionalism have been seriously eroded in the foreign and private sectors, no equivalent, highly effective formal channels have emerged. The absence of thoroughgoing marketization, moreover, has meant that incentives for using personal ties remain; foreign-sector managers recognize the tremendous importance of cultivating good relations with officials in order to achieve their business goals. Clientelist strategies are most important in the private sector, since entrepreneurs are still quite dependent upon the discretionary favoritism of local officials for protection and resources. The entrepreneurs use a variety of strategies to cultivate good relations with officials, such as paying local officials to establish a collective. (One distinguishing feature of the foreign sector is that foreign businesses have pressed the government to regularize the business environment and codify regulations, reducing by comparison the need for informal relations with officials.)^[10] Clientelism is also a central feature of the interactions between business associations

[10] In other words, although bribes for the provision of services also are demanded in the foreign sector, the effort to regularize and formalize foreign business's access to public goods is much more extensive than in the private sector.

and the state, for members and association leaders alike know that their personal ties are paramount in making the organization effective in pursuing members' goals.

The foreign and private sectors also provide substantial evidence for the other major component of this new pattern of state-society relations: socialist corporatism. We have seen that the associations of the foreign and private sectors, particularly their branch organizations, at times press the interests of their members on the state. But their dominant mode of interaction with officials is state corporatist. As with the formation of chambers of commerce at the turn of the century, the post-Mao government has legitimated interests outside the Party-state in an attempt to unleash the power of societal groups, but in a way that directs that power toward the government's own goal (national economic development) and prevents the newly created forces from acting contrary to state interests. For such reasons, the associations have been organized and sanctioned by the state, and their leadership has been dominated by cadres dispatched from related ministries. The legitimacy of associations derives solely from having received state sanction. In their major tasks, including helping to promote a favorable business environment by working with both businesses and the Chinese bureaucracy, they have served the goals of the state.

As the perceptions of these associations' constituents make clear, however, at this stage of development socialist corporatism is more of a government strategy and a set of institutions than an effective channel linking state and society. The continuing perception of members that these associations are fully governmental and can be only weak advocates of members' legitimate interests reflects the weight of China's Leninist past.^[11] The lack of importance that business elites assign to associations means that, for business elites, clientelism is the most salient part of the hybrid pattern.

Socialist corporatism, which dominates the state's efforts in the associational realm, and clientelism, which characterizes the behavior of both individuals and associations, are consistent and complementary. Far from seeming out of place in post-Mao China, this hybrid seems quite natural there. One reason is that each half of the clientelism-corporatism marriage has a deeply rooted legacy in China. The use of informal personal ties existed not only prior to 1949, but has also pervaded the post-1949 context in conjunction with the formal authority

[11] The weakness of these associations also becomes apparent in the comparison (drawn below) with business associations in Taiwan and South Korea.

relations of neo-traditionalism. The Janus-like pattern that underlies socialist corporatism is rooted in a long history of merchant-government ties. Indeed, the post-Mao government's corporatist strategy can be conceived of as an attempt to have business serve the same function—aiding economic development while controlling the political role of merchants—as it did in the Qing period, and as the state-sponsored guilds did in the Nationalist era.

Each half of the hybrid pattern, clientelism and socialist corporatism, is rational in the post-Mao environment. Though perhaps not optimal (for either normative or efficiency reasons), this hybrid nevertheless works—and in some ways works well —for both state and society. The proof that this pattern is not wholly dysfunctional is that the business elite has thrived financially without significant political change. Hence, clientelism works well for members of the business elite because it allows them access to officials in an environment where formal channels of interaction are poorly developed. Where they do have a formal channel, through their business association, it is useful in significant part because of its leaders' guanxi. Although some members of the business elite complain about the need to rely heavily upon guanxi , most are comfortable with the central role it plays in their business activities.

Clientelism also serves the interests of the central state and of individual officials.^[12] It provides the government with a relatively costless means (measured in terms of state power) of quelling unhappiness within the crucial foreign and private sectors. Such piecemeal distribution of public goods by the state undermines the ability of societal actors to pressure the state in an organized way. Although use of guanxi creates pressure on officials to meet the needs of business, it is too individualized and fragmented to be a regular channel to promote lasting policy change. Distributing public goods in response to personal requests diffuses societal energy rather than concentrating it; it allows the state to buy off discontent short of a point where such discontent might foster organized lobbying or opposition.^[13] In other words, informal vertical

[12] Thus, the norm of reciprocity central to the idea of clientelism (the idea that both sides benefit) is present in post-Mao patterns of clientelism, as it was in Maoist neo-traditionalism.

[13] This is not to say that there are no costs associated with the state's need to respond to demands made through clientelist channels. The distribution of material state resources may be much less efficient than what could be achieved through a more collectivist bargaining pattern with business elites. In other words, clientelism can undermine bureaucratic capability. Calculation of costs to the state would have to net out the benefits the state—or individual officials—may gain through both legitimate (access to privately developed resources) and illegal (bribes) channels.

clientelism helps prevent the strengthening of horizontal ties within or between economic groups and hinders class formation. Moreover, benefits of clientelism also accrue to individual officials. Because officials benefit financially, and often illegally, from their ties to business, particularly in the private sector, they are at least as eager for such ties as are the members of the business elite themselves. Still, corruption is not always the motive of entrepreneurial local officials; many officials find it rational, for political and economic reasons, to use informal ties to aid the development of businesses within their jurisdiction.^[14]

The other half of the hybrid, socialist corporatism, benefits foreign-sector managers and entrepreneurs insofar as it sanctions significantly more freedom within their functional realm than they had previously had under Leninist patterns of government control. Moreover, although corporatist business associations co-opt business elites, these organizations in theory provide a formal channel of access to the state. Corporatism obviously is beneficial for the state because it gives the state access to the resources of society to put toward economic development, while at the same time divesting it from the burden of directly carrying out all economic tasks. Socialist corporatism therefore complements clientelism's tendency to prevent the emergence of a stronger, more organized society. Nevertheless, these benefits of socialist corporatism to the state could be given fuller play if the system were more effectively implemented.

