The Nature of the Chinese Formation and the Making of Its Welfare Regime

Abstract

The driving forces of the Chinese economy since the reforms of 1978 are the subject of intense scholarly debate. Some emphasize the role of private entrepreneurship; others identify the public/collective sector, local or central state as the engine of Chinese growth. This article suggests that the first decade of the Chinese reform was entrepreneurial. During the 1980s, the transformation stemmed “from below.” Since the 1990s, the change has been state-led, “from above.” With the privatization/marketization of the corporate sector the revenues of state-owned/controlled firms increased, but the source of these revenues was the privileged relationship of the public sector to the state, hence state-owned enterprises collected rents rather than earned profits. The “Chongqing model” has used some of these rents to fund welfare provisions with remarkable success, but a sustainable welfare system in a market economy has to be based on taxes collected from market-generated incomes and profits rather than rents of state-owned enterprises.