Mao and Markets: The Communist Roots of Chinese Enterprise

Mao and Markets: The Communist Roots of Chinese Enterprise by Christopher Marquis and Kunyuan Qiao

China is not Russia. Initially, Mao was influenced by Soviet Communism. However, he later went his own way. The Chinese background was much different than that of Russia. Chinese society also has a number of underlying, primarily Confucian beliefs that differ from those of Russia. Chinese communism had started in the rural areas, rather than factories. The Chinese also had a Japanese occupation to respond to as well as another government to deal with. 

Mao's reign was defined by a number of key episodes that continue to influence business today. Many large businesses have followed a similar path of starting in rural areas and then expanding into cities. Business leaders that lived through the Great Leap Forward tend to be very frugal. Leaders that went through the cultural revolution have less respect for the rule of law. The Third Front helped launch key business hubs in remote locations. Some of these have gone on to prosper today.

Modern China has become very capitalist, while still maintaining Communist rule. There are many communist party members. To join the party, one must go through a fairly extensive process. Party membership is not a prerequisite for business leadership. However, business that have multiple party members will set up an organization. The government itself is an extension of the party. Top down control is exerted over the country. However,  individual regions have significant autonomy. Thus individual localities may compete with others and may have different policies that work for or against businesses.

Charitable giving and relationships are also a key part of Chinese business. Business leaders typically result to relationships rather than the courts to resolve disputes. Charitable giving and support of the country is seen as part of the duties of a business leader. Many charitable organizations are also tied to the communist party.

Things are not all rosy for business leaders. Prison terms are not uncommon for those that speak out against the government. Local leaders may implement anti-business policies. Some wealthy business leaders have sought to leave the country to protect their wealth.

China has achieved great economic growth while maintaining the single party leadership. There is significant autonomy within the system to support a variety of ideas. Communism and capitalism work fine together. How will they fare in an economic downturn?