The hybrid nature of emerging state-society relations in the leading economic sectors is not surprising insofar as pure typologies are more often a convenience of analysts than a reflection of reality. If pure typologies cannot be expected in stable times, they can be expected even less during a time of transition as dramatic as that of the post-Mao era. Nor is the way in which this pattern manifests itself uniform across sectors, as seen in the different strengths of clientelism in the foreign and private sectors and in the somewhat different roles played by associations. China has long been recognized as having great diversity in its regions and sectors, and so to find differences even within the most advanced portions of the economy is not especially surprising.

Given that the two segments of China's new business elite in which we are most likely to find greater independence from the state (the elite in the foreign and private sectors) exhibit patterns not primarily of civil society but of a clientelist-corporatist hybrid, it is highly unlikely that

[14] See Oi (1992).

other segments of the business elite that start out more closely tied to the state—particularly officials-turned-entrepreneurs and taizidang— will be at the forefront of even more liberal patterns of state-society relations. Rather, these other segments of the business elite are more likely to fit easily into the corporatist-clientelist hybrid identified here. By the same logic, it is unlikely that the other key sectors of the economy, the state-owned and collective sectors, will establish patterns of interaction with the state that are more independent than those found in the foreign and private sectors.^[15] And there are no signs in practice that greater independence or pressures for political liberalization have occurred in other sectors of the economy. As the economic reforms deepen and organized dependence breaks down, individuals within these other sectors must increasingly rely upon the market for jobs and the provision of other necessities of life. But these changes have not occurred at the pace or to the degree found in the leading-edge sectors. As in the foreign and private sectors, moreover, we see that the central government has considered extending corporatist controls to industrial associations. Clientelism remains a prominent feature in these sectors as well.

China in the East Asian Context

A more nuanced perspective on the patterns of state-society relations that have emerged in China's leading business sectors can be gained through a comparison of the institutions of China's business-government relations with those found in other East Asian nations, particularly South Korea, Taiwan and, to a lesser extent, Japan.^[16] The picture of business-government relations painted in the core literature on statism in Taiwan and Korea shows these countries to possess autonomous states that have, through talented and uncorrupted bureaucracies, intervened intelligently in the economy (often by promoting exports and screening foreign investment) in order to mold market forces to the state's goals of rapid industrial development. Strong, authoritarian states are insulated from and dominate relatively

[15] This conclusion follows the logic of the critical case study discussed in the introduction.

[16] The small size and non-national character of Singapore and Hong Kong (and the colonial status of the latter until 1997) make comparisons between them and China less useful. The East Asian "statism" literature is summarized in ch. 1.

weaker and more malleable business communities, often through intermediate corporatist associations. Recent additions to the founding works in this literature modify this picture to show that a range of institutional structures, and particularly of mechanisms to coordinate business and government, is possible under the "statist" guise. In addition, over time business has grown into a more influential partner. It has also become clear that the competent bureaucracies of these regimes coexist with deeply rooted personal networks. These networks often engage in corrupt and rent-seeking activities, and modify earlier works' claims of state autonomy.^[17] Despite these variations and imperfections, however, the works in this second wave of the statism literature continue to validate the importance of strong, competent states working effectively with business elites.

To the extent that China's business-government relations have evolved in a corporatist direction, that country has grown more similar to Taiwan and Korea. At a very broad level, similarities exist in these countries' formal institutions of business-government relations and in the goals of the regimes. Yet China's marriage of clientelism to socialist corporatism contains key dis similarities, particularly a relatively weaker set of government and corporatist institutions, that cast in relief key features of China's hybrid pattern of clientelism and socialist corporatism.

Business-government relations in contemporary China exhibit three core similarities with other East Asian countries. The first similarity centers around the goals of the regime. China's reformers have adopted the same broad goal as did their East Asian counterparts: rapid, stable economic growth, based in large part on exports.^[18] Similarly, the Deng regime has been committed to stability, particularly after the chaos of the Cultural Revolution.

Second, the Taiwanese and Korean governments have established cooperation-promoting institutions that link the state with business. These institutional linkages reflect governmental strategies quite similar to the Chinese regime's effort to marshall the resources of non-state sectors and at the same time retain ultimate authority over them. Business historically has been a subordinate partner in the relationship, moreover; the major task of business elites and their associations has been to facil-

[17] On these modifications, see Cheng, Haggard, and Kang (1995); Kang (1995).

[18] China has not relied as heavily on exports as did its East Asian neighbors; it has not needed to, given the size of the domestic economy. Still, exports from China have been an important engine of growth since the mid-1980s. See Lardy (1992).

itate implementation of government policy. Thus, in Korea the government has sanctioned and granted monopoly representation to a host of business associations, including peak associations such as the Korean Chamber of Commerce and Industry and the Federation of Korean Industry (FKI). The Korean government has also cooperated closely with the chaebol (business conglomerates, such as Hyundai), organizations which it had a strong hand in promoting but which have grown into dynamic business concerns with significant influence.^[19] Taiwan has also seen the growth of bodies to coordinate between business and the state, although these have taken a somewhat different form from, and became influential later on than, their counterparts in Korea. In Taiwan, the industrial and commercial associations that represent businesses were established along classic state corporatist lines. They have been subject to government approval in exchange for a functional monopoly. Any business sector with more than five firms is required to form an association, which is approved and controlled by the Guomindang's Committee on Social Affairs. The committee influences the appointment of top staff members, the most important of whom are usually loyal former military, security, or government officers. Indeed, the leader of the two national business federations during much of the 1980s was the same man, C.F. Koo, who not only owned the enormous Taiwan Cement Corporation but also was a member of the Guomindang Standing Committee for many years.^[20] However, these state corporatist associations, much like their PRC counterparts, were without much influence as they were established by the Guomindang in order to prevent the emergence of an independent power base among native Taiwanese businesses.

