The Chinese Economy Between Confucianism and Modernity

The Chinese model/variety of capitalism has been characterised as authoritarian, state capitalist, hybrid, development state, primitive/extensive accumulation, and much more. Another label which is the one adopted in this paper is Confucian capitalism. This is based on the assumption, or rather the hypothesis, that economic relationships and economic behaviour in any context reflect deep-rooted cultural practices, norms and values, and that Confucianism has a major impact on these roots in China. This conceptualization stresses the impact of culture on business practices. Basic values such as the importance of the family, group mentality, stability, loyalty to superiors, paternalism and reciprocity underpin business practices and economic governance. This paper focuses on the intermediating role of formal institutions. A distinct set of institutions are embedded in culture and provides the framework for economic governance, business transactions and management practices. The institutions of the labour market, inter-firm networks, corporate governance, welfare services provision and local government have distinct characteristics in the Chinese model of capitalism. The processes of high growth rates and major structural change in the last decades have been based on these institutions but have simultaneously put pressure on established institutions. Likewise, external changes are influencing Chinese institutions in incremental fashion. These evolutionary patterns merit a new look at the sources, patterns and consequences of change.

The paper reports from an explorative research project funded by the British Council. The study consisted on (a) extensive desk research (review of literature, including contemporary Chinese research literature), (b) interviews of experts, professionals and managers in China, and (c) observation field notes from several visits to China in 2013-14. The study focused on three areas: (i) labour market trends, the hukou system, social security failure, and emerging employee protest; (ii) the complex effects and the decline of support for traditional forms of social capital (or guanxi) as an asset for inter-firm networks; (iii) executive excess and corruption including land grab.

The development trends in these areas are seen as challenges to the basic tenets of Confucian capitalism. The paper concludes that Confucianism still provides a powerful prism for interpreting economic relationships and behaviour in China today. However, tensions with Western individualism are prevalent in the three areas in focus and in many others. In some areas the impacts of Confucianism seems to be crumbling. Further, there are important regional differences. The heritage of Confucianism is still strong in central Eastern regions, especially in Shandong and neighbouring provinces, whereas it is far weaker and is becoming even less so in the economically prosperous Southern China.