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The Chinese Communist Party and the Chinese Bourgeoisie (1949–present): From First Alliance to Repression and Contemporary Mutual Dependence

Gilles Guiheux

Introduction

In today’s China, the private sector contributes more than 50 per cent to tax revenue and over 60 per cent to GDP. It also accounts for more than 70 per cent of technological innovation, over 80 per cent of urban employment and comprises more than 90 per cent of market players.¹ Nevertheless, the attitude of the party-state towards private entrepreneurs is ambiguous. Billionaires at the head of large companies are regularly criticised, and are sometimes prosecuted by the courts and imprisoned. At the same time, the contribution of private entrepreneurs to nation-building and prosperity is being praised.

High-profile entrepreneurs in the tech industry have recently come under public and official scrutiny like never before. Several of the most prominent of them have retired from the management of their companies. Jack Ma, Alibaba co-founder, has kept an uncharacteristically low profile since October 2020, when the government began a regulatory crackdown on his companies. Colin Huang, founder of the Alibaba rival Pinduoduo, resigned as chairman in March 2021, less than a year after he stepped down as chief executive. In May 2021, Zhang Yiming, founder of TikTok’s parent company, ByteDance, said he would hand over the chief executive post to focus on long-term strategy. In June 2021, Pan Shiyi and Zhang Xin, the husband and wife team that runs Soho China, a major national property developer, turned over their company to an investment firm.² This is not a new phenomenon and many other individual entrepreneurs, such as Sun Dawu and Ren Zhiqiang, have been forced to leave the stage over the years.

At the same time, the regime regularly praises private entrepreneurs for their unique role in bringing prosperity to the Chinese nation. In 2018, as the Chinese Communist Party (CCP) was celebrating the fourteenth anniversary of Deng Xiaoping’ reforms, the All-China Federation of Industry and Commerce (AFIC), a key business association,³ together with the United Front Work Department, the mission of which is to deal with people and entities that are outside of the Party proper, released a list of ‘100 Outstanding Private Entrepreneurs’.⁴ The list aimed to show the significant achievements made in the development of China’s private economy since reform and opening up, and:

to vigorously promote the spirit of outstanding entrepreneurs, to create a good environment for the healthy growth of private entrepreneurs, and to better motivate the majority of non-public economic people to ‘not forget the original spirit of entrepreneurship, to carry on the great work of reform’.⁵

Over the past 40 years of reform and opening up, as the Chinese media reported, ‘the private economy has developed rapidly, making a significant contribution to ushering in the great leap of the Chinese nation, standing up, getting rich and getting strong’.⁶

This chapter reviews the complex relationships between the CCP and private entrepreneurs over the last century. To explain today’s ambiguous relationship between the CCP and private entrepreneurs, we look at the historical development of this relationship. Present practices of the Party as an organisation become less surprising if we look at how it behaved in the past. Historically, Chinese capitalists emerged as a social group during the first half of the twentieth century in the treaty ports. Together with merchants, craftsmen, bankers and officials involved in business, they were members of the emerging bourgeoisie extensively studied by Marie-Claire Bergère (2009). In the 1920s, they were not immune to social issues, nor to the interests of the working class; but, when it came to facing their social responsibilities, businessmen looked for inspiration in Christian values and in the traditional practices of guilds and chambers of commerce rather than in Marxism (Bergère 1969, 264). In 1927, the installation of a new government in Nanjing opened an era of difficult cooperation between the bourgeoisie and the Guomindang (GMD). Parks M. Coble (1980) has argued that Chiang Kai-shek’s government actively and consistently opposed Shanghai capitalists, using a variety of techniques, both official and unofficial, to extract money from them. William C. Kirby (1995) has also shown how, for instance, modern forms of business organisations were adopted by the Nationalist government not for fostering wealth and independence for businessmen, but rather, quite the opposite, as a means to achieve state domination of the industrial sectors. In the 1940s, this gave way to open and mutual hostility. As a matter of fact, contrary to the hopes of the business community, the end of the war did not mean a return to more liberal economy policies. Entrepreneurs, whose daily activities were crippled by inflation, denounced the inconsistencies and brutalities of the government’s policies, and the way in which the government was using the crisis to increase its control over industrial capacities – notably taking control of former Japanese companies (Bergère 1989). In 1946, Shanghai industrialists lost all confidence in the GMD’s ability not only to resolve the economic and financial crisis, but also to govern the country and prevent the Communists from triumphing. They began to transfer capital and equipment out of China, mainly to Hong Kong.

In this chapter, we argue that the CCP policy towards capitalists since the reforms and opening up can be understood if we look at the mechanisms and techniques of governance used during the early People’s Republic. The collaboration between the Party and private entrepreneurs over the last decades, like the recent tensions between the actual leadership and the entrepreneurs’ class, look less exceptional if we acknowledge that red capitalists were creations of the Party itself in the 1950s.