The third broad similarity between China and its East Asian neighbors is clientelism's place at the core of the system. As we have seen,

[19] On peak associations and chaebol , see Cheng, Haggard, and Kang (1995); Johnson (1987); Jones and Sakong (1980); Koo (1987); Onis (1991), pp. 115-116; Park (1987, pp. 905-908); and Woo (1991). Park (pp. 915-916) finds corporatist institutions in other sectors of South Korean society (professions, workers, and peasants), but offers the caveat that corporatism works quite differently in each sector; business associations in Korea, he argues, are the most influential even though they are susceptible to government manipulation.

[20] On Taiwan's state corporatist business associations, see Chu (1994); Tien (1989), esp. pp. 43-63; Winckler (1992), pp. 241-242; Wade (1990), pp. 271-272; and Zeigler (1988), pp. 182-183. The Taiwanese government did not corporatize the small and medium-size firms that have been the basis for Taiwan's phenomenal export-driven growth over the past two decades, however. See Unger and Chan (1995).

clientelism in China pervades the business elite's encounters with government officials. Despite the arguments of the earliest works in the statism literature that East Asian states are autonomous and insulated from social pressures, and despite the picture of a pure Weberian bureaucracy,^[21] clientelism is far from absent there; personal ties undergird the formal organizations that coordinate business and government, and are central to business-government relations. Such networks were first noticed to be important in Japan's industrial policy. There, state bureaucrats from the Ministry of International Trade and Industry (MITI) retire early to key positions in corporations or industry associations, where they provide crucial coordination between industry and the bureaucracy. This carefully institutionalized process is known as amakudari , or "the descent from heaven."^[22] Similarly, in Korea "many big businessmen have other channels [than business associations] through which business elites can influence the government: personal relationships, power brokering, outright corruption, and political contributions to the ruling party or politicians."^[23]Chaebol relations with the government are based heavily on personal ties of top business leaders with the office of the president and key bureaucrats. These ties, and their corrupt nature, were dramatically illustrated by the scandals that erupted in the mid-1990s at the highest levels of Korea's political system. The institutional links between Taiwan's business associations and the state are also underlain by a web of complex clientelist relationships. At the top of this network, for example, business leaders are married to members of the Guomindang's central leadership.^[24]

Comparisons of goals and broad institutional structures suggest that business-government relations in China have come to look on the surface quite a bit like what exists in Taiwan and Korea. Nevertheless, there

[21] The argument that relatively great autonomy, particularly early in the process of development, shielded East Asian states from societal pressures that could seriously undermine their goals was made by, for example, Haggard, Rim, and Moon (1991, pp. 859, 869); Onis (1991 , p. 124); and Wade (1990 ). The early works in this literature played down "traditional" rent-seeking behaviors, perhaps because the authors were attempting to argue (against the neoclassical development school) that the state could be efficient, honest, and rational.

[22] See Okimoto (1989); Gerlach (1992).

[23] Park (1987), p. 907; see also p. 915. The use of personal ties in South Korea is facilitated by the fact that Korean elites in both business and government are from the same schools and types of family, and often know each other personally.

[24] Chu (1994), p. 119. See also Evans (1995), p. 56-57.

are important differences in the pattern that is emerging in China, of which three features are most significant. Each of these differences reflects, at least in part, the socialist context from which post-Mao state-society relations have emerged.

The first difference is the relative strength in Taiwan and Korea of the institutions linking the business sector to government and the effective coordination these institutions foster between business and government. The institutions of business-government relations in Taiwan and Korea in some ways look quite different from each other, and yet in both countries these institutions help provide effective coordination between business elites and the state. The peak associations of business in Korea were relatively weak when formed in the 1950s and 1960s. Yet they have grown in organizational capacity and in influence. Such growth is especially evident in the FKI; at the same time as the government manipulates the FKI's support and plays a strong role in choosing its leaders (many of whom have been retired government officials), the federation has been influential in the policy process and in the 1980s has even grown more oppositional in some of its policy stances. Business federations also have close links with the industries they represent, as measured in terms of how satisfied the business community is with their activity. In one survey, three-quarters of the business representatives reported they were basically satisfied with the activities of their associations.^[25] Business federations are very closely tied to leaders of Korean industry, moreover. Because corporatist associations in Korea are legitimate and authoritative in the eyes of their constituents, they are better positioned for genuine, value-producing coordination with the government, even if they tend to be state-dominated. The chaebol conglomerates are even more important than the federations for linking business with government. Indeed, business power has been so concentrated in the chaebol conglomerates that their direct firm-level ties with the country's president and relevant portions of the bureaucracy have tended to eclipse the role of peak associations. Through the strong institutions it has created, the Korean state has fostered a highly effective division of labor between government and business based on complementary roles.

Taiwan's institutions for government-business coordination, although they started out quite similar in form to those in China, have also been strengthened over the past decade. As Taiwan embarked on a

[25] Park (1987), p. 908.

strategy to shift its productive capacity to more sophisticated industries, the government allowed what were relatively contentless corporatist shells to grow into much more significant actors on the political scene, both by providing input on policy and by participating (through financial contributions) in the electoral process. Just as important has been the appearance of a deliberation council, the Industrial Development Consultative Committee, modeled on Japan's shingikai , to bring together private-sector, bureaucratic, and academic voices in policy consideration. An Industrial Policy Advisory Board, established in 1982 under the Ministry of Economic Affairs, also sought private-sector input. Though still generally dominated by government and academics, such organizations have given further authoritative voice to business.^[26]

In contrast to both Taiwan and Korea, China's business associations do not have strong links with industry. Weak links are evident, for example, in foreign-sector managers' lack of understanding of CAEFI's role, and the feeling among both foreign-sector managers and entrepreneurs that their associations are not particularly effective (see chapter 5). China's associations are poorly institutionalized and possess little clout—that is, have little authority and legitimacy with their intended constituents, or with the state.

