Barbara Krug

Framing China: Transformation and Institutional Change Through Co-Evolution

This paper proposes a new institutional perspective to explain not only the diversity of local business systems in China but also how this diversity results from the integration of major institutional forces. We model the emergence of Chinas business systems as a co-evolutionary process unfolding along a business-government and a micro-macro-level dimension structured by intergovernmental institutional competition, business to business and business to government networking and public-private corporate governance. We find that: (i) Chinas emerging business system is the result of local institutional competition at the micro level that reduces the need for national (macro) institutions and impacts on the local implementation of national (including supranational) policies; (ii) the interaction between government and business is structured through networks which operate according to an economic rationale while drawing on cultural norms and traditions; and (iii) local businesses interact with local governments to recombine productive factors and reorganise firms and industries in line with local institutions. We conclude that the astonishing adaptability of Chinese businesses as well as the risk of corruption and lack of formal control at local government level are elements of locally differentiated business systems which are held together by an overarching institutional architecture.

China incorporated: property rights, networks, and the emergence of a private business sector in China

Based on fieldwork in Zhejiang 2000/01, the paper analyses the processes and mechanisms that shape China’s new private sector. The paper argues that the development of the private sector is characterised by the on‐going interaction between local jurisdictions, networks and entrepreneurs. The search for and protection of private property rights can be singled out as the most crucial factor for explaining the establishment and organisational form of firms. The empirical study can also help to explain why the family is no longer at the core of private firms, offering too small a resource base, and too little access to asset protecting networks.

The Current State of Research on Networks in China's Business System

This illuminating book broadly addresses the emerging field of ‘diversity of capitalism’ from a comparative institutional approach. It explores the varied patterns for achieving coordination in different economic systems, applying them specifically to China, Japan and South Korea. These countries are of particular interest due to the fact that they are often considered to have developed their own peculiar blend of models of capitalism.

Blood, sweat, or cheating: Politics and the transformation of socialist economies in China, the USSR, and Eastern Europe

Most people agree that a major factor contributing to the “revolution” in Eastern Europe in 1989 was the poor performance of socialist economies.’ If political change was indeed initiated by economic factors, does this then imply that the problem of transformation falls into the field of economics? Can economic theory explain why the socialist economic systems failed or predict in which direction and how quickly the transformation process will proceed? Such questions as these will be tackled in the following pages. As will be shown, traditional textbook economics does not contribute to an explanation of the transformation process and is therefore rather useless for more realistic questions such as how to initiate, proceed, and implement the necessary economic reform. The demand that a market economy be established, and this at a moment’s notice (the so-called “big bang” or “crash” solution), is only of limited help since the basic reason for the relative uselessness of textbook economics lies in a conceptual failure: First of all, economics restricts itself to an cxplanation of the functioning of markets-and it dots so admirably. What is overlooked is that economics actors do not normally live in a pure market environment, facing nothing but the market constraints of, say, income or market prices. We all live in an environment which is a mix of markets which coordinate individual actions with relative prices; hierarchies in which individual actions arc coordinated with order and compliance; and voting which coordinates individual actions with a majority/unanimity rule. The greater the volume of transactions coordinated by non-market institutions the smaller the sector of real life transactions economics can explain. This is true for all economic systems but even more so for socialist economies which do not have much of’s market to begin with. A second reason why textbook economics fares badly in explaining the transformation of economic systems is that the theory is outcome-oriented. The models are designed in order to explain how the Pareto-criteria as developed in welfare economics can be fulfilled. Economics in this sense is a normative theory. In its most

The Economics of Corruption and Cronyism — An Institutional Approach to the Reform of Governance

Moral outrage was the response of the Chinese press, when Cheng Kejie, one of the country’s highest officials, Vice-Chairman of the Standing Committee of the National People’s Congress and former Governor of the Guangxi Zhuang Autonomous Region, was arrested on grounds of corruption on 25 April 2000. Cheng’s arrest came amidst a spate of serious corruption cases that reached into the top echelons of China’s state leadership (China Aktuell, 2000). His case attracted wide public attention in national and international Chinese media because of his high office, the number of officials implicated, and the involvement of his lover Li Ping (dubbed the “Jiang Qing of Guangxi” by the Hong Kong and overseas Chinese press) (Ming Pao, 2000), daughter-in-law of his predecessor in the position of Governor of Guangxi, and for years the most influential woman in Guangxi. This was not just a case of a local official embezzling public funds, but a story of love and greed of a popular political leader, who had achieved much for his province. This was also not the story of an anonymous mistress, but of an ambitious, intelligent and attractive woman using the position of, first, her father-in-law, then her lover, to systematically, and on a long-term basis, exploit the powers vested in the office of provincial governor.