Forging private enterprises in Jilin : the political economy of institutional change

Abstract

This is a case study of the political economy of institutionalizing private enterprises in Jilin region, Jilin Province, Northeast China during 1994-2008. This study is contextualized in a larger constellation of national/provincial institutions and policies. It examines changes in the institutions governing private enterprises at the local level, and shows how the policies and actions of the central/provincial state have caused Iocal-Ievel political economic institutional changes, which in turn created incentives and constraints that shaped the behaviour of local state officials; and how, in the backdrop of changing central-local relationship along with China’s economic transformation, the actions of local state officials have shaped local adaptive informal institutions which, with repetition and diffusion, took on an institutional reality of their own, and at Iast resulted in the change of formal institutions at national/provincial level. This study is constructed upon the empirical evidence from both Chinese and Western scholarship, quantitative data from published and unpublished official documents and statistical figures, and the qualitative data from interviews in the field site. The New Institutional Economics QSlIE) approaches are used to examine the development of private enterprises from the relation of transaction cost and institutional change in China’s political economy, Susan Whiting’s model (2001) is applied to the analysis of how institutions affect local private enterprise development, and how the development of private enterprises induces institutional changes, and Susan Shirk’s framework (1993) is employed to analyse how the power of the central government is constrained by local factors within the institutional arrangements of central-local relations, and how local political and economic innovations could contribute to the change of national political and policy change for private sector development. The central contention of the thesis is that (1) the interaction between national/provincial political and policy changes, the innovation of local political and economic institutions, and grassroots state and non-state actors, has shaped decisively the development of private enterprises in Jilin between 1994 and 2008; (2) due to the differences in local political and economic institutional arrangements, the model of private enterprise development varies significantly from one locality to another; and (3) to accommodate the development of local private enterprises, local political and economic institutional changes occurred, and these changes have contributed to the change of national/provincial political and policy environment for private sector development.