The comparative weakness of corporatist institutions in China is due in part to the fact that they are relatively young; because they have existed only since the mid-1980s, and are several decades younger than the Korean and Taiwanese associations founded in the 1950s and 1960s, they cannot be expected to have developed their capacities fully. But the fact that the Chinese association with the greatest autonomy, CAEFI, does not appear to have strengthened much since its founding suggests that the comparative weakness of such institutions has other causes. In addition to youth, the weak organizational foundation of business itself appears to bear part of the responsibility for the weakness of associations. The business elite is not, as we have seen, a cohesive or secure group with a collective consciousness of its role. The role the state has assigned to these business organizations is further responsible for their weakness. The Chinese government has tried to use corporatist arrangements to preclude the growth of counterparts to Korea's FKI or chaebol; it has not

[26] Cheng, Haggard, and Kang (1995 ); Chu (1994); and Tien (1989). The growing voice of business in Taiwan has been in large part a result of the ongoing democratization of the regime.

fostered strong businesses or business associations. Rather, China's industrial policy thus far has been aimed more at protecting old state-owned industries.^[27] One must question how effective the coordination function that corporatist institutions should play can in fact be when the societal stratum with which government wishes to coordinate is poorly developed, and when the agent of coordination has no real authority.

The second feature of China's business-government relations that differentiates it from Taiwan and Korea is the quality of the bureaucracy. China's central economic bureaucracy since the 1949 revolution has not focused on the cultivation of excellence in its officials, and policy is made in what continues to be a politicized context that promotes caution. The situation differs markedly in Korea and Taiwan, both of which in the 1960s and 1970s undertook reforms to strengthen the capacity of the state to make economic policy.^[28] Economic bureaucracies were reorganized and were granted strong coordinating authority over the economy (though Korea's were more centralized and interventionist than were Taiwan's). Personnel reforms were perhaps even more important than reorganization. Under these reforms, meritocracy was made the key to entrance into the economic bureaucracies. The result was to create a small group of highly trained, if not wholly uncorrupted, bureaucrats with the talent to make intelligent economic policy. As Onis argues,

The system was designed in such a way as to attract the best managerial talent available to the ranks of the bureaucratic elite, which in numerical terms was quite small by international standards. Rigorous standards of entry not only ensured a high degree of bureaucratic capability, but also generated a sense of unity and common identity on the part of the bureaucratic elite. Hence the bureaucrats were imbued with a sense of mission and identified themselves with national goals which derived from a position of leadership in society. . . . The common educational backgrounds plus the high degree of intra-elite circulation were instrumental in generating an unusual degree

[27] In the late 1980s the Chinese government tried to promote the formation of business "groups," essentially agglomerations of several existing state industries. While some have succeeded, the intention in forming them was primarily to use strong factories to bail out weaker ones, not to strengthen them into internationally dynamic industries along the lines of keiretsu (Japanese conglomerates) or chaebol. The protectionist focus of policy may be changing, however. Industrial policy (of which only small bits are made public due to the fact that evidence of such policy would harm China's entry into the World Trade Organization) appears slowly to be gaining in sophistication.

[28] See Cheng, Haggard, and Kang (1995).

of cooperation among the bureaucrats, the executive, and the entrepreneurial elites.^[29]

Together, business and the bureaucracy were able to promote industrialization through well-designed policies of export-led growth.^[30] In other words, a talented bureaucracy has allowed these countries to take advantage of the potential for cooperation with business that was embodied in their corporatist structures.

The PRC government has carried out some organizational and personnel reforms of the economic bureaucracy along lines similar to those made earlier in Korea and Taiwan. As mentioned previously, the Economic and Trade Office was created as a new "superministry" in the early 1990s under the leadership of Zhu Rongji. A central goal of this agency has been to coordinate economic policy. Personnel reforms also have been carried out to compensate for problems arising from personnel policies of earlier years. Whereas during the Maoist era, recruitment into the bureaucracy was based less on ability than on seniority and (increasingly over time) "virtue" or political loyalty, since the early 1980s reformers have tried to create a technocracy by emphasizing ability in recruitment. New bureaucrats have been selected from among the best-educated college graduates, and from among those who have had training relevant to their work. The ministries responsible for the foreign business sector and for many parts of the domestic economy appear to have been major beneficiaries of these efforts. The quality of the economic bureaucracy is therefore improving.^[31]

[29] Onis (1991), p. 114. Onis (p. 125) criticizes the public choice literature for assuming that bureaucrats will necessarily seek rents; in East Asia, he argues, bureaucrats have been extremely effective at producing socio-economic outcomes that are broadly beneficial.

[30] Amsden (1989) argues that the Korean bureaucracy's talent at disciplining enterprises (through selective incentives and subsidies) has been key in producing that country's economic successes. Kang (1995) argues that the motivation for effective economic policy was not primarily economic, it was driven by the desire of leaders to meet the external security threat.

[31] On the Maoist-era bureaucracy, see Hong Yung Lee (1991), pp. 47-74. In the early 1950s the relative lack of expertise in the bureaucracy was due to the fact that the pool of educated people (particularly those who were politically reliable) from which to draw was tiny. (The government in fact kept on some functionaries from the Nationalist government to combat this problem.) By the late 1950s, the emphasis on "red" over "expert" was a matter of revolutionary policy. On post-Mao bureaucratic reforms, some of which improve policy coordination, see Halpern (1992); Hong Yung Lee (1991), pp. 387-388; and Zhang (1993). Intra-elite circulation of the sort praised in the above quote by Onis is also on the rise.

Still, China's economic bureaucracy stands in stark contrast to that of its neighbors in several respects. The most obvious difference is its huge size, which hides a redundant and overlapping structure. Fragmentation of authority and difficulty in coordination, at least in part a reflection of the bureaucracy's size, appear to have increased with the decentralization of resources during the reforms. Such fragmentation has necessitated extensive bargaining between offices, bargaining that enhances coordination but more toward the end of satisfying all parties than generating the most effective policy. Decentralization and fragmentation have not been accompanied by an increase in central coordination, at least in the areas of fiscal and monetary policy. Yet in Taiwan and Korea, these were arenas in which reforms enhanced state capacity.^[32] Just as important is that flaws remain in the strategy of meritocratic recruiting. Economic policy-makers in the PRC often are well educated and extremely bright, but their training tends to be in engineering or in other production-related fields that are not best suited to policy-making. Although the importance of "virtue" has declined, use of personal connections as a means of entering and advancing in the bureaucracy is still a major constraint on meritocracy. The most flagrant examples are the taizidang , the sons and daughters of high-level officials who hold top ranks in the policy structure.^[33] Finally, policy-making is still subject to incentives and uncertainties dictated by politics. In the mid-1990s, for example, the jockeying of top officials to position themselves for the post-Deng era, and the general uncertainty introduced by Deng's ill health, dictated a conservatism among bureaucrats that prevented the construction of an overall policy to guide the reforms.^[34]

[32] On "fragmented authoritarianism," see Lampton and Lieberthal (1992). On fiscal and monetary controls in China, see Huang (1996), and in Korea, see Amsden (1989).

