Wright on Bian, _The Making of the State Enterprise System in Modern China: The Dynamics of Institutional Change_

[Book Reviews in Economic and Business History]

Published by EH.NET (November 2008)

Morris L. Bian, _The Making of the State Enterprise System in Modern 
China: The Dynamics of Institutional Change_. Cambridge, MA: Harvard 
University Press, 2005.  xi + 331 pp.  $49 (hardcover), ISBN: 0-674-01717-X.

Reviewed for EH.NET by Tim Wright, School of East Asian Studies, 
University of Sheffield.


Scholars are paying ever greater attention to continuities between China 
under the Nationalist government and under the post-1949 Communist 
regime, and are increasingly questioning the idea that 1949 marked an 
unbridgeable watershed.  Morris L. Bian of Auburn University contributes 
to this new scholarship with a study of the origins of the State Owned 
Enterprise or “danwei” (unit) system in urban China under the People’s 
Republic.  He argues these origins can be found in state enterprises in 
the ordnance and heavy industries in Nationalist China during the Second 
World War.

At the most basic level this book is a study of the running of the 
defense-related industries in China under the Nationalists.  After an 
introduction outlining the theoretical concepts he is about to employ -- 
particularly “path dependency” and (much less usefully in my opinion) 
the idea of “mental models” from cognitive science --  in Chapters 1 and 
2, Bian deals with the modern history of the Chinese ordnance and other 
heavy industries.  Three further chapters then cover governance 
structures (Chapter 3), management and incentive mechanisms (Chapter 4) 
and the provision of social services and welfare (Chapter 5) in those 
industries. In these three chapters, Bian draws on a range of published 
and archival sources, and uses the Dadukou Iron and Steelworks in 
Chongqing as his major case study.  Chapter 6 traces the origin of the 
use of the term “danwei” in the meaning of “work unit,” which came to 
prominence during the War, but originated in American theories of public 
administration.  Chapter 7 deals with the emergence of the ideology of 
the developmental state in Nationalist China, as involving an emphasis 
on state-owned as against private enterprises, heavy as against light 
industries, defense as against livelihood considerations and (socialist) 
economic planning as against market mechanisms. Finally, a conclusion 
draws out the implications of the book’s findings.

The book makes more ambitious claims than to be a study of wartime 
industry in China.  As its title suggests, it argues that industrial 
organization during the war provides the key to the origins of the 
“danwei” system that dominated urban China from the 1950s into the 
1990s.  It rejects the idea that this system originated in the Soviet 
model, earlier patterns of Chinese labor organization or indeed 
enterprise organization in the 1920s and 1930s.

Bian argues that the Nationalists’ adoption of the patterns of 
organization used in the defense industries was path dependent, in that 
they had to draw on the institutional and ideological endowments 
available to them -- the traditional model of China’s state 
administrative bureaucracy had a profound influence on the management 
organization of these industries.  He also maintains that the Communist 
adoption of the “danwei” system was path dependent, rather than path 
independent as it would have been in his terminology had they taken the 
idea from the Soviet Union.  He stresses that the path on which the 
later “danwei” were dependent consisted of the organizational patterns 
specifically emerging as a result of the national crisis during the 
Second World War -- he frequently stresses that patterns or ideas that 
were only incipient or competing with many others in the early 
Nationalist period during the late 1920s and early 1930s became dominant 
during the war because of the exigencies of national defense.

The first part of this argument, focusing on path dependency in 
industrial organization during the war, is well developed and quite 
convincing.  Bian clearly demonstrates that the immense pressures 
generated by the War led to the adoption of organizational patterns and 
ideas that had been around, but not dominant, in the earlier period.  He 
argues that these new ideas represented a change of “mental models,” 
though perhaps others might wonder whether they were in part temporary 
responses to the exigencies of war.

The extension of the argument to the contention that the Communist State 
Owned Enterprise or “danwei” system originated in these organizations is 
much less convincing.  It is also less explicit and developed: for 
example Chapters 3, 4 and 5 make virtually no mention of the post-1949 
period, though Chapter 6 does, albeit in broad terms.  The argument 
seems to be that merely because certain patterns existed both before and 
after 1949, therefore the later versions were “path dependent” on the 
earlier.  If one was to argue that there were similar outcomes because 
both Nationalists and Communists were drawing on similar institutional 
endowments inherited from traditional China, most scholars would 
probably agree (I think that, despite the author’s claims, few would 
unambiguously locate the “danwei” system as a legacy of the Soviet 
Union).  However, it is a major further step to go on to suggest that 
the Communists were specifically influenced by the pattern of 
organization in the enterprises studied in this book.  Surely such a 
step requires evidence that these Nationalist enterprises were perceived 
as an important part of the institutional resources inherited by the 
Communists, but no such evidence is presented.  The argument becomes 
even more strained in relation to labor emulation campaigns, which, Bian 
argues, the Nationalists adopted from the Stalinist Stakhanovite 
campaigns -- but are we then to believe that the Communists took the 
idea from the Nationalist ordnance industries rather than from the 
Soviet Union?

In conclusion this is an informative and worthwhile study of industrial 
organization in Chinese defense industries during the war, which also 
raises interesting but less tested ideas about the influence of this 
form of organization on the Communist regime after 1949.


Tim Wright is Professor of Chinese Studies in the White Rose East Asia 
Centre and the School of East Asian Studies at the University of 
Sheffield.  He is currently working on the economic fluctuations in 
China in the 1920s and 1930s, and on economic reform in the contemporary 
Chinese coal industry.  His recent publications include “The Manchurian 
Economy and the 1930s World Depression,” _Modern Asian Studies_, 41:5, 
(September 2007): 1073-1112.

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