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The interaction between the state and large-scale business enterprises has played a key role in the catching-up of many "late-industrializing" countries. In particular, various forms of large business or corporate groups, which typically consist of legally independent firms bound together by persistent formal and informal ties, featured prominently in the growth miracles of Japan (kereitsu) and South Korea (chaebols) in the 20th century.1In recent decades, China has also experienced the rapid growth of a complex variety of large corporations and business groups, both in the private sector (such as Alibaba and Wanda Group) and the state-controlled sector.2Within the state-owned enterprise (SOE) system, the rise of over 100 giant business groups and financial institutions, directly controlled by China's central party-state and commonly referred to as centrally controlled businesses (yangqi[...]), is one of the most significant outcomes of China's institutional development.3For some, it epitomizes the achievement of China's gradualist approach to enterprise reform versus the Russian/East European "shock therapy"; for others, it represents the resistance of vested interest groups which hinders China from completing its final steps in its transition to the free market.4How the relations between the central party-state and big business are re-defined will prove to be critical in the next stage of China's system reform.
This article investigates the role of the Chinese Communist Party (CCP) in the rise of China's yangqi. It starts by comparing two competing policy approaches that position the relations between the Party and large enterprises: the separation approach, which argues that the Party should extricate itself completely from the enterprise sector, versus the adaptation approach, which contends that the Party's authority should be adaptively maintained and integrated in the new structures of corporate governance. It examines how the Party's "pro-big business" policies have shaped China's large enterprise reform since the 1960s and led to the formation and growth of the yangqi. The article then goes on to examine the Party's key mechanisms for controlling the yangqi, including the Party's nomenklatura system and personnel management as well as its anti-corruption campaigns and disciplinary force. After analysing how the Party both helps...