[33] On these problems with meritocratic recruitment into the Chinese bureaucracy, see Hong Yung Lee (1991), p. 403. As has been acknowledged in the government's myriad anti-corruption campaigns of the reform era, many of these high-level officials typify the "rent-seeking" bureaucrats criticized by Onis. Chen Yuan, the son of Chen Yun who has been a vice-governor of the People's Bank of China, is one of the more talented of these taizidang ("princes"), and therefore is an exception.

[34] This is not to say, of course, that the reforms cannot be judged successful on many dimensions. As is discussed below, however, the successes came about largely because of initiatives released from below by a gradual policy that was not well planned in advance. The reform leadership did have a key insight, then, that "feeling the stones to cross the river" could lead to success. But this insight—almost an intuition, it would seem—was not the output of a "crack" bureaucracy.

The third characteristic that differentiates China's situation from the "statism" of other East Asian countries concerns the role played by clientelism. We have seen that, as in China, clientelism is important elsewhere in East Asia, and that corruption has not been eliminated. But in Korea and Taiwan, as well as in Japan, the negative effects of clientelism appear to have been reduced. In part the less problematic role of clientelism in Taiwan and Korea can be assumed to reflect the fact that the wider expansion of markets throughout East Asia makes personal ties less crucial, whereas in China personal connections are important for even the most basic of business operations. Bureaucratic reforms also have reduced the role of clientelism in economic policy-making, at least in Korea. There, the bureaucracy was bifurcated in the 1960s so as to concentrate patronage, which was still a valuable source of support for the regime, into non-economic bureaucracies such as Construction and Home Affairs, while keeping the financial ministries, which had the strongest role in economic policy-making, relatively clean.^[35]

The most important factor distinguishing clientelism in China goes beyond the suggestion that there is simply less clientelism in Taiwan and Korea. Rather, the clientelism that exists in those countries appears to be more functional for producing competent policy.^[36] This point can be explained most easily with reference to the literature on networks in East Asia. Peter Evans has developed the concept of "embedded autonomy" as a way to integrate the reality of East Asian networks into the "statism" literature's vision of a strong "developmental state," and in doing so has helped capture the notion of functionality. "Embedded autonomy" means that the state is connected to (embedded in) those segments of society with whom it shares the goal of economic development, and yet the state maintains its own robust internal structure, often bound by its own corporate norms, that allows the state to formulate policy that transcends individual or parochial interests (autonomy).^[37] In Evans's con-

[35] Kang (1995).

[36] These comments comparing the functionality of networks are somewhat speculative, and are intended to be hypothesis-generating.

[37] See Evans (1995, esp. pp. 49-50, 59). Embedded autonomy is characteristic of "developmental states" and is lacking in "predatory states" such as Zaire. China would not be considered by Evans to be a predatory state, however, as it does have the capacity to formulate policy that is separate from the individual interests of its bureaucrats. China bears more resemblance to Evans's "intermediate" states, which lack a high level of corporate coherence and competence, and have less well-organized external ties. (The idea of the "developmental state," or a state that positively fosters rapid economic development, was first suggested in Johnson [1982].)

cept, state competence remains central to the explanation of the success of Korea and Taiwan. But a less obvious point concerning the functionality of informal networks also emerges: policy coordination may not only be unharmed by, but actually may be enhanced by, informal personal ties between government leaders and business elites.

Thus, networks in Japan and Korea have been shown to tie together relatively strong, cohesive, and effective business organizations (both businesses themselves and their federations) with relatively talented government bureaucracies. In Japan, the personal networks within the bureaucracy exist in a setting where entrance into the bureaucracy is itself based on merit. In this situation, the network provides internal coherence to the bureaucracy. As Evans notes, these "nonbureaucratic elements of bureaucracy reinforce the formal organizational structure."^[38] Much the same can be said about the networks that bind the state to business, networks fostered in part through the practice of amakudari. In Korea, even though corruption emanating from personal networks has not been eliminated from the economic bureaucracies, the government channeled the role corruption was to play. As one study notes, "The government exercised control over the uses to which rents were put by limiting the opportunity for speculative activity and capital flight and insisting on productive investment as the quid pro quo for government support."^[39] Taiwan's situation is different still from that of either Korea or Japan. It lacks the extremely close interpersonal networks seen in the other two countries, in part because the business-government divide echoes the Taiwanese-mainland ethnic divide. Yet, though poorly understood, such networks do exist. They appear crucial to Taiwan's business-government relations, and have only increased with the Taiwanization of the state.^[40]

If the kinds of clientelist networks that exist in Korea, Japan, and Taiwan can be said to create competence, the same does not appear to be true of China's informal business-government ties. We have already seen how clientelism is extremely useful for individual members of the Chinese business elite. Yet China's clientelism appears much less functional from a developmental point of view. It is a connectedness that fails to

[38] Evans (1995), p. 49.

[39] Cheng, Haggard, and Kang (1995), p. 76. See also Kang (1995), p. 21. Corruption also was reduced because the external security threat provided a major incentive for the regime to seek genuine developmental policies rather than "rents."

[40] Evans (1995), p. 56.

increase competence.^[41] It is uncoordinated, in the sense that it does not increase the collaboration between business as a whole and economic bureaucracies but, rather, provides for a one-time satisfaction of demands by each side in the interaction. Unlike in Japan, networks are not considered a legitimate part of bureaucratic life. Even what might be considered the Chinese version of amakudari fails to be very useful in the Chinese environment; rather than providing a means for the transferal of competent bureaucrats to the private sector, we hear jokes from members of China's business elite that business associations are "retirement homes for old cadres," and we are presented evidence that people with inappropriate skills are assigned to at least some staff associations.

