The Transition of the State-Business Relationship in China

Taking as an example the private software industry in Beijing and government policies concerning the software and information industry promulgated in 2000, this article examines the performance of the local government. From the perspective of neo-statism, it assesses whether the communist state conform a "developmental state" relationship with enterprises in this up-and-coming sector. It is concluded that the Chinese regime is proceeding toward a developmental state. However, two institutional obstacles remain in its path: (1) lack of coordination between the different parts of the state machine, leading to a disconnection between policymaking and implementation; and (2) lack of mutual communication and trust which has hampered the development of "governed interdependence." Although the state machine has incentives enough to boost the national economy, it is insufficiently farsighted. The state's policymaking still tends to be reactive and passive; policy changes always trail behind trends in the industry. Hence, China has not attained the ideal model of a developmental state in terms of neo-statism.