Power Play: Leaders and State-Owned Enterprises (SOEs) in the Making of Shenzhen

Abstract

Since its inception, Shenzhen has been widely understood by both academics and the public alike as a city whose development is, and has been, primarily driven by strong market forces. However, if one looks beyond the surface of this conventional view, we see that the Chinese party-state (primarily in the form of SOEs, especially central SOEs) has been the true underlying force advancing the city’s development, especially in its early stages. Mainly through the use of industrial zones, Chinese SOEs have continuously intervened in the city’s development, shaping the city’s urban structure, and arguably operating as the invisible planners who have guided the city’s overall development. Thus, against to the predominant conventional view, I argue that the Chinese state (in the form of SOEs) had been in fact the driving force behind the development of Shenzhen. In addition to shaping the city’s physical and economic structures, the central SOEs (especially the China Merchants Group in Shekou) are also responsible for pioneering China’s reform experiments. Against this backdrop, I explore the critical question of “Why SOEs for the reform?” First, by analyzing the important role of personal power interests in policy making on the basis of many veteran scholars’ lengthy observations of political developments in China, I contend that the success of the reform is where Deng Xiaoping’s legitimacy and political power came from. Here it is important that significant temporal pressure was built into the reform. As such, for Deng and his pro-reform allies, I argue that along with the cumbersome politics and tightened fiscal situation of the central government at that time, Deng and his allies could not rely on the existing formal bureaucratic system to function efficiently as the main policy implementation channel. This is why Deng and his allies made use of SOEs (especially central SOEs) to implement their reforms. This is what I call the “political logic of the SOEs in the making of Shenzhen”. The case study of the establishment and development of Shekou by the China Merchants Group clearly embodies this political logic. Highlighting the informal political decision-making processes between the pro-reform central leaders and the leaders of the China Merchants Group, I argue that Deng, along with his allies, came to rely on the China Merchants Group as a personal political tool for carrying out his political and economic visions and ultimately to consolidate the political power. My claim that China’s central SOEs functioned as the personal political tool of Deng and other leaders is further substantiated and generalized after identifying a similar practice in the era of Xi Jinping. By analyzing the role of central SOEs in the “Belt and Road Initiative” and case studies in the development of Chinese metropolitan regions, I further argue that central SOEs have continued to play a critical role in implementing Xi’s foreign and domestic policies, which not only serve national interests but also Xi’s interest for the consolidation of his political power. Beyond contributing to our understanding of the state-driven development model of Shenzhen, this study advances our knowledge of the political logic of China’s SOEs in the making of the city as well as the role of the individual leaders’ motives in the politics of leadership surrounding the use of SOEs in China. This analysis of SOEs within the context of the pursuit of leaders for political power helps to illuminate many of the decisions concerning SOEs as well as the rationale behind many of the activities carried out by China’s SOEs.