Thus, China can be said to fit only very loosely into the category of "East Asian statism." Although the Chinese government is beginning to set up institutions that facilitate government cooperation with business, business associations have neither close enough links to, nor sufficient authority with, either industry or government to make them effective tools to stimulate business or coordinate it with government. Chinese corporatist institutions are unable to nurture business as effectively as they might if they were more institutionalized and legitimate, and perhaps if they had well-functioning personal networks underlying them. The result in China is poorer coordination between government and business—exactly the advantage that corporatism is supposed to afford.^[42]

This relatively unfavorable comparison with Korea and Taiwan of China's institutions of business and government, and the comparison of the role of clientelism, raise a question that this book can neither fully address nor fully ignore. If China's institutions are so much weaker than the institutions that are said to have produced growth elsewhere in East

[41] The link between connectedness and competence is made by Evans (1995), P. 50. It is interesting that the situation of non-functional clientelism in the PRC appears similar to what existed in Taiwan prior to the 1970s. See Chu (1994), pp. 120-121. While not studied directly, anecdotal evidence suggests that the personal networks that exist at the very top of the Chinese economy between top government leaders, on the one hand, and the taizidang and high officials-turned-entrepreneurs, on the other hand, also fail to be highly functional.

[42] For example, in the foreign sector there has been much criticism by central state officials of the duplication of investment projects such as in real estate. Similarly, local officials have been criticized for setting up numerous "special investment zones" that needlessly compete with each other for investment. Better coordination could have allowed the state to avoid these problems.

Asia, then what explains the comparable growth in China?^[43] Indeed, the real growth in gross domestic product that occurred in the first decade of China's takeoff (9.7% growth between 1980 and 1990) was on a par with parallel periods in Korea (8.6% between 1960 and 1970; 9.5% between 1970 and 1980) and Taiwan (9.2% between 1960 and 1970; 9.7% between 1970 and 1980).^[44]

Three possible explanations for this conundrum present themselves. First, it is possible that the differences identified here with regard to China are too insignificant to produce differences in levels of growth. While this possibility should be examined more systematically, the evidence of differences in the quality of the bureaucracy and the strength of institutions appears on the face of it great enough that, if these are relevant factors for explaining growth, then the different levels at which they exist should produce different outcomes in growth.

Second, it is possible that, contrary to the suppositions of the statism literature, the institutions of a competent state and the practice of effective coordination with business are not in fact the causes of growth in East Asia. This argument has support from several sources. Some economists have argued that East Asian growth has resulted from "an astonishing mobilization of resources. Once one accounts for the role of rapidly growing inputs in these countries' growth, one finds little left to explain. Asian growth . . . seems to be driven by extraordinary growth in inputs like labor and capital."^[45] In both China and Korea, for example, industrial growth was fueled by a massive input of labor that was released from agriculture as a result of rural reforms. Partial support for this second possibility also can be found in the fact that formal corporatist institutions have not always guaranteed strong economic results; plenty of well-institutionalized state corporatist regimes (notably in

[43] This discussion of China's "fit" into the East Asian statism literature can only with difficulty ignore the question of how to explain growth because, as noted in ch. I, explaining growth is the whole point of that literature. This discussion cannot fully address the question of growth, though, as it is a subject that requires a much more detailed analysis of the sources of economic growth. The comments in this section are therefore intended to be suggestive and provocative rather than decisive.

[44] Dixon and Drakakis-Smith (1993), p. 2.

[45] Krugman (1994), p. 70. Although in this article Krugman is directing his comments against the view that increases in efficiency created growth, his argument could also be directed against institutional explanations for growth. He demurs in the case of China, however, saying the causes of growth are very difficult to identify because of poor information and difficulties in identifying a benchmark for growth.

Latin America) have demonstrated poor economic performance.^[46] Moreover, it can be noted that growth in China and East Asia alike might be attributable in part to a propitious international economic context: world trade, a key stimulus to growth, was expanding at an unprecedented rate. China in particular had favorable access to huge amounts of foreign direct investment and foreign loans. Investments based on these sources have fueled the country's phenomenal export growth.^[47]

Third, it is possible that growth in China has occurred despite the lacuna of corporatist institutions which have produced growth elsewhere in East Asia. Some of the factors mentioned above are also relevant here, notably the role of massive inputs of labor and foreign investment. But other factors that many analysts credit with a leading role in explaining China's growth are absent from other East Asian countries. An important factor may be the strategy of economic reform. Reform in China did not occur according to some grand scheme created by central policy-makers, and yet it created incentives for that country's innovative local officials, enterprises, and individuals to engage in growth-generating behavior from below. By allowing some competition within non-state sectors, the reforms stimulated tremendous growth in those sectors and, to a lesser degree, pulled state enterprises into the arena of market competition. Moreover, local officials played a crucial role by acting as innovative "corporate directors" on behalf of their localities.^[48] The crucial possibility to be raised here is that the central Chinese state, even though it lacks the capacity and the robust institutions to coordinate with business, may not have gotten in the way of innovation from neophyte business entities in business, agriculture, or local government.

That China's stunning growth during the reform period appears to have been achieved with institutional features other than those found in

[46] Haggard (1990).

[47] On expansions in world trade, see Wade (1992), pp. 315-316. On investment and export growth in China, sec Lardy (1995). Lardy further argues, however, that these foreign investments have not created backward linkages to the state sector of the economy, leading him to be skeptical that levels of growth achieved up to the mid-1990s can be sustained.

[48] "Gradualism" is the label that has been put on the economic reform process. See Jefferson (1992); McMillan and Naughton (1992); and Naughton (1994). Goldstein (1995) argues that the base for this local innovation was laid during the Maoist era, as economic policy was significantly decentralized compared with the Soviet Union. On innovation by local governments, see Oi (1992).

its East Asian neighbors suggests that the government-business relations in China, and patterns of state-society relations more broadly, may also carve their own channel in the future. It is to the question of the future that the next section turns.