The chapter starts with analysing how, after the establishment of the new regime, the CCP tried to rally some members of the so-called national bourgeoisie to its nation-building project. The alliance was temporary and was quickly followed by repression, all private businesses being nationalised in 1956. In the second part, we look at how, after the launch of the reform and opening-up policy in 1979, and especially after 1992, private entrepreneurs emerged again as a social group. Deng Xiaoping’s call to ‘let some people get rich first’ (rang yibufenren xian fuiqilai 让一部分人先富起来) gave rise to a new social stratum of business owners. The chapter ends with a discussion of how capitalists may or may not be able to shape public policies in contemporary China. In the different periods of the history of the People’s Republic considered here, the choice is made to use the terminology in force in China itself; thus, we talk about capitalists and bourgeoisie in the 1950s, and of the return of a social group of private entrepreneurs with the reforms.

The Chinese Bourgeoisie and the Founding Years of the People’s Republic of China: An Opportunistic Alliance

In the 1920s, the CCP, which was founded by intellectuals under the guidance of the Comintern, tried to transform itself into a workers’ party. In the 1930s, the double failure of its alliance with the GMD and its conquest of urban proletarians led it to take root in rural China. It is only when it moved into cities that the CCP had to consider what strategy to follow vis-a-vis the industrial and commercial bourgeoisie. That explains why we begin by looking at the founding years of the People’s Republic of China (PRC).

If destroying capitalism was the ultimate target of the socialist revolution, during the first years of the PRC, businesspeople were the object of favours and leniency from the CCP. The main ideological justification of the relatively moderate policy of the CCP in its early years up to the Cultural Revolution was the united front policy. Most authors consider that the Party cooperated with the Chinese patriotic bourgeoisie out of opportunism and pragmatism. The CCP lured it to join the fight against the Japanese and then the civil war against Chiang Kai-shek, and finally to restore the productive capacity of industry after 1949. For Yang Kuisong (2007, 16), ‘it was just a question of time before they [the Communists] would once again regard the Chinese national bourgeoisie as their political enemy’. Christian Henriot (2014, 160) argues, as well, that ‘the Chinese bourgeoisie never had a chance’. Did the CCP cooperate with the bourgeoisie out of political expediency, and was the agenda set from the beginning? Other scholars argue that it would be a mistake to assume that the CCP and the Chinese capitalists definitively determined their relationship in 1949 and that it was the events that followed that were decisive (Chan 2014). Rather than speculating on what the Chinese leaders had in mind in the early 1950s, we can only observe what actually took place.

Rallying the ‘National Bourgeoisie’ to the Party: The New Democracy Policy

The idea of an alliance between the CCP and the bourgeoisie goes back to the Wayaobao meeting in December 1935, when the Party decided to renew cooperation with the GMD in a united national front against the Japanese invasion. A line was drawn between the ‘national capitalists’ (minzu zibenjia 民族资本家) who were true patriots, and the ‘comprador bureaucratic capitalists’ (maiban guanliao zibenjia 买办官僚资本家) who sold out to imperialist countries. The first group were invited to join the fight against the Japanese and, later, against Chiang Kai-shek. On the eve of the establishment of the People’s Republic, Mao Zedong renewed the distinction: ‘national capitalists’ were welcome under socialism whereas ‘bureaucratic capitalists’ were the target of the revolution.

On 5 March 1949, in his report to the Second Plenary Session of the Seventh Central Committee of the CCP, Mao Zedong stated that ‘private capitalism ranks second in modern industry; it is a great force that cannot be underestimated’ (Zhao 2014, 263). Thus, after the takeover, the united front policy continued and justified continuing to grant privileges to the former capitalists. The CCP claimed that it wished to bring together and even accommodate all social classes, including the capitalists, under the political umbrella of the ‘New Democracy’ (xin minzhu 新民主). The section of the formal elites vetted by the CCP as ‘national’ had a role to play in China’s democratic revolution. More pragmatically, the CCP was eager to mobilise and use the resources and skills of ‘national capitalists’ to rebuild the country. New Democracy, protecting private urban industry and commerce became the keynotes of the Party’s policy on the bourgeoisie.

At the time of the founding of the PRC in 1949, the Central Committee of the CCP unambiguously proclaimed that ‘the national bourgeoisie’, along with workers, peasants and the petit bourgeoisie, enjoyed ownership in the new China. The priority was not to seize private assets, establish a planned economy or transform Chinese society, but to restore economic health and industrial production.

One reason why the CCP Central Committee took such a positive attitude in wooing the bourgeoisie was its understanding of the economic situation; the decrease of production and closure of many factories had led to a rapid increase in unemployment. For example, in Shanghai, in the spring of 1959, the unemployed accounted for more than 200,000 out of a population of 6 million (Yang 2007, 19).

