Mao and Markets The Communist Roots of Chinese Enterprise 9780300268836 Compress
Mao and Markets The Communist Roots of Chinese Enterprise 9780300268836 Compress
Mao and Markets The Communist Roots of Chinese Enterprise 9780300268836 Compress
MARKETS
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349-99188_Rothfels_ch01_3P.indd 6
MAO AND
MARKETS
T H E C O M M U N I S T RO OT S O F
CHINESE ENTERPRISE
C H R I S TO P H E R M A RQU I S
AND
KUNYUAN QIAO
This book may not be reproduced, in whole or in part, including illustrations, in any form
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Yale University Press books may be purchased in quantity for educational, business, or
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A catalogue record for this book is available from the British Library.
10 9 8 7 6 5 4 3 2 1
For Alex and Ava and their generation as they navigate the com-
plex relations between the world’s most powerful countries.
—Chris
For my family as they are concerned with and hoping for better
U.S.-China relations.
—Kunyuan
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349-99188_Rothfels_ch01_3P.indd 6
Contents
Introduction 1
vii
viii Contents
Conclusion 233
349-99188_Rothfels_ch01_3P.indd 6
Introduction
1
2 Introduction
Figure I.1 President Xi Jinping Leads Politburo Members in Renewing Their CCP
Vows during the CCP Centenary Celebration
“China Crackdown,” Associated Press, June 28, 2021. AP Photo/Ng Han Guan.
clear that Americans do not have adequate knowledge of China and its
system. Approaches to China seem to have followed established ideo-
logical principles, and in some ways reaction to China is like a Ror-
schach test: Americans’ views reflect whatever picture they already have.
This is reinforced by frequent negative portrayal of China and Chinese
in American discourse—from the early, racist Fu Manchu comic books
and movies to President Donald Trump’s references to COVID-19 as the
“China Virus” or “Kung Flu,” which spurred anti-Asian hate crimes
during the pandemic. Likewise, politicians from across the party aisle
also vilify China. Bernie Sanders has claimed that America lost three
million jobs due to its disastrous trade deal with China, and Marco
Rubio said that the CCP is using power to infiltrate American politics
and stealing trade secrets and technologies from the United States. Tom
Cotton claimed that “America confronts a powerful totalitarian adver-
sary [China] that seeks to dominate Eurasia and remake the world
order,” and in outlining the Biden Administration China policy, US
secretary of state Antony Blinken said that “Beijing’s vision would
move us away from the universal values that have sustained so much
of the world’s progress over the past 75 years.”15 Overall, perspectives
on China and even Chinese focus on knee-jerk condemnation of the
country and its model, which is not helpful for fostering relations and
counterproductive if Americ a is to effectively deal with its greatest stra-
tegic and economic rival in the twenty-first c entury.16
Related to these hardened ideological stances, there has been too
much wishful thinking about the CCP’s future and overall an unrealis-
tic imagination of life on the ground in China. Many people believe
communism will collapse in China, as happened in the Soviet Union and
other Eastern European countries three decades ago. These observers
may have overestimated the liberalizing power of the marketplace and
how much the United States and the West in general can affect China’s
domestic and foreign policies. As the foregoing examples suggest, Xi
is committed to developing a model for China that is independent of
the West.
Since the United States and China are the world’s largest economies
and most important national actors, we believe that realistic engage-
ment is essential for both countries and for the world at large, especially
given the recent concerns about decoupling (for example, in the technol-
ogy and financial realms) and even discussion that we may be entering
Introduction 5
a new type of Cold War. In his China policy speech, Blinken recognized
that “the United States and China have to deal with each other for the
foreseeable future,” and that “there is growing convergence about the
need to approach relations with Beijing with more realism.”17 By real-
istic, we mean that the hard calculus of national interest should drive
engagement. But to accomplish this, analysts and policymakers have to
start with a more accurate and objective evaluation of China, rather
than just relying on politics and empty hopes. To do so effectively, we
are in dire need of more accurate knowledge of China’s deeply seated
ideology.
Many China commentators have focused on China’s ideological flexi-
bility in incorporating capitalist elements into its state-run economy
since its opening in 1978 and are surprised when there are reversions as
have occurred u nder Xi.18 Our alternative view is that it is not a question
of what has changed, but how it has and, even more importantly, what
has remained the same. As we show in more detail, Mao, the powerful
founder of the People’s Republic of China, has left an enduring imprint
on Chinese individuals, society, and institutions that even today strongly
shapes China’s economic and political activities. While there may be
changes, or periods of flexibility, what is important to recognize is that
they all take place within the constraints, or guardrails, originally estab-
lished by Mao. They are the bedrock of Chinese governance—reflected
in an oft-repeated phrase, “The CCP leads everything.”
Overall, we suggest that the United States and the West need to under-
stand the Maoist “playbook” to be able to deal with China more effec-
tively. As even Xi has said repeatedly, “To understand China t oday, one
must learn about the foundation of the CCP.”
This in many ways may seem counterintuitive, as communism and
capitalism are typically seen as diametrically opposed. However, as we
show in this book, foundational economic policies and strategies in China
can be traced back to Maoist principles. We aim to clarify the long-standing
confusion about China and its contemporary economic model by trac-
ing the deep communist roots of its enterprises and of the Chinese econ-
omy and state more generally. Our investigation of this understudied but
critical topic has the potential to fundamentally change our understanding
of private business in China, as well as how such a distinctive form of cap-
italism evolves, and even our understanding of recent shifts in govern-
mental policy. This angle allows us to develop new insights for business
6 Introduction
practice, policy, and academic research, and provide a unique set of rec-
ommendations both for those who want to do business or invest in China
and for policymakers. In the past, the United States paid a huge price for
its inadequate knowledge and an automatic fear of communism, as ex-
emplified by its involvement in the Korean and the Vietnam Wars. By
approaching China’s ideological system in a holistic way and from both
the top down and bottom up, we provide a much clearer view of how it
affects its economy and those who interact with it.
More generally, it is essential to rethink the connection between po
litical and economic systems. Decades of interaction with China are
based on the idea that economic liberalization predicts political democ
ratization.19 Accordingly, the United States supported China’s entry into
the World Trade Organization in 2001 under the assumption that as it
became more prosperous and more integrated into the global economy,
democracy would naturally follow. “By joining the WTO,” President
Clinton declared in 2000, “China is not simply agreeing to import more
of our products, it is agreeing to import one of democracy’s most cher-
ished values: economic freedom. When individuals have the power . . .
to realize their dreams, they w ill demand a greater say.”20 Germany
has been criticized for similar assumptions about Russia, as its attempts
to engage with the country economically—such as purchasing natural
gas—left it vulnerable following the invasion of Ukraine.
This perspective went hand in hand with the idea that global commu-
nications technologies such as the internet were an inexorable force for
freedom. In an even more evocative quote, Clinton famously said that
controlling the internet was as hard as “nailing Jell-O to the wall,” so it
would provide a way for the Chinese populace to hear the voice of free-
dom from the bottom up, without the oversight of the CCP. Similarly,
former US ambassador to China Jon Huntsman, in a 2011 presidential
debate, anticipated that Chinese internet users would be allies of the West
in “taking China down.”21 But today, China exerts strong control over the
internet and has harnessed technology to more effectively monitor and
supervise its population, as has been well demonstrated in the many
COVID-19 lockdowns. Thus, such “wishful” projections of what hap-
pened in the West onto China have resulted in analysts frequently ask-
ing the wrong questions, such as how flexible the CCP is in implementing
market reforms, and whether the CCP might change as dramatically as
the Bolshevik party did in the former Soviet Union.22
Introduction 7
As well, many have misunderstood the extent of the role that entre-
preneurship and private business play in China, wrongly assuming that
the economy is mainly state owned.23 While there is significant state
oversight and t here have been some harsh crackdowns, particularly since
2020, private enterprises have increasingly been the engines of China’s
growth. According to recent statistics, 90 percent of the firms in China—
twenty-five million in total—are privately owned, and they are run by
more than fifteen million entrepreneurs. These firms account for more
than 50 percent of China’s tax revenue, 60 percent of its GDP, 70 percent
of innovation, and 80 percent of urban employment.24 Other than indus-
tries of strategic interest, which the Chinese government tightly controls,
private entities can and sometimes are encouraged to invest broadly, and
many have scaled into massive conglomerates. For example, Tencent was
established in 1998 by Ma Huateng (also known as Pony Ma). In 2015
it became one of the most valuable firms in Asia, with a market value of
$500 billion, and was ranked by the Boston Consulting Group as one of
the most innovative firms in the world.25 Alibaba was founded in 1999
by Ma Yun (also known as Jack Ma); since 2015, it has become the
world’s largest retailer and e-commerce company, generating $72 bil-
lion in revenue in 2020.
To understand these seemingly puzzling facts, build more general
knowledge of capitalism and market development in China, and shed light
on practical and policy implications, we need to not just rely on Western
theories and assumptions but look historically at how communism and
capitalism have combined into a distinctive system. Existing writings on
China’s economic transition have seldom examined its deep socialist ideol-
ogy and how that leads to unique market phenomena. The result of this
lacuna is an inaccurate and incomplete understanding in both China and
the West. Throughout this book, we suggest that because of China’s blend
of communist political governance and capitalist markets, the traditional
dichotomy of communism and capitalism does not apply.
To show the communist roots of the Chinese market and how Mao’s key
campaigns and institutions enduringly shape it, we w ill examine the key
actors who sit at the nexus of the Chinese capitalist-communist hybrid
today: business leaders and their private enterprises and the local politi-
cians who manage economic growth. While a number of books have ex-
amined Mao’s history and his influence on the CCP, these mainly focus
on topics like communist ideology and revolutionary behavior, typically
8 Introduction
while Mao was in power. Furthermore, many analyses have also focused on
how traditional Chinese culture—such as Confucian ideals—has a lasting
influence on China.26 Our contribution is to provide perspective for un-
derstanding the lasting and even penetrating influence of Mao’s ideas on
the business growth and entrepreneurship that has taken place since
Deng Xiaoping’s capitalist-oriented economic reforms.
To be clear, our goal is not to assess w
hether Mao and his influence on
the CCP and China have been “good” or “bad” from a moral standpoint.
