This working paper considers the politics of China’s economic transition from socialism. It is not intended to provide a comprehensive account of domestic reform in China – that would take a book in itself - but instead is conceived as providing an understanding of the domestic context of change for those scholars interested in International Political Economy (IPE) who are not familiar with the specifics of the Chinese case. It shows how different interests influenced the emergence of a public-private relationship by focussing on three factors the changing bases of CCP legitimacy, formal policy relating to the socialist nature of the Chinese economy and state, and reform of the financial structure.

It starts from two basic assumptions. First, economic systems and structures do not just emerge on their own but are constructed to serve specific ends. This does not mean that their evolution follows some sort of pre-ordained plan. Often, as is the case with China, the development of the economic system can be dysfunctional in that the system that emerges owes more to the agglomeration of numerous initiatives to interpret and implement economic change to serve particular interests than it does to the plans and strategies of national level decision making elites. Second, and very much related, emerging economic systems in transitional states are politically, historically, socially and culturally embedded – where they came from is a key determinant of where they are going.