New Democracy policies emphasised, among other things, labour–capital cooperation in private enterprise. China’s economy did not come under state management with the Communist victory in 1949. During an initial period of transition, the CCP experimented with new forms of labour relations such as labour–capital consultative conferences (laozi xieshang huiyi 劳资协商会议), which were required by law in all privately owned factories. In some instances, such as in Shanghai’s silk weaving industry, this novel form of consultative management achieved its goal of labour–capital cooperation and economic restoration (Cliver 2021). The labour–capital consultative conference benefited silk factory owners by reducing violence and disruption and granting them access to supplies, credit and markets. To Robert Cliver (2021, 53), this institution:

reveals the complexities of the power relationship between the party-state and capitalist enterprises and demonstrates that most factory owners were not hapless victims of Communist revolution but were instead savvy and capable players.

Another example of this inclusive policy was the effort made by the CCP to persuade entrepreneurs who had fled the country to come back, especially the undecided big capitalists who had no history of supporting the GMD. Zhou Enlai wrote personal letters to some of the biggest capitalists with a promise that they would see their businesses grow rather than shrink under the new regime. One prominent example is Liu Hongsheng, who set off for Taiwan but decided not to move there and remained in Hong Kong, where he was assured that his business would not be affected by the regime. From Hong Kong, he moved back to Shanghai and, for the first two years, was strongly convinced that the new Communist regime was sincere in supporting capitalist enterprise and treating the capitalists well (Cochran 2007). Another famous example is Wu Yunchun, a major industrialist in the Republican period who manufactured monosodium glutamate. When the People’s Liberation Army took over Shanghai, Wu had already taken refuge in the United States and was considering whether or not to return to China. Invited to come back, he arrived in Beijing in October 1949, where he met Zhou Enlai. In October 1950, Wu became a member of the Shanghai municipal government, a political position that seemed to uphold his economic status (Chen 2014).

Three years later, in October 1953, 640 delegates representing every sector of the Chinese economy attended a meeting of the Federation of Industry and Commerce. During the meeting, Li Weihan, the united front director, declared that:

the period of transition extends from the founding of the PRC to the completion of socialist transformation … both [the public and private sectors] are essential and beneficial to the national economy of people’s livelihood. (Zhao 2014, 267)

Despite these statements, the situation had already significantly deteriorated for private entrepreneurs by that time.

Repressing Capitalists: The Three-Anti and Five-Anti Movements

Two anti-corruption campaigns, the three-anti and five-anti movements, launched in 1951 and 1952, respectively, radically changed the social position of capitalists. The CCP gradually moved away from its original policy of cooperation with the national bourgeoisie. Aimed at the bourgeoisie as a whole, the campaigns succeeded in destroying the social basis for capitalist business; as a result, the socialisation of all private enterprises in 1955–56 would occur smoothly.

The Three-Anti Movement was launched in the winter of 1951 and was opposed to the three evils of corruption, waste and bureaucratism. It had initially been intended to combat corruption and waste by CCP cadres, but the three evils were rapidly linked with the so-called degenerate ideology of the bourgeoisie (Yang 2007, 23). As reports from the provinces claimed that bribery was rife and that public officials were acting in collusion with businesspeople, the leadership of the CCP leapt to the conclusion that this was a well-organised counter-revolutionary attempt by the bourgeoisie, ‘a violent attack against our Party’ (Yang 2007, 23).

The Three-Anti Movement was rapidly expanded into the Five-Anti Movement to deal with malpractices involving bribery, tax evasion, stealing of state assets, cheating on government contracts and theft of economic intelligence. It was a mass campaign, mobilising thousands of individuals to enter factories and shops and organise mass denunciations. Capitalists were humiliated, and ties of loyalty between employers and workers were severed. By May 1952, the final assessments for businesses under investigation were announced. According to the CCP’s official data, the campaign scrutinised the business conduct of 999,707 firms nationwide. Business owners were investigated and then categorised into five groups: law-abiding business owners (10–15 per cent of the total), basically law-abiding (50–60 per cent), semi-law-abiding (25–30 per cent), serious lawbreakers (4 per cent) and total lawbreakers (1 per cent) (quoted in Lu 2018, 75).

Through these two successive campaigns, the Communist regime generated mass support for the social and financial destruction of the capitalist class. After 1953, the CCP began the socialisation of private firms by introducing public–private joint enterprises (gongsi heying 公私合营). From the second half of 1955, the government accelerated the process and within a year had rushed through the socialisation of all private enterprises.

As Christopher Leighton (2010) has shown, a distinction should be made between elite capitalists and smaller ones. The first were politically, economically and socially integrated into the new regime. United front institutions like the Democratic Construction Association and the Federation of Industry and Commerce drew prominent capitalists into collaboration with the Party, rewarding them with privilege and position in return for their networks and management expertise while preserving smaller capitalists to serve as targets for mass struggle. As Leighton (2010, 7) puts it, prominent ‘red’ capitalists were ‘hybrid creations of the Party itself’.