Furthermore, we are not proposing that researchers and observers accept
the current historical narrative articulated by the CCP in an effort to bur-
nish the CCP centenary and legacy more generally. We have undertaken a
deep and systematic study of Mao and Maoism, used contemporaneous
accounts of his discourse and influence, and combined this investigation
with a social scientific understanding of the effects of Mao and Maoism
on individuals and the characteristics of China’s systems and institutions.
Mao’s legacy is profoundly mixed; the disastrous ideas and policies
that led to the persecution and deaths of tens of millions cannot be for-
gotten or swept u nder the rug. But we think that the polarizing effects
of his legacy have led to a blurred understanding of its influence. Many
in the West emphasize Mao’s murderous nature while underestimating
his deep and lasting influence. In China, negative assessments of Mao
are labeled “historical nihilism”—an idea invented by the CCP to de-
scribe criticism of such entities as the party, its leaders, national heroes,
and others—and so banned; and many scholars and intellectuals have
been persecuted for holding such “wrong” views of history.
The punchline of our book is that our decade-long research shows
that Mao left an enduring imprint or legacy in the Chinese society, on
both Chinese institutions and individuals. The CCP-government main-
tains these Maoist institutions and individuals hold beliefs deeply rooted
in Maoism and pass them on to following generations. Therefore, Mao’s
influence on China will endure. We marshal diverse sources of data, from
individual interviews to large-scale databases, to examine how and why
Chinese entrepreneurs and politicians developed the deeply held values
and cognitive frameworks that affect their economic decision-making
and behavior, and how Chinese markets and politics reflect Maoist
principles more generally. To paraphrase Karl Marx and Friedrich En-
gels’s famous assertion in the Communist Manifesto, a specter is haunting
China—the specter of Mao.27
Introduction 9
for a period as an accountant for the CCP’s rival party, the Kuomintang—
posed a problem. After Mao’s death and Deng’s early reforms, many of
Ren Moxun’s former students regained power and returned to important
CCP-government positions. With their help, Ren joined the CCP in 1978.
Ren retired from the army in 1983. He and his wife, Meng Jun, w ere
well positioned since his father-in-law, Meng Dongbo, was vice governor
of Sichuan Province. This connection won him a management position
in the China National Offshore Oil Corporation. However, Ren did not
really understand business operations and his business lost 2 million
RMB (around $541,000). As a result, he was dismissed from the firm
and his wife divorced him. Worse still, Ren was indebted to the firm for
hundreds of thousands of dollars.32 To repay them, he established Huawei
in 1987 with an initial capital of 21,000 RMB ($5,680) and leveraged
his technical expertise—he had won numerous national awards for his
excellence in telecommunications engineering.
Huawei’s initial focus was on selling network switches; by 1993, Ren
was rich, and Huawei had come to dominate the entire Chinese tele-
communications market. Later, Chinese political leaders, including then–
vice president Hu Jintao, brought Ren overseas to sell Chinese products,
which helped Huawei expand internationally. Meanwhile, Ren spent
millions of dollars per year on research and development and innova-
tion.33 Today, Huawei is one of the most innovative firms in the world.
In 2021 it ranked fifth worldwide in patent holding, and it has the
second-largest research and development outlay ($20 billion). It earned
the equivalent of $140 billion in revenue in 2020 and $99.43 billion in
2021 despite sanctions initiated by former US president Trump.34
Ren and Huawei have been a source of consternation for Western
lawmakers for decades and have faced many challenges in the United
States and Europe, mostly due to national security concerns. Recently,
the US government prohibited governmental entities to use any of Hua-
wei’s products or devices and banned US chip producers and other tech
companies from supplying Huawei. As a result, many other firms, in-
cluding Google, Intel, AMD, and Qualcomm, ceased d oing business with
Huawei.
While it is reasonable for countries to exclude foreign suppliers from
certain industries of national importance, the characterization of Ren
and his motivations is overly broad-brushed and is mistakenly focused
on the question of whether his firm is formally state controlled. Cur-
Introduction 11
rent accounts have not tried to delve deeply into his ideology or man-
agement model, either.
It is important to look back to his early experiences in the CCP, and
in particular the influence of Maoism on his thinking. While Huawei is
private— neither owned nor controlled directly by the Chinese
government—Ren is a dedicated communist and ingrains CCP values
in Huawei, as the quote at the beginning of this section illustrates. For
example, Ren has said, “I would still keep my word when joining the
CCP as the Communist Manifesto is to serve all human beings . . . and
Huawei was getting at this. . . . Our effort was effective and thus ful-
filled the mission of the CCP.” If the interests of the CCP ever conflicted
with those of Huawei, Ren says, he would “choose the CCP whose in-
terest is to serve the people and all human beings, and he could not be-
tray the principles of serving all human beings.”35
As we will show throughout this book, explicit state control—which
is the typical focus of Western analysts—is incidental to the deep im-
print that the CCP and Mao have left on Chinese citizens and institu-
tions. As Ren reflects, “People of my generation exhibit a deep Maoist
imprint because of the special period we lived through.” Ren still reads
Mao’s writings frequently.36 Joining the military and then the CCP w ere
critical events for him to inculcate the values of hard work and devoting
and even sacrificing himself for the interests of the people.37 Through the
strict indoctrination and socialization process that the CCP maintains
for its new members (which we discuss in depth l ater), Ren swore to “be
loyal to CCP, fight for communism for his w hole life, sacrifice himself
for the interest of people and the CCP, and never betray the CCP.” On
numerous occasions, Ren has affirmed that he has always kept his word.38
As Huawei grew, Ren instituted Maoist principles within the com
pany. He often claimed, “Maoism is the guiding principle (and soul) of
Huawei,” and Huawei’s “management philosophy and strategy are com-
mercial applications of Maoism.”39 There are numerous examples of
how Ren followed his spiritual mentor Mao. Surprising to many, Hua-
wei is collectively owned by its employees, an imitation of Mao’s so-
cialist ideal, and has rotating co-CEOs, a reflection of Mao’s strategy
of swapping positions between different military leaders so that all of
them would have a panoramic view (and it also ensures that none of
those co-CEOs can threaten Ren’s status, likely Mao’s original inten-
tion as well). The CCP employs similar practices in the political realm.
12 Introduction
45
40
Percentage of entrepreneurs
35
30
25
20
15
10
5
0
1993 1995 1997 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Survey year
convinced him to establish CCP branches in the army to secure the com-
mitment of existing troops while transforming new recruits (many
from “questionable” backgrounds) into communist soldiers and com-
missars (political workers). After the communist takeover in 1949, CCP
branches were expanded to every aspect of Chinese society. For exam-
ple, in state-owned enterprises, CCP branches are the governing bod-
ies, and they make important decisions and indoctrinate communist
beliefs in employees.
While interference by the CCP in private firms is a potentially seri-
ous issue, there is confusion about decision-making processes and in-
formation sharing within the CCP branch, and how lines of authority
are divided between business managers and the CCP branch.51 We
believe such organizations should not be dismissed out of hand because
of our own ideology; it is important to recognize that many commu-
nist entrepreneurs believe their activities are essential to their compa-
nies’ social and economic development. More generally, we should try
to understand their management model from within the Chinese sys-
tem as opposed to from a Western perspective. That is why we use the
more neutral translation of the Chinese term zhibu (支部) as “branch”
as opposed to the ideologically tinged English word “cell.” We will
discuss the effects of these organizations on Chinese firms in more
detail later.
Communist Entrepreneurs
The idea that entrepreneurs can fuse ideas from communism and cap-
italism bucks the conventional wisdom that communism and capitalism
are diametrically opposed and incompatible. Marx and Engels’s Com-
munist Manifesto portrayed entrepreneurs and capitalists in general as
class enemies. Many Western observers and academics therefore assume
that the CCP could simply be forcing (or luring) entrepreneurs to join
them so it can bend them to its will, or that the entrepreneurs use CCP
membership as a way to gain personally. For instance, an entrepreneur
could join the CCP or become involved in politics, such as by becom-
ing a delegate to either the National People’s Congress or the Chinese
People’s Political Consultative Conference (CPPCC), the two nominal
legislative bodies in China, in order to have a way to informally deal
with the poor property rights protections the government provides or
16 Introduction
time, the central government has had to honor local autonomy for eco-
nomic development and the diverse social norms of its different regions.
Weber argued that a new social class emerged—shidafu (士大夫), the
scholar-official class—to resolve this contradiction. These individuals
were loyal to the emperor and the government and at the same time led
their families and managed local communities, carefully balancing the
centralizing and decentralizing forces.68 For example, the family of
Mu was in charge of the city of Lijiang in China’s southwest Yunnan
Province. This family was especially loyal to the emperor: most of its
patriarchs—who were also chiefs of their jurisdictions—died in wars
that helped the central government suppress armed rebellions and fight
off invaders. They also wielded power to develop the local economy,
and the central government did not intervene in t hese affairs. There were
many other examples of shidafu, such as Zeng Guofan, one of the most
famous chancellors in the Qing dynasty (1644 to 1912), who self-funded
a militia to help the government suppress the rebellious Taiping Heav-
enly Kingdom. Even while he wielded enormous power of his own, he
was steadfast in his loyalty to the emperor.
Seen through this lens, communist entrepreneurs play a similar role as
the shidafu—they are dependent on the CCP-government but are also in
dependent, entrepreneurial individuals. Both the shidafu and the commu-
nist entrepreneurs reconcile the contradictions of governance that have
occurred over the millennia. Thanks to the shidafu, the central government
could not only govern society and levy sufficient taxes and fees but also
avoid becoming shorthanded.69 In the recent period, the CCP-government
has had to maintain control while allowing the private sector to flourish,
driving the country’s economic development. Communist entrepreneurs
and their enterprises contribute to the Chinese economy while their com-
munist beliefs ensure that the market forces remain under political con-
trol.70 During our interviews with entrepreneurs in China, all of the CCP
members and more than half of the noncommunist entrepreneurs said
that they saw no conflict between following the CCP-government and
their business interests.
Because of the central role they play in managing the contradictions
in the political economic system, it is likely that communist entrepre-
neurs will only grow in importance for as long as the communist re-
gime is in place. By joining the CCP, they will carry Maoism and later
ideological innovations into the future.
