The Making of the State Enterprise System in Modern China: The Dynamics of Institutional Change (review)

In this book, Bian thoroughly explores many hitherto untapped official archives of ordnance enterprises operating under Nationalist Party (Guomindang) auspices during the war of resistance against Japan (1937–1945). Based upon this rich material and an analysis of both business history (notably the concept of "path dependence") and cognitive theory (the concept of "mental models" and institutional change associated with North), he delivers some fundamentally important findings.¹ His argument that "the basic institutional arrangement of China's state-owned enterprises—the bureaucratic governance structure, the distinctive management and incentive mechanisms, and the provision of social services and welfare—took shape in China during the Sino-Japanese War" boldly challenges the idea that modern China's industrial state enterprise system was variously derived from the pre-1949 experiences of the Chinese labor movement, the history of the Chinese Communist Party (CCP), or the Soviet development model that the CCP emulated in the 1950s (213). This conclusion is controversial, especially with regard to the historical parentage of the once ubiquitous danwei or urban "work units," which are steadily being phased out in China's increasingly marketized economy.

Bian begins by tracing the vicissitudes of China's ordnance industry from its origins in the 1860s to the Japanese invasion in the early 1930s. That crisis impelled the Nationalists to centralize and rationalize the arms industry in line with their comprehensive economic-mobilization plans for the heavy industrial sector as a whole. While the industry's traditional bureaucratic organization persisted, the novel use of technocratic management, modern cost-accounting methods, incentive mechanisms in the form of work-emulation campaigns, and the provision of welfare and social services in ordnance enterprises evinced the pragmatic importation of foreign models. Formal institutionalization of these enterprises as danwei soon followed, buttressed by frequent Nationalist ideological justification of the developmental state and state socialism as the future path for China's industrial growth.

Bian's fine study reinforces an evolving body of scholarship suggesting continuity between the Nationalist and Communist eras, an evolution rather than a revolution of both institutions and ideas. Despite instances of overly repetitive invocation of theory, and an occasionally formulaic organization and presentation, this well-written work makes an important contribution to the history of economic organization in modern China.