Allowing Capitalist Lifestyles to Continue

While, by the mid-1950s, the CCP had deprived Chinese capitalists of their means of production, the socialisation of all private enterprises was carried out peacefully, an approach that differed from the confiscation of private enterprises in the Soviet Union and some Eastern European countries. The peaceful redemption included paying an indemnity in exchange for the property at a fixed rate of interest (dingxi 定息), assigning jobs to the private staff who were in active service and maintaining high wages for the owners of the enterprise. Government compensation was paid over seven years at 5 per cent fixed interest. By early 1956, 810,000 business owners and their agents had received payments nationwide (Lu 2018, 75). In 1962, the seven years of redemption ended. Following Chen Yun’s and Zhou Enlai’s suggestions, Mao Zedong agreed to extend the payment for three more years (Xiao-Planes 2014).

Another revealing fact is that capitalists were able to preserve their lifestyles (Lu 2018). After 1949, as far as material comfort was concerned, the long-time rich still lived an infinitely better life than most Chinese at the time. The persistence of bourgeois lifestyles under communism was an outcome of the CCP’s United Front policy, as well as an ingenious use of government policy and programs by capitalists themselves to preserve a way of life that was politically condemned. After 1956, China’s former capitalists, facing purges and political condemnation, were doomed as a class, but much of the lifestyle of the old capitalist class survived and persevered beneath the surface of Communist egalitarianism and asceticism. In Shanghai, former capitalists continued living in luxurious villas, throwing parties in their houses, organising lavish weddings and receptions in hotels, and banquets in high-end restaurants that were preserved notably to entertain foreign visitors. It is only with the Cultural Revolution in 1966 that the privileges the formerly wealthy still enjoyed after the 1949 revolution came to an end. Official records indicate that from August 1966 to the end of that year, the homes of more than 48,000 Shanghai capitalists were ransacked and the households’ valuables confiscated (Lu 2018, 75).

From a comparative perspective with other socialist revolutions, China’s case seems unique (Cochran 2014, 12–17). In China, the Party dispatched emissaries throughout the country and abroad to convince capitalists that they should serve their country under communism during the revolution; whereas during the Russian Revolution, the transition from capitalism to socialism was abrupt and violent – historians agree that pre-revolutionary private capitalists were virtually all killed or driven out of the country by 1920. Thus, the peaceful redemption of the means of production from private industrial enterprises contrasts with the confiscation of private enterprises in the Soviet Union and later in Eastern European countries.

The Re-emergence of Private Entrepreneurs (1979–2001)

One of the consequences of the reforms launched in the late 1970s was the reshaping of Chinese society and the re-emergence of private entrepreneurs. The formation of a new capitalist class was gradual. Once the party-state acknowledged their important contribution to the building of a prosperous nation, capitalists were not only encouraged but also portrayed as national heroes and incorporated within the system. Four decades later, private entrepreneurs form a socially diverse class.

The Gradual Development of the Private Sector’s Legal Framework

The development of private enterprises since the end of the 1970s can be divided into several stages. The first decade (1978–88) was an informal entry stage during which entrepreneurs gained entry into the market in spite of the lack of a legal framework and were tolerated. With the opening-up policy, private enterprises developed first in the form of individual enterprises (getihu 个体户). In July 1981, the State Council issued a document making legal reference to such economic activities, stipulating that these enterprises could have no more than seven employees⁷ and that their activities could only complement those of state-run and collective enterprises. During the 1980s, the periodic political campaigns against spiritual pollution (1983–84), bourgeois liberalisation (1987), tax evasion and corruption regularly challenged the legitimacy of private entrepreneurs.

The second stage started in 1988 when the state legitimised private enterprises and permitted them to hire up to eight employees. From then on, the passing of new laws and successive revisions of the PRC Constitution contributed significantly to the development of a private sector. In April 1988, the National People’s Congress modified article 11 of the PRC Constitution, which henceforth stipulated that ‘the private economy is authorised to exist and develop within the framework as provided by law’. In June 1988, the State Council adopted new sets of regulations concerning what were now designated as private enterprises.

In early 1992, Deng Xiaoping travelled south to reinvigorate the national spirit for profit and encouraged the masses to ‘jump into the sea’ (xiahai 下海) of entrepreneurship. This call led many individuals to leave the security of state-owned enterprise work and to set up private businesses. But it took 10 more years for Chinese leaders to accord constitutional protection to the private economy. It was only in 2004 that the phrase ‘the lawful private property of citizens is inviolable’ was incorporated in the PRC Constitution.⁸

Private Entrepreneurs as Socialist Heroes

Not only has the structure of the Chinese economy changed with the private sector becoming a key player, but the Party and the state have also acknowledged this change and have revised their attitudes towards the individuals embodying it.

In post-reform China, the new subject promoted by the authorities is an entrepreneurial subject, autonomous from the state, at least in the economic and social arenas, and in that sense, entrepreneurs become the new symbolic figure, or hero, of the socialist market economy (Guiheux 2012). The entrepreneur, as a social category, epitomises some of the main values promoted by the Chinese state, because he embodies a new kind of autonomous subject. State dependency and supervision have been giving way to what may be called a post-Mao ‘enterprise culture’, a discourse that does not promote collective political action but ‘individual and local calculations of strategies and tactics, costs and benefits’ (Rose 1992, 145). Chinese citizens have been encouraged to draw on their own resources to compete in the open market, ‘to conduct themselves with boldness and vigour, to calculate for their own advantage, to drive themselves hard and to accept risks in the pursuit of goals’ (Rose 1992, 149).

