- China's Trapped Transition: The Limits of Development Autocracy
Having recently reviewed Dali Yang's Remaking the Chinese Leviathan (China Review International vol. 12, no. 2, 2005) and given Yang's and Pei Minxin's earlier formulations of their respective views (Yang 2003; Pei 2002), I was expecting this book, China's Trapped Transition, to serve as a counterfoil to Yang's optimistic claim of the rise of a regulatory state in China. I was pleasantly surprised. These two books do not offer a simple contrast of the glass half-full or half-empty, but rather competing interpretations of complex new relationships between the party-state and the market economy, and between the party-state and its main constituents. Pei finds the survival strategies of the Leninist party-state damaging to the healthy functioning of the market economy, and the failure of these strategies has led to the under-provision of public services and the internal rot of the bureaucracy. As a result, a "paradox of power and ineffective" (p. 13) robs the regime of legitimacy in the eyes of the populace and flexibility in crisis management and reform policy making. Pei's thesis is generally very well supported, offering arguably the best political economic critique of the Chinese state in the English literature to date.
"Trapped transition" refers to the narrowing of options and room for error created by a widening discrepancy between political reform and social and economic development. Pei sees little, if any, political institutional progress between the Deng and Jiang eras-in chapter 2 he reviews the literature on the National People's Congress, local People's Congresses, legality and the judicial system, village elections, media and the internet, and actions and inactions of critical social groups such as peasants, workers, private entrepreneurs, and intellectuals. He finds that the conservative elite has consolidated behind an autocratic consensus since the 1989 Tiananmen Square crisis and imposed strict limits on political liberalization through a partly coercive, partly cooptative strategy of "illiberal adaptation." On top of that, the Chinese Leninist state consistently fails to clarify and provide stable institutionalization of the party-state, central-local government, and state-market relationships. The fundamental reasons for this failure can be summarized as the following: too much at stake, too many overlapping layers of shady reciprocities in the political hierarchy, and increasing short-term opportunism by political actors who foresee the disintegration of the current political order.
Chapters 3, 4, and 5 lay out the important costs of the Chinese Communist Party's (CCP) political survival, in terms of the negative impact on the gradualist approach to market reform, on the party-state's attempt to reform itself from [End Page 491] within, and on the provision of public services. Pei's most interesting theoretical points concern gradualism. Contradicting Qian Yingyi's (2000) and others' arguments about the utility of the dual-track pricing system in minimizing losers of structural adjustments, Pei argues that the hybrid institutions are unstable and have incurred tremendous costs that are typically neglected in the overall assessment of the Chinese leaders' economic performance. Examining failed liberalizations of grain procurement policies, telecommunications services, and the banking sector, Pei points to monopolistic state-owned enterprises (SOEs) as the sole and illegitimate beneficiary of partial and at times back-tracking reform measures. While select SOEs wallowed in rent-seeking opportunities, Beijing lost control over state assets, and consumers and potential entrepreneurs suffered from the lack of competitiveness and poor economic performance resulting from the politicized allocation of resources. Interestingly, Pei notes that with rampant bribery of bank officials in making loans, borrowers effectively accept interest rates approximating rates exacted by the private credit market (p. 119). If so, one suspects that market forces can overwhelm any attempts at regulatory measures and the state has only the choice of creating institutions to promote a more equitable distribution of wealth and bringing the informal economy into the light, or perpetuating these distortions.
My overall reservation about Pei's political economic account...