Introduction 21
Ray Dalio, the founder of Bridgewater, the world’s largest hedge fund,
claimed China was a riddle: “A communist country can be so capit alist
that they have the second largest capital market in the world, produce
billionaires, and simultaneously be Marxist.” He claimed that “if you
don’t know how to answer that riddle, then you must not understand
China.”71 While we are not fully sure Dalio himself has come to grips
with the puzzle he identifies, we do agree that aiming to reconcile t hese
seeming contradictions is essential for Western policymakers and busi-
nesspeople. However, prior work has been built on flawed assumptions
such as that economic liberalization will inevitably lead to political
democratization and that China can be understood through the Soviet
example, as well as an overemphasis on the CCP’s economic flexibility.
Alternatively, we argue that understanding the lasting influence of Mao
and Maoism (and therefore the bedrock principles of the CCP) is what
is key to understanding the puzzle Dalio describes.
Over the past forty years, credit for China’s rise is typically given to
Deng’s formulation of a “socialist economy with Chinese characteris-
tics” that laid the conceptual groundwork for China’s transition. But
as we also examine, Mao and Maoism w ere the intellectual bedrock for
Deng’s theories, and the system still adheres to them. All of its adapta-
tions have been made within that Maoist framework, and they even re-
fer to Mao to gain legitimacy. Furthermore, Deng’s statement “Let
some people get rich first” is often quoted to justify market reform; the
second half of his statement reflects its Maoist objective “for the pur-
pose of achieving common prosperity faster.”87
Thus, a theme that Xi continually sounds is, “Do not forget the original
intention, keep the mission in mind.”88 By this, he means to stick to Mao-
ist principles, such as seeking truth from facts (to test theory against
reality) and the mass line (connect to the people), which we elaborate
later.89 During his centenary speech for the CCP on July 1, 2021, Xi
reiterated that the CCP has been unswervingly steadfast, meaning that
China’s economic reforms have all been undertaken within the “guard-
rails” of communism and Maoism: “The CCP leads everything.”90
The party is deeply embedded in all facets of China’s political econ-
omy; people, capital, and ideology are all kept under increasingly tight
control. When there are conflicts between markets and the state, it is
the CCP that stands at the center as the ideological glue that holds t hese
different institutions together.91
The CCP’s heavy hand is something of a double-edged sword. Under
Xi, the ideological climate has become more conservative. Mao and the
CCP are frequently extolled, the communist ideology is highlighted as
the paramount principle, and the Chinese media’s anticapitalist and anti-
Western rhetoric is increasingly fierce. The most recent version of The
Brief History of the CCP cast Mao in a more positive tone than previ-
ous official histories and downplayed the effects of the Cultural Revo-
lution.92 During the centenary speech for the CCP, Xi quoted Mao’s
saying that “Only socialism can save China, only socialism can develop
China,” and stated, “At a fundamental level, the capability of our Party
and the strength of socialism with Chinese characteristics is attributable
to the fact that Marxism works.”93
But these trends could create governance issues in the long run. As we dis-
cuss throughout this book, while Mao’s ideas galvanized the population and
his military strategies ultimately succeeded, he typically underemphasized
26 Introduction
pointed out, by referring to himself with lofty titles that w ere previ-
ously only used by Mao (such as “helmsman” and “people’s leader”), Xi
is himself creating a cult of personality, even though Article 10 of the
Constitution of the Chinese Communist Party, introduced in 1982,
“forbids all forms of personality cult.” Looking at t hese developments
through a historical lens can help us understand where China is g oing
in the f uture. As Winston Churchill said, “The longer you can look back,
the farther you can look forward.” We hope the business and gover-
nance principles we develop in this book will be helpful in this regard.
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349-99188_Rothfels_ch01_3P.indd 6
I MAO ZEDONG, MAOIST
PRINCIP LES, AND
PRIVATE BUSINESS
IN CHINA
A CCP member should place the Party’s interest above their own.
33
34 Mao, Maoist Principles, and Private Business
M AO ’S ROAD TO POWE R
Mao was born into a well-off peasant family in 1893. He was taught
Chinese classics and read translations of Western authors such as Adam
Smith, Montesquieu, Jean-Jacques Rousseau, Charles Darwin, and Al-
dous Huxley. He matriculated at First Normal University in Hunan at
the age of twenty, with the aspiration of becoming a teacher. Instead,
he became a communist. One of his professors was Yang Changji, who
later moved to Peking University. Yang liked Mao (after his death, Mao
would marry his daughter Yang Kaihui) and recommended him to Li
Maoism—Communism, Chinese-Style 35
the Soviet Union and China. The Russian Empire had set industrial-
ization in motion before the October Revolution in 1917 and was at the
time the fifth-largest industrialized country in the world. Thus, there
were many factory workers, and the situation was consistent with Karl
Marx’s theory, which was developed in industrialized E ngland and
Germany and thus saw the factory as the locus of the revolution.
Mao’s understanding of the Chinese situation and history and his tai-
loring of communism to it set the stage for a different kind of revolution.
He surmised that peasant revolts had been the most successful drivers
of regime change in China over the past two thousand years. China’s
hundreds of millions of peasants constituted the majority of the popu-
lation. Mobilizing farmers made much more sense than mobilizing fac-
tory workers in an agrarian society like China’s.
But Wang and his Bolsheviks did not listen, deriding Mao as a “hick”
(literally “muddy-legs,” a metaphor for ignorant peasants whose legs
were dirty from working the fields). Though Mao’s troops defeated the
KMT in b attle four times between October 1930 and March 1933, the
Bolsheviks insisted that they attack cities instead. As a result, their army
was very nearly annihilated.
Because of this fiasco, Mao advised the CCP to retreat; by the end of
1934, the remaining CCP troops had begun their famous Long March.
In January 1935, they occupied the city of Zunyi, where the KMT had
limited forces. Dissatisfied with the leadership of Wang and Bo, many
Bolsheviks switched their allegiance to Mao. In Zunyi, the CCP Polit-
buro ratified his military leadership and affirmed his strategy. This was
a turning point for Mao, who then led the CCP troops to Yan’an, in
Shaanxi Province. The Long March took more than a year, but the CCP
survived. It began the second stage of its growth in 1935, under Mao’s
leadership.
Mao became the chairman of the Central Military Commission of the
CCP in 1936 and thus the de facto leader of the CCP; his supreme lead-
ership lasted until his death in 1976. However, he was not the de jure
political leader of the CCP, as Zhang Wentian was elected as its tempo-
rary leader (between 1935 and 1945, the formal leadership position,
general secretary of the CCP, was vacant). There has been a tradition in
the CCP that the military leader wields the most power and assumes
the de facto supreme leadership, reflecting Mao’s famous dictum, “Po
litical power comes from the barrel of the gun.” For instance, Deng Xia-
Maoism—Communism, Chinese-Style 37
oping, the de facto supreme leader of China and the CCP a fter Mao, was
not the de jure political leader. But he held the position of chairman of
the Central Military Commission of the CCP and could depose the de jure
leaders, such as Hu Yaobang and Zhao Ziyang. Since the Jiang Zemin
administration (1989–2002), the top positions—general secretary of
the CCP, Chinese president, and chairperson of the Central Military
Commission of the CCP—have all been held by the same person.12
Unlike most other countries, where the military reports to the head
of the state, in China it reports to the CCP. As Xi emphasized at an Au-
gust 2020 “Military Political Work Conference,” the “People’s Libera-
tion Army remains the Party’s army and must maintain absolute loyalty
to political masters.”13 Echoing Mao’s famous saying, Xi also recently
noted that “the Party commands the gun.”14
Mao’s position was still precarious when he became chairman of the
Central Military Commission. First, the Communist International spon-
sored the CCP, and Moscow persistently interjected itself into its oper-
ations. Stalin and Mao had significant debates about whether the CCP
should unite with the KMT, and whether the CCP or KMT should take
over the administration of the territories in mainland China that the
Japanese surrendered at the end of the Second Sino-Japanese War. Also,
many CCP leaders, such as Zhou Enlai and Deng Xiaoping, w ere in the
Diligent Work-Frugal Study Movement. This rival faction constrained
Mao’s power.
Furthermore, while political power may come from “the barrel of a
gun,” Mao in reality only controlled the First Front Army of the Chi-
nese Workers’ and Peasants’ Red Army, which was only one of the four
sets of troops under the CCP’s leadership. In addition, nine out of ten
of those troops had died or disappeared during the Long March. Mao’s
troops were outnumbered by the Red Army based in Shaanxi Province,
which was led by Xi’s father, Xi Zhongxun.
In February 1942, Mao initiated the Yan’an Rectification Movement,
the first of many political campaigns he created, to force the Bolshevik
faction—for example, Zhang Wentian and Yang Shangkun (later president
of China)—out of power and solidify his own position. The movement fo-
cused on the localization of Marxism, added Maoism to the CCP’s con-
stitution, and eliminated Soviet control. Since overseas experience
became a less important credential, it also undercut the power of the
Diligent Work-Frugal Study Movement faction. Meanwhile, the other
38 Mao, Maoist Principles, and Private Business
leaders at the time e ither died or eventually supported Mao. The mili-
tary leaders Liu Zhidan and Xie Zichan both died on the battlefield, and
Xi Zhongxun was arrested. Mao released him, and Xi became a strong
supporter of Mao. Mao’s status within the CCP was stabilized and he
promoted his loyal supporters to the top of the hierarchy, such as later
Chinese president Liu Shaoqi, an enthusiastic advocate of Maoism.15
erty of nature, society, and human mentality. After the Korean War, when
China and Mao won acclaim from countries in the Eastern Bloc, t hese
two essays became required reading throughout the USSR. After receiv-
ing that recognition, Mao became increasingly focused on creating new
theories and thoughts to amplify his influence in the global communist
movement.
Second and relatedly, Mao needed to consolidate his power within
the CCP. Since he deeply understood China and its history, he knew that
a unified, absolute autocracy would be viable only if people accepted a
common philosophy, culture, ideology, and religion.18 Confucianism had
served that purpose since 134 BCE, and the cornerstone Confucian ideal
of loyalty to the monarch had been especially useful to China’s leaders.