At the end of the twentieth century, China’s heroes, or model citizens, are those who have been able to start their own business. All kinds of rhetorical techniques are being used to praise entrepreneurs, whether they head small or large enterprises. In the case of formerly laid-off state workers, all kinds of titles and medals are being awarded to exemplary entrepreneurs: ‘star of the re-employment policy’, ‘exemplary creator of enterprise’, as well as ‘model of excellence of the national youth’ and ‘model worker’ (Guiheux 2007). Distributing honorific titles that are highly publicised in local media, state or Party agencies contributes to creating a new moral environment for business, legitimising the enrichment of a minority. Actually, there is a great similarity between the Mao-era call for self-dedication to the building of the country and the call for private entrepreneurship in terms of propaganda techniques, but the values promoted and the forms of self-achievement are not the same. In the earlier era, striving to be a model worker like Lei Feng meant selflessness and contributing to the community; now, becoming an entrepreneur means promoting reflexivity and autonomy.

Over the last 40 years of reform and opening up, entrepreneurs have moved from the fringe to the centre of the economic and political arenas. People engaging in independent economic endeavours were being blamed and socially marginalised in the late 1970s; a quarter of a century later, they are being praised for their contribution to the wellbeing of the whole Chinese society. Private entrepreneurs, previously persecuted, have been praised and courted by the CCP since the 1990s.

Incorporating Private Entrepreneurs within the CCP

In the 1980s, there were various answers to the question of what the role of entrepreneurs should be (Parris 1999). Hardliners argued that the official justification of the private sector did not conform to economic and political realities. Moderates wanted the private sector to remain marginal and transitional. For the reformers, the private sector was becoming a key part of the overall economy; private entrepreneurs and the newly rich needed to be presented as patriotic and hard-working innovators who enriched not only themselves but also the whole nation. Not unlike reformers in the late Qing dynasty, the reformers made the claim that the private was not inimical to the public but was a necessary part of it. They gained the upper hand during the 1997 Party congress.

On 1 July 2001, the eightieth anniversary of the founding of the CCP, Jiang Zemin introduced his Three Represents (sange daibiao 三个代表) theory. He made a controversial call for qualified members of the various social strata that had emerged over the reform period – including private entrepreneurs – to be admitted to the CCP.⁹ According to Jiang, the Party represented the development requirements of China’s advanced social productive forces, the progressive course of China’s advanced culture and the fundamental interests of the majority of the Chinese people. Jiang’s vision was clearly elitist: he recognised that technology, the domestic economy and globalisation were changing very quickly, and he wanted to incorporate those forces into the CCP. The Three Represents theory was later enshrined in the CCP Constitution at the Sixteenth Party Congress in autumn 2002 and in the preamble of the PRC Constitution in March 2004.

After the 1 July 2001 speech, Party leaders defended Jiang Zemin’s call in practical terms. They agreed that it was necessary to admit to the Party the most dynamic social forces or face the same fate as the Communist parties of the former Soviet Union and the socialist countries of Eastern Europe. Party commentators repeatedly emphasised the rapid growth of the private economy and the Party’s poor representation among that segment of society.

As a matter of fact, the inclusion of private entrepreneurs in the CCP was not a new phenomenon. Beginning in the mid-1980s, entrepreneurs were coopted into the Party in large numbers, but, fearing that ‘bourgeois’ influences were spreading into the Party, the CCP banned the new recruitment of private entrepreneurs after the imposition of martial law in 1989. According to a survey conducted in 1993, 13 per cent of private businessmen were members of the Party (Zhang and Liu 1995, 408). This jumped to 18 per cent in 1997, 19 per cent in 2000 and 30 per cent in 2002 (Zhang, Lizhi and Zhuanyun 2003, 31). However, these entrepreneurs were not necessarily directly recruited; a significant number of Party members had become private entrepreneurs (in 2002, 80 per cent of the entrepreneurs surveyed had become members of the Party before starting a business).

The new legitimacy of private entrepreneurs in a still Communist China was made possible by a redefinition of the public good. Economic and social issues moved to the centre of the agenda of the CCP. Economic reform and the rise of the private economy had resulted in a struggle to redefine private interests as part of, rather than in opposition to, the public good. As the expansion of the private economy seemed inevitable, the public good was no longer identified with a revolutionary public spirit or Communist vision but, rather, with a more instrumental notion of material wellbeing and national power. Private entrepreneurialism, contributing not only to producing goods and services but also to creating jobs and solving unemployment issues, was therefore seen as an important force in the realisation of these goals.