The Leading Sectors and the Future of State-Society Relations in China

The hybrid pattern of state-society relations that has emerged in the post-Mao era is a comfortable pattern for China as it undergoes economic transformation. But will this pattern remain comfortable into the future?^[49] Or might the new economic elite and its business associations eventually enter their own post-communist "golden age" and gain independence and influence on a par with their counterparts elsewhere in Asia or Latin America? A scenario whereby civil society emerges easily and directly out of the process of economic reform has already been shown to be simplistic. A "disintegration" scenario also has been suggested by some observers. If the state were to face disintegration from pressures from either inside or outside the country, it is possible that economic elites could become an influential force for change, much as the chambers of commerce were at the end of Qing rule and during the May Fourth period. A contemporary example could be Russia, where the implosion of the Soviet state was followed by the opening of politics to include business elites. Indeed, some members of the new Russian business elite, who are very closely connected with state officials, have become powerful in that country's political system.^[50] A disintegration scenario seems highly unlikely in China, however. Not only is China's central government too strong an international force to be seriously threatened with disintegration by outside powers, it also

[49] This section does not attempt discussion of the overall likelihood of democratization in the PRC. As argued in ch. 1, any such analysis would have to consider forces outside of the new economic elite, particularly changes in the inclinations of the ruling elite. However, many of the reasons given below for the likely stasis of state-society relations in their current mode also are applicable to the broader question of democratization.

[50] Erlanger (1995) and Stanley (1995). These elites were not at the forefront of the revolution, however. Indeed, they were relatively passive actors until after the Soviet Union ended in 1991; in other words, they did not bring about the revolution.

remains too potent domestically to face disintegration and, despite periodic displays of disaffection from intellectuals, retains relatively broad-based social support.^[51]

That these extreme scenarios are unlikely does not mean, however, that we cannot imagine ways in which further liberalization of the political regime might occur, in part through the influence of the business elite. Given what we know about the foreign and private sectors in China, then, what is the "most plausible best case" to be made that China's new economic elite will help to usher in a significantly more liberal polity? Such a scenario has a number of possible components, and must account for the likely role to be played not only by societal actors but also by the state.^[52] On the societal side of the equation, the seeds of greater independence that already exist could conceivably continue to grow. One component concerns the development of the business elite's ideology and group cohesiveness. If market forces deepen and the private and foreign sectors of the economy continue to be successful, the business elite may gain confidence in pressing its views in favor of extreme market reform and, often, political liberalization. It is possible to envision a number of scenarios wherein a major barrier present in the first decade and a half of reform—a practical disinterest and an unwillingness to be vocal, despite strongly held views—may erode. Members of the business elite could come to feel increasing friction from the limits imposed by partial marketization, and frustrated in their inability to bring about lasting changes through clientelist means. Or if the central government were to stumble in a major way in its handling of the economy, particularly such that business investments were severely threatened, leading to a crisis in performance legitimacy, then business pressures that had previously had less need to emerge might in fact find reason to do so.^[53] This possibility may be especially pertinent to private entrepreneurs, who arguably have more of a stake in the political system

[51] Zhang (1993) contrasts the PRC government's social support with that enjoyed by the Soviet state before its collapse.

[52] The core components of this "most likely best case" scenario are extensions of two of the factors most likely to intervene in the relationship between economic and political reform—ideology and interests of societal actors and state actions—discussed previously.

[53] Payne (1994, p. xv) finds that severe threats to business investments, combined with a sense of exclusion on the part of the business elite and the development of links to other sectors of society, can lead an otherwise inactive business elite to action on behalf of democratization.

because they do not possess the alternative means for pressure (foreign businesses) that foreign-sector managers do.

Organized pressure on the government for major systemic change would depend on the expansion of a more cohesive business elite. Processes of intra-elite circulation that are now quite weak could grow and enhance cohesion. In particular, the job mobility of members of the business elite could come to include the possibility of moving in and out of the government, or increasing their now very minor representation in people's congresses or the CPPCC.^[54]

Functional associations, in which a very limited autonomy is already recognized in the corporatist strategy, could exercise a growing interest in serving their constituencies.^[55] Here, Taiwan might be thought to provide a model. Taiwan's business sector was tightly controlled by the ruling Guomindang Party, but since the mid-1980s it has begun to exercise significant influence over economic policy. The government has attempted to engage business in the restructuring of the economy to be more internationally competitive. Business has begun to assert influence in part through existing corporatist business associations that had been established in the 1970s to maintain control over a business sector dominated by native Taiwanese. The Taiwanese business elite also has become deeply implicated in the electoral system, and indeed has gained significant influence over business matters through support of legislators to the increasingly powerful Legislative Yuan.^[56]

Such an evolution in the PRC might, as it was in Taiwan, be stimulated by the government's recognition that further industrial development depends on a tightly coordinated effort to move the country in a new direction. This evolution would be more conceivable in the cases of CAEFI and ACFIC than in heavily state-dominated associations such as SELA. That CAEFI and ACFIC members have bases of authority in foreign companies and large private firms (hence outside of the state) and that they are funded primarily by membership dues suggest that they

[54] It is possible, moreover, that both the blending of the business and government elite (intra-elite circulation) and growing pressure by business interests would create change in practice long before it is recognized in ideology or policy.

[55] This scenario is depicted as quite likely in Chan (1993) and Unger and Chan (1995), who further argue that the activism of associations will evolve China toward societal corporatism rather than political democracy.

[56] Chu (1994); Cheng, Haggard, and Kang (1995). Despite the rapid rise in business influence in the 1980s, however, the state still tends to dominate business in Taiwan.

would be more protected in any move toward greater independence, and have greater resources to put to the task. Such pressure is most likely to continue to come from the local levels of these organizations rather than the national level. Foreign managers involved in CAEFI could be a further impetus in this direction.^[57]

We have already observed that China's new economic elites are unlikely to lead a challenge to the Party monopoly. It is plausible, however, that groups which are more naturally politicized than the business elite—students and intellectuals—may once again press the state for more drastic political change, as they did in the various political movements of the 1970s and 1980s. In those earlier movements, and particularly the 1989 Tiananmen movement, students and intellectuals failed to build effective bridges to those other sectors of society that might have lent the movement support.^[58] Leaders of future movements might take such criticism to heart and actively build alliances with the economic elite. In such a "New May Fourth" setting, those in the leading-edge economic sectors could be mobilized to lend significant finances and prestige to support pressures on the state initiated elsewhere.

