Most debates in the study of contemporary Chinese political economy turn on how to properly characterize the role of the state in the economy. These debates are both empirical and normative, with scholars disagreeing about the nature of the state's involvement in various sectors of the economy as well as the effects of that involvement on economic growth to date and in the future. Consensus is beset by the fact that the “role of the state in the economy” is a moving target; the nature of state involvement has varied regionally and at different levels of government as well as over time. Junmin Wang enters the debate by examining the nature of state involvement in a single sector – the tobacco industry – from the beginning of the reform era through the first decade of WTO membership. Based on archival research and ethnographic interviews at firms and local and central institutions that govern the industry, Wang's book offers a dynamic and multilevel analysis of relationships between government and market in this important industry.
The book's core analysis – as indicated in the subtitle – concerns the dynamics of decentralization in the tobacco sector during the 1980s and 1990s (“local state competition”) and of “recentralization” and adjustment following WTO accession (“global market building”). In chapter three, Wang argues that decentralization of SOE control in the 1980s created incentives for local governments act like “market participants” in pursuit of their own financial interests. Wang argues that the state – under pressure from competition from “out-of-plan,” private tobacco companies – took over the sector by creating the State Tobacco Monopoly Administration (STMA) bureau system in 1984. Local governments in turn used the STMA bureaus to protect and nurture their own local tobacco enterprises, creating a nationally fragmented market for tobacco. Instead of labelling some local governments “protectionist” or “predatory” and some “developmental,” Wang's insight is that all of these local governments were acting as “rational market participants,” but some were more successful than others: “if we look at the bigger picture here, the local governments might not even intentionally choose to be ‘good’ or ‘bad.’ They simply compete, and some of them win and some lose” (p. 14).
Chapter four, the empirical heart of the book, narrates the rise of Hongta Group in Yuxi, Yunnan province, which was the biggest tobacco corporation in Asia by 1995, as a case of a successful local government (p. 68). Hongta and its well-connected leader worked closely with the local government to establish a new institutional framework that would enhance the local tobacco industry's ability to compete. By combining the cigarette factories, STMA local bureaus, and tobacco trading companies into “corporation-like entities” and experimenting with enterprise-directed tobacco farming, Hongta and Yunnan were able to overcome the major supply problems in the industry and increase market share from around 9 per cent in 1986 to 19.3 per cent in 1996 (p. 60). Though empirically rich, the story of this “tobacco empire” does beg for a more structured comparison, either with other successful regions or with unsuccessful ones.
Chapter five details the end of the era of local state competition and concomitant rise of global competition post-WTO accession. In 2003, the central government embarked on what Wang calls a “radical merger movement” through which the number of tobacco industrial enterprises declined from 120 in 2003 to 30 in 2008 (p. 108). Local STMAs were reorganized into a “vertical bureaucracy” that would act like corporate entities to promote domestic tobacco firms in global markets. Critically, Wang argues that this conglomeration was a result of the central government's desire to create national champion firms. The merger movement and “recentralization” of control was not at all renationalization or a reversal of the CCP's earlier liberalization policies, but rather the central government picking logical winners out of fragmented local tobacco markets and favoring them globally – a “‘deeper’ economic decentralization” (p. 119).
The major theoretical framework as presented in the second chapter is “market-building as state-building,” drawing on a sociology literature that envisions states and markets as mutually constitutive. The emphasis on state-building unfortunately neglects power relations between levels of the state. For example, when local “winners” become national champions, do local governments resist centralization of control or do they benefit? Conversely, how was the central government so easily able to dissolve the local STMA bureaus when they had served local interests for two decades? The book would also benefit from serious consideration of alternative hypotheses. For example, Wang asserts that the central government enforced mergers to foster global competitiveness, but the evidence presented is also consistent with the logic of forcing winners to absorb losers rather than letting them fail.
Nevertheless, the methodological approach has much to recommend it. Wang's most important achievement, in addition to producing an informative monograph on an understudied but critical industry, is providing an excellent example of the benefits of combining subnational and multilevel analysis. By examining local state competition and how local state management interacts with central goals over different periods, Wang departs from a static analysis of either local states or central policy to present a dynamic portrait of CCP industrial policy at the macro level. The result is a nicely argued study that challenges simple characterizations of the nature of state ownership in the Chinese economy and will appeal to those interested in industrial policy, state–market relations, and general political economy of reform in China.
