The Making of the State Enterprise System in Modern China: The Dynamics of Institutional Change

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.