A "most plausible best case" scenario must also take into account the actions of the state. It is likely that the state will continue to use the institutions at its disposal to shape how state-society relations evolve. Corporatist institutions might facilitate further liberalization of the political system to the degree that reformist leaders may desire to see such change. Indeed, it could be in the context of corporatist structures that state officials' early learning about and comfort with contestation, a defining factor in democracy, could occur.^[59] But the case of Taiwan reiterates, even for advocates of an optimistic vision of the future, that the participation of business elites in further liberalization in state-society relations is likely to lag behind actions on the part of others in the system, particularly by the state but also by other elements of society. In Taiwan it was, first, a decision on the part of the central leadership, and apparently on the part of Guomindang leader Chiang Ching-kuo, to

[57] But expatriate managers, who generally try to be "good corporate citizens," are unlikely to press for changes in a way that would alienate officials. See Sklar (1976).

[58] See, e.g., Perry (1992). The exception of the Stone Corporation is discussed in ch. 4.

[59] Zhang (1994) argues that corporatist institutions make a country more conducive to successful negotiation of democratizing pacts. (He finds these lacking in China.) This view is consistent with Dahl's (1971) classic argument that contestation within an elite is more likely to lead to stable polyarchy than rapid and highly inclusive democratization.

open the political system to competition and, second, pressure from a constellation of middle-class Taiwanese and intellectuals on the state, that eventuated in liberalization.^[60] The Taiwan case implies that in the PRC a rise in business influence will depend upon a "strategic opening" within the state combined with pressures from other sectors of society.

When speculating on the likelihood of such a "most plausible best case" scenario it is wise to bear in mind its limits. As the evidence provided in previous chapters suggests, there are reasons to expect continuing constraints on the willingness of business elites to act. Not only are the elites unlikely to be leaders of change, even their role as followers is problematic. The hybrid pattern of state-society relations that has grown up in the reform era serves the purposes of the business elite reasonably well, without posing the risks to the government of direct political action by the business elite. Indeed, it seems quite plausible that reliance upon personal ties could become institutionalized if the partial market system remains just that—partial. It is quite conceivable, moreover, that further change in the political environment could actually harm the interests of the new economic elite. Despite their expressed desires for political liberalization, uncertainties in the business environment that would be created by political upheaval could sap economic elites of reformist leanings. At the same time, members of the business elite could come to find in corporatist associations, if they were strengthened, a channel of effective contact with the state, and might therefore lose the incentive to seek other formal channels of influence. If the members of the business elite remain financially successful, and as the corporatist and clientelist institutions that keep them tied to the state become even more firmly entrenched, the business elite may be converted into a much more conservative political force. It is even conceivable that this elite could be absorbed, together with the former officials-turned-entrepreneurs and children of high-level cadres (taizidang ), into a blended merchant-cumofficial class analogous to that which existed during the late Qing and Nationalist eras.

Foreign-sector managers also may be prone to political conservatism in the future insofar as the foreign investors who back them will wish to

[60] These explanations of Taiwan's democratization, which are reflected in various writings (e.g., Chu [1994]; Cheng and Haggard [1992]; and Tien [1989]), are largely consistent with the "transitions" theories described in ch. 1. Initiation of major change by the central leadership also was crucial in the Soviet Union, particularly Gorbachev's rescinding of the Soviet Constitution's Article 6 guaranteeing the Communist Party's monopoly.

see a stable investment environment, even one guaranteed by authoritarianism. And both foreign-sector managers and entrepreneurs may be prone to support a state that uses corporatist or even more authoritarian levers to ensure a docile labor force.^[61] Their support for upheaval by other segments of society would be forthcoming only as long as the elites perceived that the movement was not disrupting the economic climate. Thus, a corporatist-clientelist hybrid that helps furnish access to government and to a stable environment in which to pursue business may be enough to snuff out any desire on the part of business to pursue civil society.

Limits on change are also imposed by the state's attempts to institutionalize its power in a new corporatist form. Even with a continuing decline in the Party-state's legitimacy, and even if the economic elite begins to form into a coherent "class for itself," the state can be expected to have the corporatist institutions it has established keep its own interests in the foreground, and to keep firm limits on the establishment of autonomous or competing associations. The pressure that arises out of such associations is therefore likely to be restricted to issues relevant to their functional areas, and to stop short of posing a fundamental threat to the state. Even if business elites or their associations do become more politically active on their own behalf, there is no guarantee that, absent major changes favoring liberalization elsewhere in the system, current institutions or counter-actions by the state will not be effective in rendering business pressure ineffective.

Ultimately, then, there is reason to be skeptical that the business elite in the PRC will either emerge as a strong independent force or that it will be at the center of a more progressive form of state-society relations. There is nothing obvious at work within the leading-edge sectors and their interaction with the state to suggest that a move away from the current pattern of state-society relations is likely, much less necessary. It is quite plausible that the contemporary business elite will continue for some time to cooperate closely with officials (particularly at the local level), and that its associations will retain a dualism characterized by elements of both state domination and independence. This group need move neither toward fuller liberalization nor toward monism. Such a stasis—the absence of a compulsion to resolve the tension between autonomy for society and continued domination by the state—would

[61] The concern of business elites about social unrest, discussed in ch. 4, supports this view.

continue the deeply rooted pattern for state-society relations in China, and at the same time it finds a precedent in state corporatist regimes around the world.^[62] The hybrid of socialist corporatism and clientelism is not necessarily an inexorable phase for socialist countries undergoing reform. But for China it is a logical situation in which to find itself, and one with staying power.

[62] Stepan (1978, pp. 43-45) suggests with regard to organic statism that continuous tensions between autonomy and control are to be expected.