Those leaders—initially called kings and then emperors starting with
the Qin dynasty (221 BCE)—were also ideological leaders, analogous
to the European concept of the divine right of kings, whereby the mon-
arch’s role extends to ideological and religious realms.19
By creating a similar hybrid of philosophy, culture, and ideology,
Mao’s words gained tremendous mobilizing power over time and
strengthened his position; essentially no one in China could usurp him.
Further, per Marx, communist beliefs can and should replace religion as
the populace’s guiding ideology.20 Mao’s writings, such as his little red
book, Quotations of Chairman Mao Zedong; Mao Zedong Thoughts;
and Selected Works of Mao Zedong, would thus become the official
ideological teaching for Chinese society. By 1945, “Mao Zedong Thought”
was written into the constitution of the CCP.
Third, when Mao was developing Mao Zedong Thought (Maoism),
the CCP was not the ruling party of China. The KMT was, and it had
greater military strength. However, Mao hoped to rule China, and he
believed that by the 1940s, the ground would be fertile for his commu-
nist principles.
Over thousands of years, and even today, Chinese political philoso-
phy has suggested that Chinese monarchs are bestowed with the Man-
date of Heaven (that is, legitimacy to rule due to the peace and prosperity
the ruler creates) and called “sons of heaven.”21 However, the Mandate
of Heaven does not confer an unconditional right to rule. Retaining
the mandate is contingent on the just and able performance of the rul-
ers, and the people have the right of rebellion. Bad weather (for exam-
ple, drought) or disasters (for example, floods) w ere signs of heaven’s
40 Mao, Maoist Principles, and Private Business
M AO I S M : AN OVE RVI E W
Economic system
Ownership of Mostly private Mostly by the state
property
Basis of the Entrepreneurship and State-owned enterprise
economy free enterprise
Claim of profit Individual The entire nation
Operation of Competitive market Government regulated
economy and planned
Social structure
Class Differentiated Egalitarian and classless
via struggles
Wealth distribution Uneven and merit based Equal and based on need
Focus on and Individual freedom Community and society
priority of as a w
hole
Source: Based on authors’ summary of facts and prior work, such as Qiao, Kunyuan,
“Historical Political Ideology and Firm Innovation: Worldwide Evidence of R&D
Investments (1982–2016),” Academy of Management Proceedings 2020, no. 1 (2020):
10089.
decide their f utures on their own, rely on themselves, and downplay ex-
ternal aids. In the words of the CCP, “For a country’s communist party to
achieve victory in revolution and construction, it must be based on its
own country’s situation, its own reality, and its own revolutionary forces
and people.”30 Mao claimed that “self-reliance should be our key ap-
proach” and “we Chinese p eople have the determination of realizing
our splendid times with self-reliance.”31 He even praised KMT leader
Chiang—his old opponent—for his nationalism, saying that Chiang
“dared to defy the U.S. policy for ‘two Chinas’ in front of [ John Foster]
Dulles, proving that he is still a great nationalist.”32
The second main ideological principle is frugality. Mao asserted, “We
should be frugal to build factories, run stores, all state-owned and co-
operative businesses, all other businesses, etc. and everything should be
guided by the principle of frugality. Frugality is the fundamental princi
ple of the socialist economy.”33 He also claimed that it was necessary
because “China was a poor and economically underdeveloped country,
and to make our country rich, we need to hold on to the frugal con-
struction principles and shall never waste. It w ill take decades for China
to become rich, but the principle of thrift should be held on to in the
next few decades and even a fter we have achieved that goal. It is par-
ticularly necessary to promote frugality within a few decades, i.e., the
several incoming five-year plans.”34 As we will discuss in more detail
later, the principle of frugality has roots in traditional Chinese culture,
and Mao borrowed it and highlighted it for his rule.
The third ideological principle is the “mass line,” which leads to a
focus on devotion for CCP members. The mass line maintains that
“everything is for the [popular] masses, everything depends on the
masses, and [the CCP’s work and theory should come] from the masses,
go and apply to the masses [for further development].” It is collectively
reflected in Mao’s “serve the people” proposition, which requires CCP
members to sacrifice their own interests to t hose of society as a w hole.
All candidates, upon joining the CCP, swear to respond to the party’s call
and sacrifice their lives if necessary. This also originated in traditional
Chinese culture, especially Confucianism (by Confucius, Mencius, and
others), which emphasizes people-oriented thought that values the people,
honors the p eople, and loves the people.35
eople, cares for the p
Mao’s military principles (or Mao Zedong Military Thought) are
expounded in the Collected Works on Military by Mao Zedong and
44 Mao, Maoist Principles, and Private Business
Socialist Institutions
A key aspect of Chinese-style communism is its unique socialist institu-
tions, which grew out of Mao’s revolutionary experience. Their main fea-
tures are their political centralization and economic decentralization.46
Political centralization means that power flows from the top down,
with officials appointed by the supervising authorities rather than elected
from the bottom up. China has CCP-governments at the national, pro-
vincial, prefectural (city), county, and township levels. National leaders
appoint provincial leaders, who in turn appoint prefectural leaders, and
so on. The system is consistent with Mao’s belief that the CCP should
lead everything and that a proletariat dictatorship under CCP control
is the right approach for China’s political institutions. The political cen-
tralization of China’s socialist institutions is similar to what existed in
the Soviet Union but contrasts sharply with most Western countries,
where leaders are elected. In the United States, for example, state gov-
ernors are elected by their own state and are not appointed by the pres-
ident; though t here are local and national offices with varying amounts
of authority, the lines of control are not as hierarchical.
Yet scholars have also noted that Chinese regional leaders such as
party secretaries and government heads (for example, governors and
Maoism—Communism, Chinese-Style 47
mayors who are vice-party secretaries in their provinces and cities) are
responsible for appointing directors of the different bureaus in their ju-
risdiction to work with them, and that they are fully in charge of many
of the economic and other affairs therein.47 This diverges from the So-
viet Union, in which ministers of different industries at the national level
appointed directors of their corresponding industries at the republic
level, who in turn appointed directors of the respective industries one
level below. In China, the central authorities typically do not intervene
in local leaders’ economic decisions.
As noted, the system grew out of Mao’s military experience. Military
leaders pledged allegiance to him, but when many became regional CCP
officials a fter the start of the communist regime, they maintained local
autonomy, which follows from Mao’s philosophy of seeking truth (that
is, right and appropriate military strategy) from facts (that is, the front-
line situation and the reality). Many popular and academic writings
characterize this system as economically decentralized (“federalism”)
with Chinese characteristics.48 Mao, in his famous essay “On Ten Ma-
jor Relationships,” also stated that “under the premise of consolidating
the unified leadership of the central government, we should expand the
power/discretion of the local government, giving the local government
more independence, and let the local government do more.”49
Both the economic and political structures of socialist institutions
have remained basically unchanged, despite Deng’s paradigmatic shift
in economic policies and incentives for politicians. Before Deng’s reform
in 1978, China maintained a planned economy that local party secre-
taries implemented based on the national-level five-year plans, making
plans for resource allocation in accordance with government mandates.
Political leaders w
ere judged by their allegiance and loyalty to Mao and
Maoism. But after the economic reform in 1978, a market-based econ-
omy began to form, and local party secretaries issued policies to aid
the market in the allocation of resources in certain industries. Political
leaders have been increasingly judged by their economic performance,
what Xi calls “GDP heroism.”50
Mao and the CCP did not totally object to capitalism; recent studies
reveal that the CCP-government began engaging in international trade
well before 1949. The main issue was how to use capit alist forces with-
out succumbing to them.51 Today the CCP maintains state control of
the private economy and firms via state investment, CCP branches, and
48 Mao, Maoist Principles, and Private Business
Mao Zedong’s way of thinking has a profound and lasting impact on our
generation, and it also has many useful insights for my financial work.
—Tang Shuangning, CEO of China Everbright Group
(a Fortune Global 500 firm)
49
50 Mao, Maoist Principles, and Private Business
our firm’s value and expel all those who do not share the same values
and sense of mission from our company.”15
The entrepreneurs we interviewed also exhibited an admiration and
deep appreciation of Mao, whether CCP members or not. Interview sub-
jects 8, 18, and 31 are all CCP members, and they all praised Mao—
for example, subjects 18 and 31 both volunteered, “I admire Chairman
Mao very much.” Many entrepreneurs who are not CCP members also
spoke highly of Mao and cited his sayings. Subject 5 said, “I would not
forget Chairman Mao’s words for my w hole life. . . . His words encour-
age us and motivate us when we encounter difficulties.” Subject 9 said,
“I believe Chairman Mao had g reat wisdom. . . . Many of his sayings are
valuable for us, the next generation, to learn. I think it is still a treasure
to give to us as young p eople, including the next generation. I think it
is still a very good opportunity to learn from Chairman Mao’s works.”
And subject 28 said that “Chairman Mao was a very g reat politician,
thinker, and revolutionist.”
To uncover the process of how such deep-seated beliefs are created, we
first elaborate the indoctrination process that CCP members go through.
CCP members are presumably more devout Maoists. But 93.4 percent of
Chinese have not gone through this process.16 So we also describe how
Maoism is stamped on the Chinese population more broadly.
because his father worked for the KMT. Ren’s background was cleared
when former students of his father helped in his rehabilitation.
Short-listed candidates are assigned to CCP mentors, who are typi-
cally more-senior members. Then, candidates have to attend intensive
socialization events. These include study sessions where they are taught
about the CCP constitution and principles (which they are expected to
memorize), learn about the CCP’s latest policies, and engage in activities
that help disadvantaged groups, such as the elderly. Speeches of senior
CCP leaders—for example, General Secretary Xi and members of the
standing committee of the CCP Politburo such as Premier Li Keqiang—
are studied and candidates are asked to write reflections about them.
Candidates are also asked to watch documentaries that depict how
the CCP grew from a handful of people to tens of millions, and that
extol influential CCP role models such as Zhang Side, who was born in
1915 and joined the CCP in 1937. He worked as a guard for Mao in
1943 and later responded to Mao’s call to engage in agricultural and
industrial production in Shaanxi Province. He worked hard and was
praised by coworkers. One day he and two coworkers w ere working in
a charcoal kiln that suddenly collapsed. Zhang was able to save the two
other workers before he was killed. Mao attended his funeral and wrote
his famous “Serve the People” doctrine as his eulogy.
