1992 and 2001; (4) rapid economic development from 2002 to 2012; (5) a period of sectoral differentiation between 2008 and 2012; and finally (6) a turn to upgrading and innovation since 2013. However, this categorization is rather heuristic. From a regional and local perspective, the time sequence of private sector development differed considerably across the country and is perhaps better defined by distinguishing between different trajectories or models of economic transformation in the reform era (see also Schubert and Heberer, 2015; Shen and Tsai, 2016):
(1)The Pearl River Delta model (Zhusanjiao moshi) of Guangdong province is characterized by economic growth based on foreign investment. This model stood closest to what Deng Xiaoping had in mind when he ordered the establishment of the first Special Economic Zones in Guangdong and Fujian in the early 1980s. Local governments cooperated closely with foreign (including Hong Kong and Taiwanese) enterprises by providing a sound business infrastructure with cheap land and labor and efficient transportation, while foreign investors retained full control of their companies. This model has often been identified with local state entrepreneurialism, which of course also materialized in other parts of China and was not related only to foreign investment.
(2)The Southern Jiangsu model (Sunan moshi) saw early private sector development based on the privatization of former collectively owned TVEs during the 1990s and early 2000s, and tight connections between local enterprises and governments. Many private entrepreneurs had previously been managers of TVEs and were hence party members in a position to ‘jump into the sea’ (xiahai) by taking over TVE assets and commercializing their operations. Local governments, for their part, delivered policies most favorable for private sector development and protected native enterprises from external competition, leading to what has been called local state developmentalism or even corporatism (Shen and Tsai, 2016; Oi, 1999).
(3)The Wenzhou model (Wenzhou moshi) refers to Wenzhou municipality, a prefectural-level city in Zhejiang province, where private sector development was originally based on low-tech and labor-intensive export production by native entrepreneurs, informal finance, and tight marketing networks throughout China. In the early years, the Wenzhou government took a laissez-faire approach toward the private sector and did not intervene much in the local economy, other than providing basic public goods financed by a rising tax income. Wenzhou became a model for national emulation in the 1990s, but its private sector ran into serious problems even before 2008/2009, when the global financial crisis set in and Wenzhou’s export economy collapsed. The low quality of many of its products in conjunction with the family-based structure of many of its companies induced the local government to push for industrial restructuring and upgrading — with moderate success thus far.31
(4)The Jinjiang model (Jinjiang moshi) in Fujian province stands for the rise of native entrepreneurship without the opportunities stemming from the decline and transformation of TVEs like in Southern Jiangsu. Jinjiang’s early generations of private entrepreneurs were not party members but nevertheless worked closely with local governments, relying on kinship ties and ‘localism’, i.e. the invocation of a joint mission to develop the local economy. The local government of this county-level city took responsibility for fostering private sector responsibility early on, making use of Jinjiang’s close proximity to the coast which helped to build up regional trade networks. In that sense, Jinjiang followed the logic of local state entrepreneurialism and corporatism, and many of its enterprises were small and medium sized. However, their economic outreach did not go far beyond the immediate environment in Fujian and hence differed substantially from its Wenzhou counterpart.
(5)In addition to the four models mentioned thus far, we would also add rural private sector development as a special variant and call it the Enshi model (Enshi moshi), after a county-level city within Enshi Tujia and Miao Autonomous Prefecture in Western Hubei Province where we conducted fieldwork in 2013. In places like Enshi, very few industrial enterprises exist and most of them operate in the processing of agricultural products. Tourism is also an important economic sector. Private entrepreneurs have little capital and depend strongly on the support and guidance of the local government for identifying and accessing markets or building a sound management structure within their companies. The local government tries hard to stimulate internal and external investment and clearly steers the building up of a private sector economy. It offers numerous subsidy schemes for that purpose, though its fiscal maneuvering space is limited. Enshi’s lack of qualified cadres who know how to drive forward economic modernization and its isolated geographic location with difficult transport conditions make it an inevitable latecomer in terms of private sector development in China.
No matter which model best summarizes the specific trajectory of private sector development across China, in most places, local governments have played multiple, critical roles as gatekeepers, enablers, and steering subjects. They have done so by improving the local infrastructure, ensuring access to land, labor, and credit, granting tax rebates and subsidies for product innovation and branding, providing for vocational education and market information, enforcing industrial upgrading and environmental compliance, and empowering business associations to serve as transmission belts for entrepreneurial concerns and demands. It is the objective and obligation of local governments everywhere in China to improve the competitive capacity of private enterprises in their respective jurisdictions in domestic and international markets around the world and to establish a more effective administration system. Private entrepreneurs, for their part, strive to closely cooperate with local governments because of their control of critical resources and information badly needed for market success, and the power of local bureaucracies to protect ‘their’ enterprises from external competition. At the same time, the private sector has become increasingly significant for local development and positive cadre evaluation over the years, entailing a relationship of mutual dependence between local governments and private entrepreneurs that has shaped state–business relations since the beginning of private sector development in the 1980s. As we have argued elsewhere (Schubert and Heberer, 2015), this relationship gradually changed throughout the Hu–Wen era and the early years of the Xi Jinping administration, when the local state was ordered to scale back its developmentalist and entrepreneurialist activities and become more of a regulator — a shift of function from immediate ‘leadership’ (lingdao) to ‘guidance’ (yindao) and mere service provision (fuwu).32
The Private Sector in the Xi Jinping Era
In his report to the 18th Party Congress in 2012, the outgoing CCP general secretary Hu Jintao explicitly mentioned the private sector only twice by postulating that private financial institutions and private hospitals should be rapidly developed (Hu Jintao, 2012). Also, in 2013, the CCP’s Central Committee decision on further deepening reforms, thus setting out Xi Jinping’s comprehensive policy agenda for China’s future, addressed the private sector only marginally.33 Rather, it emphasized the party state’s intention to facilitate private investment in SOEs and better access for private entrepreneurs to markets so far controlled by SOEs, but the overall impression from the document text was that the party leaders, most importantly Xi himself, had second thoughts about the government’s former commitment to more leeway for the private sector. Many private entrepreneurs were alarmed. This compelled party leaders, most notably Xi Jinping himself, to reassure private entrepreneurs that their worries were groundless and the regime ready to further support and develop the private sector.34
In fact, between 2012 and 2018, no important policies targeting the private sector were launched, though the Chinese leadership concerned themselves with reassuring private entrepreneurs that this sector would still be supported politically and that it was crucial for China’s further development and innovation drive.35 Hence, private sector policies were addressed in very general terms concerning content. It seems as though, during this period, the party leadership foremost intended to clarify the future role of the private sector for China’s further economic transformation and its relationship with the state-owned sector before any new policies were defined. As such, in the following paragraphs, we focus on a discursive level to pinpoint the party state’s stance on private sector development.
When Xi Jinping came to power in 2012, he called for greater efforts to incorporate private entrepreneurs