The subtitle is The Rise of Private Business in China and the author is Nicholas Lardy (2014).
The writer’s effort is to discredit the view that China’s version of capitalism is one where the state overwhelmingly dominates and administers all aspects of production and growth. His method of doing that is to highlight the general reforms in state policy that have engendered greater freedom of labor and an ability for the private entrepreneur to more easily form a business. Moreover, he points out how private enterprise now contributes a far greater share to GDP, and the fact that private companies generate higher ROEs (as compared to their state counterparts) has led to the growth of the private sector in most areas of the economy (he inundates the reader with statistics to make these points – generally, I find statistics to be boring, so if you’re really interested, you’ll have to read the book to see the minutiae). For those in the world who think that China is poised to dominate the 21st century, a lot of what he is saying should sound familiar and resonate. I don’t disagree with the basic premise.
Still, there are some countervailing points to be made. For example, in many of the major/important industries, the state continues to dominate or even hold an outright monopoly. Such as oil and telecommunications and finance. That last one is kind of important. Because even though Lardy notes that many of the private firms are so profitable that they have been able to fund themselves through retained earnings, it is significant that in a world driven by debt, that the state still dominates that sector. And if you have looked at all at the few years since this book was written, the state has opened the spigots and debt has flown at an absurd rate, preventing bad debt from being written off to the level that it probably should be – foregoing the inherent power and beauty of a market-based system. So, while Lardy is probably right in many respects, when push comes to shove so far, the state is looking to protect its existence, prioritizing that over a real shift to a market-based economy.