After each event, candidates talk to their CCP mentors and write re-
ports about their impressions. Each quarter, candidates write more
comprehensive reports about their experiences. After a certain period
of time, typically one year, the CCP branch w ill hold a meeting to dis-
cuss the short-listed candidates and decide which ones will be accepted
as probationary members.
Probationary members take an oath stating, “It is my w ill to join the
Chinese Communist Party, uphold the Party’s program, observe the pro-
visions of the Party Constitution, fulfill a Party member’s duties, carry
out the Party’s decisions, strictly observe Party discipline, guard Party
secrets, be loyal to the Party, work hard, fight for communism through-
out my life, be ready at all times to sacrifice my all for the Party and the
people, and never betray the Party.” However, they are still required to
attend socialization events to solidify their communist ideals over the
Mao’s Lasting Influence on China 55
next year. After that, probationary CCP members apply to become full
members. Typically, they are accepted. By the time they finish this pro
cess, they are well versed in the Maoist principles outlined in the last
chapter, Deng Xiaoping Theory, Jiang’s Three Represents Theory, Hu’s
Scientific Outlook on Development, and Xi Jinping Thought on Socialism
with Chinese Characteristics for a New Era.19
Wholehearted support for and full dedication to the CCP and the gov-
ernment is key. Mao insisted that all candidates fully yield to CCP au-
thority and see him as the central figure. Important sayings repeatedly
communicated include “Only the CCP can save China, but the CCP would
never thrive without Mao” and “Mao made the Chinese people stand
up with dignity.”20
Even when Mao committed significant errors, such as the G reat Leap
Forward, people found excuses and scapegoats—for example, saying it
was not Mao’s fault but his underlings’, who made poor decisions and
even deceived him. U nder Deng’s leadership, the CCP provided a very
positive evaluation of Mao, claiming that Mao’s overall contributions
to Chinese society outweighed his errors. To this day, it is frequently
said that Mao was 70 percent right and 30 percent wrong, although
atter.21 In the newest official his-
there is no official statement on this m
tory of the CCP, Xi praises Mao extravagantly.22
As a result of such intensive indoctrination, individuals form deep-
seated, lifelong personal values that reflect a Maoist imprint.23 This has
particularly been the case in recent years, as Xi has asked CCP mem-
bers to affirm their original intention and admission oath.24 In a video
that was widely circulated ahead of the CCP centenary, Xi and mem-
bers of the standing committee of the Politburo of the CCP—the highest-
ranked political leaders in China—renewed their oaths of allegiance.25
A photo from this event is in the introduction (see fig. I.1).
Cui was born in 1958 in Zhejiang Province. He joined both the mil-
itary and the CCP in 1978 and retired from the military in 1981. After
56 Mao, Maoist Principles, and Private Business
ample, Thomas Hobbes, John Locke, and Adam Smith) and the found-
ing fathers of the United States (for example, Thomas Jefferson, John
Adams, James Madison, and Alexander Hamilton) tended to portray
the government as a “necessary evil” or even a Leviathan.28 Most West-
erners are wary of government and seek to constrain it. Indeed, the US
federal government was specifically designed to be small but increased
its size and scope over time. This is in sharp contrast with China, where
at least since Confucius, the government has usually been placed above
and beyond the family as an object of loyalty. The Chinese translation
of “country” or “nation” is a combination of “state” or “nation” (国)
and “home” or “family” (家), with the former coming first.29 Collectivism
has been an ideal in China for millennia, so long as the ruling monarch
or dynasty maintains the Mandate of Heaven.30
China’s statism is buttressed by Confucianism, which emphasizes con-
formity and obedience to the central authority. For example, Confucius
said, “The ancients who wished to preserve the fresh or clear character
of the p eople of the world would first set about ordering their national
life. Those who wished to order their national life would first set about
regulating their family life. Those who wished to regulate their family
life would first set about cultivating their personal life.”31 It is also re-
flected in the fact that businesspeople and merchants—however rich
they are—have traditionally had low social status; to improve it, they
pushed their c hildren into government. This phenomenon persists t oday,
even after the reform and opening up. As our own and other scholars’
research shows, private entrepreneurs w ere discriminated against, es-
pecially in the early years of the economic transition.32 Leaving a
government job to start a business is called g oing down to the (busi-
ness) sea (xiahai), reflecting a decline in social status. It is not hard to
understand why entrepreneurs—particularly t hose who are also CCP
members—are as obedient as they are. In China, financial capital
(money) is always subservient to and controlled by political capital (state
power). It is unlikely China will reverse that order anytime soon.
Many of our interview subjects who are not CCP members turn to
Mao’s writings for inspiration and guidance. For example, subject 19
remarked, “Chairman Mao’s teaching that ‘solutions are always more
than questions/difficulties’ is what I usually use to encourage my em-
ployees.” Subject 20 said, “Maoism is very inspiring for business owners
as it stimulates a fighting spirit and is a spiritual power. How Chairman
Mao stayed hopeful and later guided the CCP’s victory is spectacular
and useful for enterprising. . . . After you really understand Chairman
Mao, you would find that current difficulties are only a small case and
you will definitely overcome them.”
This sort of influence is basically through cultural osmosis and is more
subtle than the formal indoctrination of CCP members, but it is none-
theless deeply ingrained. According to recent surveys at Zhihu, a New
York Stock Exchange–traded Chinese company that is similar to Quora
or Reddit, Mao is ranked as one of the greatest and most influential
people in the long history of China.33 At the celebration of the CCP cen-
tenary on July 1, 2021, film star Jackie Chan said he had wanted to be
a CCP member but unfortunately his moral failings left him unquali-
fied. “I can see the greatness of the CCP,” he said. “It will deliver what it
says, and what it promises in less than 100 years, but only a few de
cades.”34 At the 2021 Tokyo Olympics, the gold-medal-winning cyclists
Bao Shanju and Zhong Tianshi wore Mao badges on the podium
(fig. 2.1).35 To many Chinese, Mao is both a sacred symbol and a good-
luck token.36 On September 9, 2021, the forty-fifth anniversary of his
death, many Chinese spontaneously commemorated the death of the
“Great Helmsman.” As one account put it, “They thought of Chairman
Mao’s great achievements, thought that without Chairman Mao, there
would be no [ruling Chinese] Communist Party [CCP], and we wouldn’t
have the happy lives we have t oday.”37
Other f actors that ensure Mao’s lasting influence include intergener-
ational transmission of Mao’s ideas, the Chinese educational system, the
overlap of Mao’s ideas with many major tenets of traditional Chinese
philosophy, the sustaining effect of media, and the promotion of red
(communist-themed) tourism.
Young people absorb Mao’s influence from their parents and other
elders. Subject 5 of our interviewed subjects stated, “I w ill never forget
Mao’s words about self-reliance and hard work. . . . People of my par-
Mao’s Lasting Influence on China 59
Figure 2.1 Chinese Athletes Wore Mao Badges When Receiving Their Gold Medals
during the 2020 Tokyo Olympic Games: Bao Shanju (left) and Zhong Tianshi (right)
“Tokyo Olympics Cycling,” Associated Press, August 2, 2021. AP Photo/
Christophe Ena.
While some of Mao’s ideas clearly overlap with and reinforce tradi-
tional Chinese cultural ideas, he actively opposed certain elements at
times. During the Cultural Revolution, he encouraged the Chinese
people to destroy the Four Olds. These were Old Ideas (ideologies re-
lated to feudalism and capitalism), Old Culture (for example, the cul-
ture of the ancient period), Old Habits (ancestor worship), and Old
Customs (related to entertainment, holidays, and marriage). Like Marx,
who labeled religion the opium of the masses, Mao openly struggled
against China’s traditional religions, declaring that they were supersti-
tions that should be discarded. In this way, Maoist communism became
the dominant, indeed the only legitimate, national ideology for China,
supplanting ancestor worship, feudalism, Buddhism, Taoism, and Con-
fucianism. During his tenure, particularly in the Cultural Revolution,
many temples and monasteries w ere damaged or even destroyed, and
many monks and nuns were persecuted.
Starting in the 1920s, Mao pressed for the liberation of women, describ-
ing them as “the other half of the sky,” challenging a subordinate status
that had existed for thousands of years. He granted women more legal
rights, mandated a quota in the CCP leadership, and established a special-
ized organization—the Women’s Federation—within the CCP-government
system to promote w omen’s rights. In so d
oing, he gained the goodwill for
himself and the CCP of half the population, although in reality there have
been very few women in the upper ranks of the CCP-government or large
companies—for example, no woman has served on the Standing Commit-
tee of the Politburo of the CCP.44 Interestingly, the current US president,
Joe Biden, used a similar quote, “Women hold up half the sky,” when he
nominated Kamala Harris as his running mate in August 2020.45
Since 2019, the CCP has been holding seminars on the topic of “not
forgetting the original intention and keeping in mind the mission” to
remind CCP members, including communist entrepreneurs, about the
founding mission devised by Mao—to rejuvenate the Chinese nation
(that is, make China great again). These activities aim to strengthen com-
munist entrepreneurs’ confidence in the CCP’s leadership, highlighting
the Maoist principles of “serving the people” and “seeking truth from
the facts” (to test theory against reality rather than dogmatically stick-
ing to Marxism-Leninism). Many communist entrepreneurs have taken
active part in these events—for example, Cui Genliang, whom we dis-
cussed earlier, and many other leading entrepreneurs.46
Mao’s Lasting Influence on China 63
Throughout its history, the CCP-government has actively used the me-
dia to promote communism in general and Maoism in particular. Al-
most all movies during Mao’s period extolled Mao and the CCP; many
described the CCP as the main force fighting the Japanese invasion
during the Second World War and portrayed the “old society” before
the communist regime as miserable. In the famous movie Five Heroes
of Langya Mountain, a CCP military squad heroically fights off Japa
nese troops until just five men are left. When those heroes are cornered
on the main peak of Langya Mountain, all five of them jump so as not
to be captured. Likewise, another well-known movie, opera, and ballet,
The White-Haired Girl, focuses on the brutal economic conditions en-
dured by the common people u nder the KMT. The father of the protag-
onist Xi’er (the White-Haired Girl) is driven to his death because of the
debts he owes a landlord. The landlord then rapes Xi’er, who takes ref-
uge in a cave, where her hair turns white b ecause of malnutrition. Once
liberated by CCP troops and armed with Maoism, the p eople fight the
landlord and redistribute his land.