Private Entrepreneurs as a Contested Social Class under Scrutiny

In this last part, we address the entrepreneurs’ relationship to the state. We will first underline their social diversity, which helps explain why they should not be seen as a social and political force. Second, we will address the issue of their capacity for collective action. Third, we will give two examples of the recent increasing intrusion of the CCP into the private sector, looking at Party-building in the private sector and at state-driven philanthropy.

The Social Diversity of Chinese Entrepreneurs and Their Interaction with the State

In 40 years of development, the overall composition of private entrepreneurs has undergone major changes. In the early 2000s, Kellee Tsai argued that private entrepreneurs had a very heterogenous social constituency (Tsai 2005), underlining their differences in terms of company size, business significance and sociopolitical and geographical background. Twenty years later, whether or not private businesspeople altogether form a social class is still subject to debate.

The emergence of a group of private businesspeople over the last four decades is such an important social fact that one of the most enduring national-scale social surveys is dedicated to its study. The China Private Enterprise Survey (zhongguo siyingqiye diaocha 中国私营企业调查 or CPES) began in 1992, shortly after the Fourteenth Party Congress proposed the establishment of a socialist market economy; it has been conducted 14 times to date (Chen et al. 2019). The CPES is run by a research project team composed of members of the United Front Work Department of the CCP Central Committee, the AFIC, the State Administration for Market Regulation, the Chinese Academy of Social Sciences and the Chinese Private Economy Research Association.

Using data from the seventh CPES (1997–2014), Fan Xiaoguang and Lü Peng analysed the social background of private entrepreneurs in 2019. Two conclusions are particularly interesting. First, although the proportion of ‘grassroots’ entrepreneurs’ (i.e. those who never worked for the state except at the village level) with limited education is still relatively high, the overall education level of entrepreneurs is rising, and the proportion of those with higher education has steadily increased. Among those who started their businesses in the early 1980s, the share of entrepreneurs with a bachelor’s degree or higher accounted for only a single digit; by the end of the 1990s and early 2000s, they constituted about 20 per cent; and in the first half of the 2010s, they constituted more than 30 per cent. Unlike earlier entrepreneurs, those with a university education are increasingly entering the market directly, rather than joining government or state-owned enterprises before ‘jumping into business’. Second, the origins of entrepreneurs from different social classes have maintained a diversified pattern. Whatever their type, entrepreneurs have a diversity of occupational experience before starting their businesses, and this diversity has persisted over time. This shows that China’s private economy still maintains a certain degree of openness. Different social groups can join the private sector, and people from different social origins can become large and medium-sized entrepreneurs. In other words, economic expansion can still provide a stage for latecomers who have seized market opportunities (Fan and Lü 2019).

Isabela Nogueira and Hao Qi (2019) offer another typology built on the succession of accumulation regimes that have been the main engines of China’s economic growth. They also argue that different types of entrepreneurs have distinct relationships with the state. The ‘low road faction’ dates back to the 1990s, when most capitalists accumulated wealth by relying on low wages, harsh management practices and access to cheap land. Such enterprises tended to be in labour-intensive, export-oriented industries, engaged in global value chains. Because of growing social protests against insufficient wages in the 2000s, and the will to upgrade the national economy, they have been in conflict with the state. The textile sector is a good example of this faction, with enterprises increasingly relying on subcontractors and informal workers, or moving their factories either inland or overseas, where they can pay lower wages.

Since the mid-2000s, in a context of rising wages, labour unrest and economic slowdown, and in order to lessen the economy’s dependence on cheap labour and cheap land, the state has supported innovation. Thus an ‘innovation faction’ has emerged that relies on technical innovation and improved labour productivity for accumulation. The rapid growth of this faction is due to the state’s supportive policies and, unlike the previous faction, expansion of domestic markets. Giant ecommerce enterprises are members of this faction.

Finally, as a result of the economic slowdown after the 2008 global financial crisis, rising wages in manufacturing and growing competition on the international market, Chinese capitalists have increasingly engaged in speculative financial activities. As a consequence of the decline in the profitability of capital accumulation, a ‘finance faction’ has emerged. A major challenge for the state is to regulate the activities of these entrepreneurs, both domestically and overseas. The HNA Group, founded in 2000 and involved in numerous industries including aviation, real estate, financial services, tourism and logistics, is one example of a diversified Chinese investment company; in 2021, after debt restructuring efforts failed, the corporation declared bankruptcy.

Beyond this diversity, Thomas Heberer and Gunter Schubert (2017, 101) argue that entrepreneurs, as the years go by, share a ‘collective identity’ resulting from belonging to the same networks, from having similar social backgrounds, social values and lifestyle patterns, and from their common exposure to the pressures and institutional constraints of China’s political system. Again, comparatively, the Chinese configuration is quite unique, since the private sector has not emerged in opposition to the state, but as a result of its initiatives.

Private Entrepreneurs as Political Actors?

