State Elite Capitalism: How Transnational Financial Elites Managed Political Conflict over State-Owned Enterprise Reforms in Post-Mao China

Jin Sun, The Chinese University of Hong Kong

This article addresses a central puzzle in China's post-Mao economic reforms: why, amid intense political conflicts over state-owned enterprise (SOE) reforms, Chinese political elites ultimately endorsed a model of state elite capitalism—centered on state shareholdership through state-led corporatization and elite-led financialization—rather than privatization as seen in most other former socialist economies. Drawing on major SOE reforms in 1978-1998, (1) expanding enterprise autonomy (1978–1982), (2) tax-for-profit reforms (1983–1986), (3) the contract responsibility system (1987–1991), and (4) the liberal shift toward state shareholdership through state-led corporatization and financialization (1992-1998), the analysis reveals that three existing elite conflict theories—manipulative brokerage, situational conflict, and ideological divergence—effectively explain the adoption and dynamics of the first three reform models during 1978–1992. However, these theories do not fully account for the repeated failure of those models to generate a broad political elite consensus or achieve lasting success. To resolve this gap, the article introduces a novel model of “transnational elite consensus” to explain the development of state elite capitalism. It demonstrates how transnational financial elites—through their expertise, global legitimacy, and interactions with Chinese policymakers—played a pivotal role in forging alignment among fragmented political elites. This transnational influence facilitated convergence on state shareholdership as a viable compromise, enabling the preservation of state control while incorporating market-oriented international norms. The resulting trajectory diverged from China’s economic reforms in ways that most other post-socialist states did not. Instead, it is a distinctive form of state elite capitalism: the state retained control over key enterprises through financialization under transnationally politically embedded bankers (TPEBs), including domestic and external advisors from the World Bank, Wall Street, and Hong Kong. This explanation highlights the interplay between elite politics and financial elite networks in shaping China's unique reform outcome, offering new insights into the resilience and adaptation of state capitalism in a reforming socialist economy.

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 Presented in Session 198. The Chinese Reform as Social Science History (IV): Remaking Modernities