Many recent films and television programs also pick up on these
themes. Beginning of the Great Revival (literally “the g reat enterprise of
the founding of the CCP”), which was released in 2011, describes the
history of the CCP. Mao Zedong (2013) and Teenage Mao Zedong
(2015) describe Mao’s early life. The Zunyi Conference (2016) details
how Mao’s decisions saved the CCP, while The Founding of an Army
(2017) describes how Mao established the CCP troops and later the
People’s Liberation Army and political institutions. The film 1921 (2021)
is about the founding members of the CCP; particularly highlighted is
Mao’s role in establishing the Xiangjiang Review, one of the first CCP
publications.47 In addition to these new films, the CCP-government has
been promoting television programs such as Long March (debuted in
2001) and Jingang Mountain (debuted in 2007), the latter of which de-
scribes how Mao led the CCP to establish the first military base.48 Subject
28 of our interviewed entrepreneurs mentioned that she “often organizes
party members to go to watch films” to strengthen “the fortress-like role
of the CCP organization and members in business operations.”
To celebrate the centenary of the CCP, the CCP-government required
that all movie theaters play such “red” films.49 In Shanghai, the CCP-
government organized special screenings and discussions for elementary
and middle school students.50 The CCP-government in Anhui Province
64 Mao, Maoist Principles, and Private Business
Mao also implanted his values and ideas in China’s communist insti-
tutions, which shape private enterprises, entrepreneurs, and businesses
in their turn. Despite extensive economic reforms by Deng and succeed-
ing leaders, the socialist institutions, per Mao’s design, have been con-
sistently maintained by the CCP-government as preconditions for any
changes or potential liberalizations.
Political leaders—particularly the founders of regimes—shape insti-
tutions that last for decades or even centuries, and Mao was no excep-
tion.54 As noted earlier, King Louis XIV imprinted France with a
centralized state, which survived the French Revolution and the end of
the absolute monarchy.55 George Washington established the unwritten
rule of a two-term limit for US presidents u ntil it was broken by Frank-
lin Delano Roosevelt (and written into the US Constitution as the
Twenty-Second Amendment in 1951).56 Vladimir Lenin imprinted the
Soviet Union with one-party control by the Bolsheviks and the princi
ple of democratic centralism.57 Nasserism outlived Egypt’s Gamal Ab-
del Nasser, who died in 1970, and led to the assassination of his successor,
Mao’s Lasting Influence on China 65
Anwar Sadat, in 1981, in part b ecause his efforts to negotiate peace with
Israel ran against the grain of pan-Arabism.58
Mao’s designs have been consistently maintained by the CCP-government,
acting as a set of guardrails as it undertakes economic reforms.59
his invention, the real invention is the theory of the dictatorship of the
proletariat.”61 That is, the state apparatus and not the market is ulti-
mately in control. Planning and markets can be seen as different tools
in service of this more fundamental goal.
in their struggle to strengthen and develop the socialist system and . . .
the leading core of all organizations of the working p eople, both public
and state,” was deleted. Instead, the new constitution stipulated that
“the Communist Party of the Soviet Union, other political parties as well
as labor, youth and other public organizations and mass movements,
through their representatives elected to the Councils of People’s Depu-
ties and in other forms participate in the policy-making of the Soviet
state, in the management of state and public affairs.”65
Deng and his successors understood the importance of using the CCP
and Mao to provide the guiding theory to reform, so as to not suffer
the problems that the Soviet Union faced. Extending this idea, more re-
cently, some scholars have suggested that China’s reforms were in fact
a “grand strategy” for global dominance that uses Leninist one-party
control to achieve its goal.66 In contrast, the Soviet Union lacked such
a focus for its goals. Gorbachev’s approach to reform was so radical
that he lost the confidence of other senior leaders, and in 1991 a num-
ber of more hardline leaders even attempted a coup d’état.
Overall, the CCP tightly maintained its overarching framework based
on Mao’s ideas and its own position as the only legitimate ruling party
and focused on only revising the economic system in a gradual way, al-
beit with intense internal debate. U nder Deng, reform was more grad-
ual and focused on smaller-scale trial-and-error experiments, such that
the CCP could roll back any policies that proved detrimental to the
economy or threatened the CCP’s rule.67 For example, in May 1984,
Deng and other Chinese leaders introduced a dual-price system for most
products, in which there was a within-plan price determined by the gov-
ernment and an outside-plan price determined by supply and demand. The
idea was to gradually transform the planned economy into a market-
oriented one. However, people with connections to the pricing author-
ities were able to obtain commodities at the low, within-plan price and
then sell them at market prices. To deal with the corruption, the CCP-
government considered abolishing the system. However, the information
was leaked, and Chinese residents rushed to purchase everything they
could find at the lower prices, creating hyperinflation, so the CCP-
government quickly backed off.
As opposed to the sweeping, nationwide reforms that Gorbachev un-
dertook, China experimented with economic reforms in several cities,
establishing the now well-known special economic zones in May 1980—
68 Mao, Maoist Principles, and Private Business
called ‘boss.’ While the rival party KMT defeated by the CCP nurtured
a lot of bosses and capitalists, entrepreneurs focus on the collective and
the idea of entrepreneurs is close to the CCP.”
Figure 2.3 Xi Jinping Delivers the CCP Centenary Speech, Imitating Chairman
Mao in Dress and Posture
“China-Beijing-CPC Centenary-Grand Gathering-Xi Jinping (CN),” Getty
Images, July 1, 2021. Ju Peng/Xinhua News Agency via Getty Images.
“helmsman” (a term that was specifically used to refer to Mao), has pro-
moted a cult of personality, and has removed presidential term limits
from the constitution so that he—like Mao—can be a lifelong president.
In addition, Xi has cracked down on freedom of speech and intensified
state control of the economy and civil society.83 In 2021 he revitalized
Mao’s “common prosperity” slogan and committed to narrowing in-
come and consumption gaps.84
Additionally, as the Chinese economy has grown, the country’s gov-
ernment and people are increasingly emulating Mao’s assertiveness on
the international stage.85 During the Alaska summit in March 2021,
China’s top diplomat, Yang Jiechi, told his US counterpart that the
United States did “not have the qualification . . . to speak to China
from a position of strength.”86 This was celebrated online by Chinese
72 Mao, Maoist Principles, and Private Business
For all that, the West lacks an appreciation of Maoism’s lasting strength.
That lacuna is worrying. In Mao’s words, borrowed from Sun Tzu, one
should never fight an unprepared war. In part II, we elaborate on Mao’s
ideological and military principles and connect them to the business
practices of Chinese entrepreneurs and private enterprises.
II MAO’S IDEOLOGICAL
AND MILITARY
PRINCIP LES AND
PRIVATE ENTERPRISE
349-99188_Rothfels_ch01_3P.indd 6
3 Nationalism and
Internationalization
Many Chinese entrepreneurs have a strong sense of nationalism, which has
impeded their internationalization.
—Sina Finance report, March 1, 2007
75
76 Mao’s Ideological and Military Principles
net users commented at the time that local Chinese brands w ere in a
most dangerous time—echoing a line in the Chinese national anthem,
“The Chinese nation is at its most dangerous time.” After intervention
by the French and Chinese presidents Nicolas Sarkozy and Hu Jintao,
Wahaha and Danone sought a more peaceful solution to their disputes.
Finally, Wahaha completely bought back Danone’s shares.3
Many other Chinese entrepreneurs espouse a passionate nationalism in
their business activities and resist foreign intervention. In his satire Em-
bracing Globalization but Don’t Forget Our Nation, Yin Mingshan, the
founder of the multibillion-dollar motorcycle and automobile company
the Lifan Group in Chongqing, urged Chinese entrepreneurs to be wary
of so-called globalization. Yin held Mao’s quote that “foreigners are un-
reliable, and we have to rely on ourselves” as his motto.4 Chinese entre-
preneurs do not benefit from globalization, he said, since they have to
pay huge premiums for natural resources and technologies controlled by
other countries. He also claimed that European countries, Japan, and the
United States prohibit the export of technology to China and keep all but
a very small portion of profits from international joint ventures for them-
selves. He concluded by calling for the preservation of national resources,
the development of national technologies and brands, and the revitaliza-
tion of national industry to carry forward China’s national culture.5 Yin
said that he had declined many international cooperation opportunities,
turning away the foreign investment banks that could have expedited the
Lifan Group’s IPO.6 In 2019, when Yin and the Lifan Group w ere caught
in a debt crisis, he was reluctant to ask foreign banks for help.7
Since the collapse of the Soviet Union in the early 1990s and the end
of the Cold War, the world has become increasingly globalized, and most
believe that China has been one of the biggest economic winners.8 But
many Chinese businesspeople—especially loyal disciples of Mao like
Zong and Yin—object to internationalization, despite the fact that it
serves their economic interests. Why do they resist it?
As Zong said and most Chinese believe, under Mao, China “stood
up” as an independent nation instead of bowing to the West as it had
following the Opium Wars.9 Xi Jinping echoed Mao’s rhetoric during
the centenary speech of the CCP, saying, “The Chinese Communist Party
and the Chinese p eople solemnly declare to the world with brave and
tenacious struggle that the Chinese people have ‘stood up’ and the era
of the Chinese nation being slaughtered and bullied is forever gone.”10
78 Mao’s Ideological and Military Principles
miles to Russia and lost Taiwan to Japan after being defeated in the First
Sino-Japanese War (1894–95). Mongolia also became an independent
country. During the Second World War, Japan occupied China’s northeast
and established a puppet regime (the State of Manchuria) nominally led
by the former emperor of the Qing dynasty.
Mao’s dream was that China would become a great country again
under his leadership, reviving its splendid history.15 He further realized
that nationalism could be used to mobilize the popular masses, uniting
peasants in China’s vast rural areas to rise up against the Kuomintang.
Indeed, the CCP was to some extent born in a nationalist environment:
May 4, 1919, saw a massive student protest against the government after
the loss of Qingdao to Japan in the Treaty of Versailles. Two years later,
the CCP was established by Chen Duxiu, the editor of the New Youth (La
Jeunesse).16 Mao was deeply influenced by the magazine and systemati-
cally elaborated the importance of national struggle and nationalism in his
speeches and writings. The pronounced power differential between China
and the Western powers and the threat that China would be colonized or
broken up spurred his focus on autonomy and a spirit of independence.