Political scientists have paid particular attention to the development of the Chinese private sector, inspired by seminal work on the links between economic and political modernisation (Lipset 1959). What could be the political role of the capitalist class, and could it be a social force for democratic change? In the case of China, the question is all the more difficult because the state is the main architect of economic and social transformation. After several decades, the debate is still open. Under Xi Jinping’s mandate, the presence of the CCP in private enterprise has increased and entrepreneurs have been asked to join the Party’s efforts to build a more socially and economically fair society; we argue that this illustrates the unequal alliance between capitalists and the CCP.

Most scholars have argued that Chinese private entrepreneurs form a largely atomised group of people focused on their individual interests and unable, or unwilling, to engage in collective action. According to Kellee Tsai (2007), since organising collective action and confronting a repressive regime carry huge costs and risks, Chinese private entrepreneurs understandably prefer other alternatives; they adopt various coping strategies, mostly relational, under China’s relatively flexible formal institutional arrangements. In the early 2000s, Bruce Dickson (2003, 2008; Chen and Dickson 2010) argued that this social group that had emerged under the policy of reform and opening up favoured the political status quo and was, therefore, unlikely to bring about a shift towards more democracy. Private entrepreneurs are dependent on the party-state for their prosperity; coopted by the CCP, often from the apparatus (i.e. former Party or state cadres, or former managers or employees of state-owned enterprises), they are also its allies.

While most of the literature agrees that China’s capitalists are politically coopted by the regime, Thomas Heberer and Gunter Schubert (2017) have recently argued that private entrepreneurs increasingly pursue their interests as a group in an uncoordinated and yet strategic way by working through formal and informal communication channels. The change of dynamics between the private sector and the state over the past decade suggests that private entrepreneurs could be considered a ‘strategic group’ (Heberer and Schubert 2017). While they do not openly challenge the CCP, they continuously alter the power balance within the current regime coalition. On the basis of surveys carried out between 2012 and 2016, Heberer and Schubert argue that private entrepreneurs hold increasing negotiating power vis-a-vis the party-state, though they are still not challenging the regime. Whereas previous authors underlined the incorporation of private entrepreneurs within the party-state, Heberer and Schubert emphasise the various forms of collective action and distinguish between formal and informal communication channels. Since the early 2000s, the CCP has been integrating emerging private business elites into the party-state through a variety of formal institutional arrangement: granting CCP memberships and allowing them to act as national- or local-level legislators.

At the local level, Zhang Changdong (2017) sees the same growing importance of private entrepreneurs. Over the years, private entrepreneur deputies have become the second largest deputy group in local people’s congresses at the county and township levels in many regions. Zhang tries to assess if this change makes local congresses more representative and therefore makes local government more responsive. On the contrary, he finds that the cooption of economic elites generates patron–client relationships. In addition, direct elections are tightly controlled and sometimes deteriorate into personalised patronages, because private entrepreneurs purchase votes to win personal privileges, rather than to promote institutional reform (Zhang 2017, 17).

Obviously, private entrepreneurs are increasingly participating in legislative bodies at the national and local levels. The question of how they use their mandates is still open to debate. Yue Hou (2019) argues that private entrepreneurs actively seek opportunities within formal institutions to advance their business interests. By securing seats in the local legislatures, entrepreneurs use their political capital to deter local officials from demanding bribes, ad hoc taxes and other types of informal payments. In doing so, and in the absence of the rule of law, they create a system of selective, individualised and predictable property rights.

Business associations are another arena in which private entrepreneurs may forge their social identity and promote their interests. Examples are the AFIC, specialised trade and industry associations at the national level and associations established by local governments or set up by entrepreneurs themselves at the local level. Besides these formal institutions, there are an expanding number of information organisations where private entrepreneurs meet, such as clubs and circles of all kinds (Heberer and Schubert 2019, 488–92).

Party-Building in the Private Sector

While entrepreneurs are increasingly involved in formal arenas where public policies are debated, and are developing informal capacities to influence these policies, the CCP has deployed a variety of measures to expand into the private sector. Since the early 2000s, a major innovation has been the establishment of Party cells in private enterprises.

Xiaojun Yan and Jie Huang (2017) examine a campaign initiated in 2012 in Anhui Province by the CCP to extend its control over the increasingly powerful and influential private sector. The CCP used four key methods. First, it created a new institution, an agency specifically dedicated to this task. Second, it sent down a group of ‘party-building instructors’ (dangjian zhidaoyuan 党建指导员), reminiscent of the ‘work teams’ deployed during the political campaigns of the Maoist era, when higher authorities sent external cadres to complete internal rectification tasks. Unlike China’s traditional work teams, Party-building instructors today adopt a business-friendly approach and seek to facilitate and promote Party-building by providing their host firms with meaningful services and tangible benefits. Third, the CCP rewards private business elites with ‘appointments to political positions’ (zhengzhi anpai 整治安排), such as membership in local congresses or Party congresses. The Party is aware of the value of these prestigious appointments and uses them to incentivise private business elites to assist in local Party-building. Anhui’s Party authorities have also encouraged private entrepreneurs and their family members to head the Party organisations within their businesses. As a result, the entrepreneurs targeted by government policies are transformed into guards of the CCP. Fourth, the CCP reorients the work of local Party organs to better serve the needs of the private sector; Party organisations within private firms are business-oriented and support production services and employees’ welfare rather than intervening in day-to-day management and strategic planning. This is a striking example of the various techniques used by the CCP to penetrate private corporations. Daniel Koss (2021) has recently argued that the infiltration of firms by the CCP, from board rooms down to factory floors, has relied on the mobilisation of various recipes found in the organisation’s history, calling it an ‘institutional bricolage’. On one side, it is an innovation, since private firms disappeared in the 1950s; on the other side, the Party can build on its past experience, notably the establishment of committees in autonomously governed villages during the revolutionary era.

