Perspectives on the Development of the Private Business Sector in China

This article reviews new literature on the development of China's private sector. Since this sector's development is embedded in and characterised by a wider institutional environment, several general characteristics of China's capitalist transformation are discussed. Insights drawn from political science help in the understanding of the strategy of "wearing a red hat" and the emergence of China's private sector. The closely interwoven relationships between private companies and the Party-state that have taken place since the 1990s are also examined. The review indicates that focusing on state/capital relationships at different administrational levels contributes to a better understanding of China's private sector. The main conclusion is that although the development of the new private enterprises enabled the ruling elite to form and consolidate a hegemonic project that provided relative societal coherence, the project's continuity is threatened by a tendency for crises to occur. Since the 1980s, an impressive private sector has emerged in China. It seems as if a legitimised private sector now prevails where once different forms of state enterprises dominated. Overall, there has been a clear increase in companies that are formally run as private businesses: in 1978, SOes (state-owned and state-controlled enterprises) accounted for 77.6 per cent of industrial output, whereas in 2006 the share was down to 31.2 per cent, while the share of private companies had risen to 37.2 per cent. The share of foreign-funded private enterprises, including investment from Hong Kong,