The rise of red private entrepreneurs in China: Policy shift, institutional settings and political connection

Jin Yang, Jian Huang, Yanhua Deng and Massimo Bordignon ()

China Economic Review, 2020, vol. 61, issue C

Abstract: This article examines the relationship between the Chinese Communist Party (CCP) membership and private entrepreneurship in China since 2002, the year when the party revised its constitution and officially removed ideological discrimination against private entrepreneurs in member recruitment. Drawing on the data from the six waves of a nationwide survey on privately owned enterprises in China from 1997 to 2008, we find that, while very few private entrepreneurs were recruited into the CCP during the decade we examine, the constitutional change had encouraged many party members to enter the private sector. We also show that party members who became entrepreneurs after the 2002 policy shift tended to be more senior than those who had started their business before the constitutional change. Furthermore, our difference-in-difference estimation demonstrates that the phenomenon of party members turning entrepreneurs was more prominent in regions where the level of marketization was lower, legal protection was less available, and local governments were prone to more corruption, since political rents were generally larger in environments with weaker market-supporting institutions. This study suggests that party members in general and especially the elite among them were quick to sense the opportunity and knew how to translate their political influence into economic power.

Keywords: Party membership; Private entrepreneurship; Policy shift; Market institution; Political rent (search for similar items in EconPapers)
JEL-codes: G30 H7 K0 P2 P3 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:61:y:2020:i:c:s1043951x20300286

DOI: 10.1016/j.chieco.2020.101431

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