State-Driven Philanthropy

The increasing intrusion of the CCP into the private sector is one of the tools used by Xi Jinping to make China more socialist since 2012. During his first mandate, he increased Party discipline and asserted his commitment to promote the ‘China Dream’ and ‘socialist core values’. Poised to begin a third term in 2022, Xi is now calling for China to achieve ‘common prosperity’ (gongtong fuyu 共同富裕), seeking to narrow a yawning wealth gap that threatens the country’s economic ascent and the legitimacy of CCP rule. During the year 2021, Xi signalled a heightened commitment to delivering common prosperity, emphasising that it is not just an economic objective but core to the Party’s governing foundation. To reach that goal, Xi explicitly encouraged high-income firms and individuals to contribute more to society via the so-called third distribution: charity and donations.¹⁰

Answering that call, several tech industry heavyweights, such as Alibaba and Tencent, announced major charitable donations and support for disaster relief efforts.¹¹ This is the latest avatar of a policy initiated more than 10 years ago, notably through the drafting of a charity law in 2016. Entrepreneurs’ foundation’s missions align with the state’s core social welfare goals: disaster relief, poverty alleviation, assisting disadvantaged people and promoting education. Philanthropic action, understood within the framework of exchanges between capitalists and the party-state, is then similar to a more or less constrained redistribution of resources.

As in the United States at the end of the nineteenth century, philanthropy is being revived in contemporary China in an attempt to handle social issues. Private entrepreneurs are becoming agents of social justice, but, far from replacing state action, they are supportive of it. In so doing, private corporations join the efforts to build a new legitimacy for the party-state (Guiheux 2015). American donors refused to be confined to a role of complementing the state and insisted – and still insist today – on the innovative dimension of their philanthropic investments, including in the field of social or educational policies. In contemporary China, not only does the CCP still have a monopoly on defining public interest, but also private entrepreneurs and firms are confined to a complementary role vis-a-vis the party-state, forced to give back some of what they have gained from society in the shape of donations to government-recognised charity or assistance to government-backed projects.

After Jiang Zemin proposed the ‘Three Represents’ in 2001, the CCP and entrepreneurs entered a honeymoon period of more than 10 years. When Xi Jinping came to power in 2012, he began to strengthen the management of entrepreneurs and organisations. Recently, the government has pursued the ‘common prosperity’ agenda with a series of striking reforms, amounting to a major crackdown on tech, platform economy, private education, real estate and financial capital. For some, this storm of new regulations aims to increase the size of middle-income groups, raise the earnings of low-income groups and reduce excessive incomes (Dunford 2022). But there is a high risk that the crackdown is killing the innovation, creativity and entrepreneurial spirit of the Chinese private sector. The state intervention has resulted in entrepreneurs’ losing confidence in China’s future.

Conclusion

In contemporary China, as the private sector is a major engine of economic growth, the authorities cannot do without private entrepreneurs. But, at the same time, at the local and national levels, the regime remains authoritarian; the party-state keeps its monopoly on the political agenda. This does not mean that it is not porous to certain interest groups, but it is still able to draw the line. The Party needs private entrepreneurs to create jobs, reduce poverty and create wealth, yet it is not ready to cede its leadership role, which helps explain why any individual who oversteps the boundaries is likely to fall. The party-state still directly controls a large state sector and access to loans, land and many material resources, and it monopolises legal and coercive resources. Collaboration between the party-state and the private sector is on an unequal footing and can be characterised as an ‘asymmetric mutual dependence’ (Zhang 2019).

Looking at today’s relationship between the Party and private entrepreneurs from the perspective of the early years of the regime, the collaboration looks less exceptional than it might at first glance. We do not claim that post-Mao China is identical to China under Mao, but we argue that the CCP finds a useful repertoire of actions in the founding years of the regime. Although, ideologically, capitalism was the ultimate target of the revolution, within the first years after the CCP took power, under the broad strategy of the united front, it collaborated with ‘national’ capitalists. Our conclusion is in line with Sebastian Heilmann and Elizabeth Perry’s (2011) argument that ‘adaptive governance’ – concrete mechanisms and techniques of governance that were shaped during the pre-1949 decades of guerrilla fighting and resistance, and, we argue, in the early 1950s – has continued to influence policymaking, providing the CCP with a unique resource of high resilience and adaptability.

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