Mao’s nationalism fed his wariness of Soviet intervention and infil-
tration after the foundation of the communist regime. He visited Joseph
Stalin in 1949–50 to celebrate Stalin’s birthday with other communist
leaders and solidify relations between the newly founded People’s Re-
public of China and the USSR. The main points of contention between
Mao and Stalin w ere the Soviet military ports in China’s Dalian and
Lushun, and the Soviet troops garrisoned along the railroad that tsarist
Russia had built in China (the Chinese Eastern Railway).
Mao insisted that these outposts v iolated China’s sovereignty, while
Stalin wanted to maintain Soviet interests in China and refused to back
down, condescendingly refusing other meetings.17 Unsatisfied with Sta-
lin’s response, Mao refused to leave Moscow. Western media reported
that Mao had been detained, and the UK government approached China
to potentially establish relations. At the same time, the United States in-
dicated it would not prevent communist troops from occupying Tai-
wan. In public remarks, US secretary of state Dean Acheson reminded
the Chinese people that Russia had seized vast territories from China
and supported Mongolia’s independence.18 Angry at these reports and
fearing that China might ally with the West, Stalin finally agreed to
Mao’s requests in order to establish the Sino-Soviet alliance.19
Nationalism and Internationalization 81
have the determination to realize our splendid past and return to the
prominent position in the world of nations all by ourselves.” Although
China needed foreign aid during his administration, Mao insisted, “We
shall never rely on help from others, which is unreliable. . . . We must
depend on our own effort.”24
A popular political slogan was, “The liberation and independence of
China require a spirit of self-reliance.” As noted, almost all the communist
entrepreneurs we interviewed mentioned the importance of indepen
dence, autonomy, or self-reliance. Maoism typically portrays capital
ists as exploitative, mercenary, and ruthless and the West as an abyss of
suffering and misery. Collaborating with them is seen as an intolerable
betrayal of Maoism.
To show how nationalist rhetoric evolved in China, we draw on a
database of official newspaper articles (described more in the method-
ological appendix) and track the use of nationalist keywords over time.
Since the Chinese media is strictly controlled, official newspapers are the
way the government communicates with the masses and so can be seen
to reflect its mindset.25 Mao often used them to disseminate his ideas
and principles. For example, he systematically elaborated the princi
ples of autonomy, independence, and self-reliance in speeches delivered
on January 10 and August 13, 1945, which w ere subsequently pub-
lished in the official newspaper Liberation Daily (Shanghai). In the first,
Mao said, “We have to advocate self-reliance. We hope to have foreign aid,
but cannot rely on it. We must rely on our own efforts and the creativity
of all military and civilians.” Doubling down in the next speech, he
said, “Basing our policy on our own strength is called self-reliance. . . .
We emphasize self-reliance, and we hope to have foreign aid but cannot
rely on it.”26 In an interview with the US journalist Anna Louise Strong
on August 6, 1946, Mao delivered his now famous dictum that “all
reactionaries are paper tigers,” elaborating that “on appearance, they
are terrifying, but in reality they are not so powerful.”27
Keywords are often tracked in social science research to capture the
tenor of public discourse and opinion.28 To assemble a complete list of
terms related to nationalism, we followed established scientific method
by reading existing studies and developing an initial list. We then asked
three experts in this area to validate it. Our final list consisted of “inde
pendence and autonomy” (独立自主), “self-reliance” (自力更生), “impe-
rialism” (帝国主义, which was often used to denigrate the Western powers),
Nationalism and Internationalization 83
2,000
Frequency of nationalism-related words
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91
Year
Our firsthand interview data reveal the extent to which nationalism and
self-reliance shape entrepreneurship in China. As noted, all of our inter-
view subjects mentioned self-reliance, independence, or hard work. Five
communist entrepreneurs volunteered that “the spirit of independence and
autonomy is critical to our firm,” and subject 14 specifically said, “Our
independence is necessary to generate our own independent characteristics
and models. . . . We should not rely on the relatively unstable foreign mod-
els.” Similarly, subject 1 claimed, “I had doubts about g oing abroad, espe-
cially to European countries and the United States. There are more conflicts
and troubles.” Subject 26 also refused to internationalize her company,
saying, “I think China now has a total of 9.6 million square kilometers,
and its population accounts for one-sixth of the world’s population. Such
a large country and market is enough for me to develop.” She also said,
“After a few years in foreign countries, I think Chinese p eople are really
hardworking. China is a hardworking nation. In addition to Chinese com-
panies, entrepreneurs are very hardworking p eople, including myself.”
Consistent with our ideas on the imprinting effect of CCP indoctri-
nation, our paired t-test shows that communist entrepreneurs are more
likely to use nationalism-related words in their official corporate state-
ments (for example, annual reports or annual letters to their sharehold-
ers) than noncommunist ones (fig. 3.2). For example, Wang Xuehai,
the CEO of Wuhan Humanwell Hi-tech Industry, a pharmaceutical firm
on the Shanghai Stock Exchange, is a CCP member. His firm’s annual
report emphasizes “autonomy and independence” almost e very year.39
Using the same approach, we content analyzed the interview transcripts
of Chinese entrepreneurs, plotting the frequency of the words “indepen
dence,” “autonomy,” and “self-reliance” in the rhetoric of CCP members
and nonmembers (fig. 3.3). We found that communist entrepreneurs use
them almost twice as much as their noncommunist counterparts.
Our previously published research, which draws on the nationwide
Chinese Private Enterprise Survey, also provides strong support for these
claims. Entrepreneurs who went through the CCP socialization process
were less likely to cooperate with foreign capit alists and investors than
those who did not.40
Data from publicly traded Chinese firms that are controlled by en-
trepreneurs provide further evidence. We employed regression analysis
to estimate the patterns in the data. Our findings w ere that, first, CCP
membership is more positively related to entrepreneurs’ nationalist
mindset, which is reflected in their use of nationalism-related words in
1.7
Frequency of nationalism-related words
1.6
1.5
1.4
1.3
1.2
1.1
1
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year
Not a CCP member CCP member
4.5
Frequency of nationalism-related words
4
3.5
3
2.5
2
1.5
1
0.5
0
Independence Autonomy Self-reliance
Not a CCP member CCP member
Shares of foreign
investment
CCP Nationalism-
+
membership related words
Outbound foreign
acquisition
N AT I O N A LI SM, D E CAYE D ?
N AT I O NAL I SM, RE VI VE D ?
Known as the “fifty-cent party,” they are paid half a Chinese yuan
(around seven US cents) for every post that they delete that is critical of
the CCP-government and e very positive post they add. Reports indicate
that each year they make billions of fake posts. Another twenty million
“internet volunteers” do the same thing for free, according to a 2021
interview.55 The backlash against those critical of the CCP-government
intensified a fter the election of Donald Trump; some prominent figures
were stigmatized and even persecuted.56 The journalist Qiu Zimin, for
example, was arrested and sentenced to eight months in prison for the
crime of impugning the reputation and honor of the heroes and martyrs
who died in the 2020–21 China-India skirmishes.57 And in September
2021, a “Rumor Refutation Platform” was introduced to collect tips and
reports of content that “smears Party history” and “slanders and dis-
credits CCP leaders.” A person found to have spread such rumors might
face up to fifteen years in prison according to Chinese law.58
The backlash has been felt by celebrities too. In August 2021, neti-
zens noted that a rising actor, Zhang Zhelan, was smiling when he vis-
ited Yasukuni Shrine in Tokyo, where the ashes of Japanese war dead
are interred. Japanese war crimes are a sensitive topic; the Japanese were
responsible for the deaths of millions of civilian Chinese in the last
century. Zhang was blacklisted and his acting career effectively ended.59
Similarly, the CCP-government has been increasingly stringent about the
one-China rule, which makes it illegal to refer to Taiwan as a separate
country. Taiwanese actors who violate it are blacklisted and their mov-
ies and television shows banned or recast. Formerly, Taiwanese actors
could be active in mainland China so long as they did not support Tai-
wan’s independence; now they have to support reunification.60
There are numerous examples of ways that resurgent nationalism has
affected Chinese businesses and entrepreneurs. A number of Chinese
brands have emerged that cater to nationalist sentiment, such as NIO, a
Chinese electric car maker that aims to be the Tesla of China, and Heytea,
a Chinese tea drink chain that aspires to be Starbucks. Ubras is a Chinese
lingerie maker that aims to emulate Victoria’s Secret, and Li Ning is a
homegrown sports brand that aims to replace Nike and Adidas.61 On its
website, NIO says, “We have never thought that domestic brands can
make cars comparable to those of BBA and Tesla, but NIO has done it,
even better in some aspects, and it is getting better and better. We are truly
proud that our own national brand can achieve this level!”62
Nationalism and Internationalization 93
Jian, a Chinese industrialist and educator in the late nineteenth and early
twentieth centuries.
