Beyond Power and Ideology: Deliberative Bureaucracy and Market Formation in Socialist China

Kristine Li, Harvard University

Conventional theories of socialist political economy assume that central planning eliminated formal market institutions, leaving market activity to survive only in informal or “second economy” forms until national reforms revived them. This article challenges that view by examining how subnational bureaucratic practices shaped the preservation of formal market institutions under state socialism. It argues that even within highly centralized and ideologically anti-market regimes, certain local bureaucratic institutions engaged in iterative, deliberative decision-making that incorporated bottom-up input from local social actors. By exploiting ambiguities in central policy, these bureaucracies were able not merely to tolerate informal exchange but to preserve and embed market mechanisms within the formal command economy itself. Regions governed by such institutional arrangements retained the organizational capacities necessary to sustain and coordinate formal market exchange and were therefore better positioned for market transition once national reforms began. By contrast, regions dominated by conventional socialist bureaucracies—characterized by rigid top-down control and strict ideological compliance—were less able to sustain these institutional foundations, pushing market activity largely into the second economy. The argument is developed through a comparative historical analysis of two Chinese provinces during the socialist era (1956–1978), drawing on extensive local archival sources. By showing how local bureaucratic decision-making sustained formal market practices under socialism, the study highlights the role of endogenous institutional change and subnational state capacity in moderating radical central policies. More broadly, it offers a new interpretation of China’s economic transformation and contributes to debates on state-led development in the Global South.

No extended abstract or paper available

 Presented in Session 184. The Chinese Reform as Social Science History (III): Braving the Market Waves