This is among the most important books to appear on contemporary China this decade. Motivated by a socially conscious economic liberalism and guided by a firmly positivist epistemology, Yasheng Huang challenges—and defeats—some of the most sacred myths surrounding the Chinese political economy as reinforced by scholars and widely accepted by the general public. The book is essential reading for any political scientist specializing in China, international relations, comparative economic development, or comparative political change. It could easily be incorporated into graduate seminars and advanced undergraduate courses. The focus and timeliness of the book—published just before a normal (globewide) recession metamorphosed into the Great Recession—underscores the importance of coming to terms with its arguments and contentions in teaching and writing.

Huang initially articulates his objectives as twofold. First, he aims to undermine the widespread view among Western social scientists—especially economists, he writes, but also political scientists—that a wise Chinese state committed to liberal economics has wanted to created a market economy rooted in private ownership but has always been blocked from doing so by entrenched political interests and other factors; hence, Chinese Communist Party (CCP) leaders settled on a second-best reform strategy that limited private ownership but made the dominant state-owned enterprises (SOEs) more responsive to market signaling. It also welcomed foreign capital. Second, Huang seeks to overturn the widely held view that China's leaders have moved steadily and in linear, progressive fashion with reform, beginning with the small and easy steps in the 1980s but then continually advancing in a liberal direction down to the present.

The author first states his objectives modestly for the (apparent) purpose of ensuring that the link between his specific research questions and the methods he will use to interrogate the data is clear. He systematically outlines the answers we should expect to see if his hypotheses are correct. He demonstrates meticulously and with cogent argumentation that the hypotheses evidently are correct. But the argument he ultimately constructs is vastly more significant and ambitious than the painstaking opening pages would lead a reader to expect.

Huang's concerns are both ontological and empirical. Ontologically, he challenges a deeply rooted view among social scientists that China is firmly launched on an essentialist course of ever-upward linear development that will eventuate in the country becoming powerfully successful—and possibly a democracy of some sort (though not necessarily a “nice” democracy) in the not-too-distant future. To many, this will be the inevitable outcome of China's developing a market economy rooted in private enterprise. It is the kind of thinking associated with the “rise of China” metaphor, which terrifies or inspires, depending on the observer's psychological (and often material) attachment to Chinese economic growth. Huang cuts straight to the core of this ontology in the course of testing his second hypothesis. He finds that China was actually more liberal—both economically and politically—and more economically vibrant in the 1980s than in the 1990s and beyond. For example, it was far easier for rural entrepreneurs to set up their own businesses and finance them with capital from state-owned banks in the five to 10 years preceding the Tiananmen massacre (June 4, 1989). That is a key reason the countryside flourished in the 1980s but has since stagnated or declined.

The author's concerns are not strictly with economic policies and outcomes. He returns repeatedly to the theme that China was also politically more dynamic and liberal in the 1980s than post-Tiananmen. He links this “directional liberalism” (only directional because it was never consolidated) to the relatively people-centered economic development of the 1980s through the logic of property rights. In the earlier years of reform, Chinese citizens enjoyed significantly more freedom to make use of their own skill sets for the purpose of improving material well-being. Entrepreneurs also had far less need to worry that an arbitrarily rapacious state would suddenly confiscate their property (when property is defined as including such intangibles as an idea or brand) or that they would slowly be crushed by SOEs enjoying the advantages of political connections and nearly exclusive access to capital. This, Huang writes, is a key reason quality-of-life and inequality indicators improved substantially in the 1980s but have since deteriorated markedly. He is particularly appalled by the currently surging illiteracy rate.

The second way in which Huang's argument is vastly more significant than he initially indicates is empirical. He details how the post-Tianamen Chinese state has grown into an awesomely powerful apparatus for directing—and stifling—society. Sounding a bit like James Scott (in Seeing Like a State, 1999)—although nowhere does he cite Scott—Huang worries that this state will grind Chinese élan into the dust through denial of economic and political liberties. The model is Shanghai, so adored by foreign commentators (including, he notes with particular displeasure, World Bank economists), but which he pillories as a repressive, arbitrary, yet exceedingly well-financed bureaucratic machine crushing the people of a city once known for its dynamism. The political leaders of the city in the 1980s, when the Shanghai model was hatched, came to dominate all of China in the 1990s. The redirecting of resources from the countryside to big cities like Shanghai is probably one reason, Huang writes, that education and health-care indicators plunged throughout the rural areas. That foreigners could praise Shanghai as a shining example of successful Third World development is something he finds both laughable and frustrating.

Huang's methodology in overturning the received wisdom and developing his hypotheses is meticulous and detailed. He relies primarily on a collection of thousands of pages of bank documents, dating to the 1980s. He also makes use of survey data and interviews. The book is exceptionally rigorous in its logic and deployment of evidence—not at all an easy achievement when the questions addressed are so large. Yet he pulls it off. And he does so in a way that makes for genuinely pleasurable reading because he is a very good writer, deploying numerous case studies of entrepreneurs and companies and telling their stories with wit, wisdom, and sympathy.

In short, Capitalism with Chinese Characteristics is a very human book, addressing some of the most important political-economic questions of our time, and boldly challenging core metaphors and myths. And it does so in a way consistent with the rigorous expectations of social science. This is why it is a major accomplishment, and indeed one of the most important books published on reform-era China in this decade.