ByteDance was accused of falling short of that patriotic ideal. When
Trump announced a US ban on its main product, TikTok, ByteDance
founder Zhang Yiming prepared to sell its US subsidiary to an Ameri-
can company, which was rumored to be Microsoft or Oracle.71 But
Zhang faced nationalist headwinds, as the CCP-government and many
Chinese demanded that the company stand up against Trump’s bully-
ing. Before the rumored deal could close, the CCP-government quickly
issued the “Catalogue of China’s Banned and Restricted Export Tech-
nologies” to scuttle the sale.72 Similarly, the CCP-government cracked
down on the Chinese ride-hailing g iant DiDi, which went against gov-
ernmental guidance when it went public in the United States on July 1,
2021, accusing it of delivering sensitive data to the US Securities and
Exchange Commission that threatened Chinese national security.73 The
CCP-government then reportedly sought to buy a controlling interest
in the company.74
At the broader level, Xi also proposed the domestic-international “dual”
circulation strategy on May 14, 2020, which aims to reorient the Chinese
economy by prioritizing domestic consumption (“internal circulation”)
and lessening China’s existing international trade and investment (“exter-
nal circulation”). The action was similar to Mao’s moves between 1949
and 1952 to reduce connections to foreign capitalism.75 Xi has pressed the
strategy in response to the current economic downturn, pressures from
the United States, and the COVID-19 pandemic.76
The intensification of US-China trade tensions following the election
of Trump also reflects this new spirit of “China first.”77 Rather than
seeking a truce with the United States, the CCP-government intensified
the nationalist fervor, claiming that “no force can stop the Chinese
people from achieving their dreams.”78 Liu He, vice prime minister and
China’s chief representative at US-China trade talks, said that “China
is not afraid, nor is the Chinese nation!”79 CCP media claimed that the
United States was launching a large-scale trade war. “Re-learning Mao
Zedong’s thoughts and methods of dealing with external pressures can
add to calmness, allay any fear of bullying, and firm [up] confidence and
strong motivation to resist external pressures,” one government state-
ment counseled.80 At the same time, internet users called Trump a pa-
per tiger, insisting that he was not as strong as he looked and that the
Nationalism and Internationalization 95
The ebb and flow of nationalist ideas in China stems from a Maoist im-
print that fundamentally shapes Chinese business and entrepreneur-
ship. But their recent spike can also be seen as part of a worldwide trend
toward isolationism and disengagement in reaction to the many middle-
class jobs that w
ere lost to off-shoring and immigration. Populist lead-
ers and parties rose to power in Austria, Brazil, Denmark, Germany,
Hungary, India, Italy, Sweden, and of course the United States.84 The
United Kingdom voted for Brexit and left the European Union, while
96 Mao’s Ideological and Military Principles
Trump revived the isolationist slogan of the 1930s, “America first,” and
launched trade wars against many countries.85
How will multinational firms navigate the increasingly hostile busi-
ness environment in China? While it is indeed challenging to operate in
the Chinese market, there are many strategies that firms can use to be
successful there. Notable successful examples include KFC, Volkswagen,
Tesla, and Microsoft.86 We discuss t hese strategies in more detail later,
but in brief, most have adopted a localization strategy, which not only
allows them to more quickly adapt to the Chinese market but makes it
ill clash with its unique culture and institutions.87
less likely that they w
After Nike suffered a backlash due to its statements about forced labor
in Xinjiang, its CEO, John Donahoe, publicly said that “Nike is a brand
that is of China and for China.” While that did not endear Nike to the
human rights community, it smoothed over its relationship with China.88
4 Frugality and Cost
Reduction
My shoes only cost me around 80 Yuan/RMB [$12] and I have been wearing
them for two years. My shirts are all under 30 Yuan/RMB [$4.20].
—Li Shufu, founder of the Geely Group, a large Chinese automaker
(owner of Volvo and the largest shareholder of Daimler)
97
98 Mao’s Ideological and Military Principles
700
Frequency of frugality-related words
600
500
400
300
200
100
0
49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91
Year
and thrift,” Deng wrote in March 1979, “our goal [of doubling GDP]
cannot be achieved.”22 He repeated the sentiment frequently.
2.5
1.5
0.5
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year
Not a CCP member CCP member
6
Frequency of frugality-related words
5
0
Frugality Waste
Not a CCP member CCP member
0.8
0.7
0.6
0.5
0.4
0.3
1995 1997 2000 2002 2004 2006 2008 2010 2012
Survey year
Not a CCP member CCP member
We also use data from publicly traded Chinese firms to provide fur-
ther and more systematic evidence on the link from CCP membership
to frugality rhetoric and frugal practices (a low level of costs), and then
to firm performance (fig. 4.5). Using regression analysis, we found that,
first, firms with founders or CEOs with CCP membership have a stron-
ger culture of frugality than those controlled by noncommunist entre-
preneurs, as shown by their more frequent use of frugality-related words.
Second, these communist entrepreneurs tend to reduce costs more than
their noncommunist counter parts. Third, their firms enjoy better
30
performance.
The findings are consistent with published studies that show CCP
membership brings economic benefits.31 However, prior accounts em-
phasize the economic benefits that flow from greater networking op-
Frugality and Cost Reduction 107
Frugality
• Discourse (related
CCP words in annual Firm
+ +
membership reports) performance
• Action (cost
reduction)
WANG JINDUO WAS BORN IN 1957, and after graduating from col-
lege, he worked at a chemical fertilizer factory. He then became a gov-
ernment official in the Bureau of Economy and Trade. In 1987 he was
assigned to manage the economically distressed G reat Wall Electrode
Factory. Before Wang came, the firm had suffered a loss of more than
$200,000 (around $8 million in current US dollars), and 98 percent of
its assets w
ere loaned.
Wang responded to the call of the Chinese Communist Party (CCP)
and led his team to listen to their customers’ needs. According to Wang,
they w ere just following Chairman Mao Zedong’s teaching to stay close
to the popular masses and serve them. As a result, they decided to de-
velop large-scale graphite electrodes, heating elements for the electric
arc furnaces that melt scrap to produce new steel. After learning that
the total investment would exceed US$1.4 million and take more than
two years to complete, Wang sought advice from all directions to de-
velop a unique Chinese technology. In less than six months, they had
succeeded. Wang attributed his success to the strength of the popular
masses.1
In 2000, when Wang learned that some pupils had to go to school in
another village miles away because the local school was so run-down,
he donated $100,000 for new buildings. The CCP constitution asks all
110
Devotion and Social Contribution 111
180
published an article titled “The Experience of the Mass Line in the Co-
operative Movement.” The Qinghai Daily published a report entitled
“The Work Methods of the Mass Line Must Be Carried Out in the Re-
form of Agricultural Technology” on June 29, 1956.
The emphasis on the mass line culminated during the G reat Leap For-
ward campaign from 1958 to 1960, when the level of collectivization
was elevated: farmers would eat together at established communal din-
ing halls and all their harvests would be shared within their communi-
ties. Different provincial dailies frequently issued mass line–related
statements to ingratiate themselves with Mao.15 For example, the Shanxi
Daily claimed that “the Great Leap Forward enriched the Party’s mass
line” on January 8, 1959. A follow-up report was published on Febru-
ary 15 in the same year, saying, “The mass line is invincible. The Satel-
lite Commune summed up the great victory of the mass line in the Great
Leap Forward. All members enhanced their knowledge, enriched their
experience, and became more energetic and incentivized.” At almost the
same time (January 13, 1959), the Shanghai Liberation Daily stated,
“The electrolytic copper workshop of the Shanghai Smelter Factory has
done a good job in one year of the Great Leap Forward, and has achieved
Devotion and Social Contribution 115
0.25
0.15
0.1
0.05
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year
Not a CCP member CCP member
7
Frequency of devotion-related words
0
Serve the people Mass line Devotion
Not a CCP member CCP member
Devotion
• Discourse (related words in annual
CCP membership +
reports)
• Action (philanthropic donation)
123
124 Mao’s Ideological and Military Principles
1. Its methodology strictly follows the ideas of seeking truth from facts
and adapting theories to objective realities. This includes collecting
and analyzing information about the adversary’s political environ-
ment, economic power, military strength, and geographical factors,
as well as a focus on learning from one’s successes and failures. Mao
also emphasized the importance of having a panoramic view and not
losing sight of the objective, while also taking care to maintain sol-
diers’ fighting spirit, courage, and morale.
2. The theory of the p eople’s military emphasizes the absolute leader-
ship of the CCP (“political power comes from the barrel of a gun”),
a people-centric focus (closely connected to Mao’s philosophy of
serving the people), ideological and political work, and moderniza-
tion. To maintain the CCP’s strict control, CCP branches should be
built at the company level, with CCP members acting as vanguards
and role models. The theory also answers the important question of
whose interest the CCP and its military fight and stand for, which is
the Chinese people.
3. It emphasizes the importance of mobilization, based on Mao’s state-
ment, “Revolutionary war is a war of the masses. War can only be
waged by mobilizing the masses, and war can only be waged by re-
lying on the masses.”6 CCP troops come from the p eople and should
go to the p eople to serve them. At times, CCP officials attributed Chi-
na’s campaign against COVID-19 as a “people’s war.”7
4. It emphasizes specific strategic doctrines, including “Surround cities
from the countryside,” “Never fight an unprepared war,” “Concen-
trate advantageous force to annihilate the e nemy,” “Engage in pro-
tracted war,” and others. As we will show in this chapter, all of t hese
strategies are frequently used by Chinese entrepreneurs.
5. It provides an overall theory of national defense that focuses on mod-
ernization fueled by socialist construction while emphasizing the
importance of military science, industries, and education, which are
fundamental to China’s battle readiness. It also highlights the princi
ples of independence, autonomy, self-reliance, and hard work.8
is not big, as long as our mission is clear and the product positioning is
accurate, we have reason to believe that we w ill succeed step by step.
Overall, as Mao suggested, a ‘single spark can start a prairie fire.’ One
needs to be confident and optimistic in their organization’s success—
despite temporary setbacks—and should accumulate small wins into a
later big success.”
This presumed that Japanese troops would secure major victories and
occupy vast territories in China in as short a time as three months, as
some Japanese politicians and officers claimed. Some Chinese believed
that industrialized Japan was unstoppable and would do to China what
the United Kingdom had done to India. Mao argued that both views were
ungrounded. On the one hand, aid from other countries and a commu-
nist revolution in Japan might not happen soon enough; China could
not expect to beat Japan quickly given its limited military strength. On
the other hand, China had a larger population than Japan, its people
were being mobilized by the CCP, and it was not totally isolated inter-
nationally. Thus far, its military failures w ere because of the Kuomint-
ang’s poor leadership, not China’s intrinsic weakness or Japan’s intrinsic
strength.22 China could prevail in a protracted war.
Shi applied this thinking to Brain Platinum, noting that a “brand
needs time to build and many firms constantly change their brand build-
ing process. However, it is not right.”23 Li Dongsheng, founder of TCL,
the world’s third-largest television manufacturer, often told his employ-
ees that “the only way to succeed eventually is to design a strategy for
a protracted war.”24 In a meeting on August 3, 2005, he told his man
agers that “internationalization w ill be a protracted war, requiring three
stages—‘turning around, stalemate, and growing,’ ” acknowledging that
it would take at least ten years to establish the brand worldwide. In the
meantime, he said, TCL should make small technological and commer-
cial breakthroughs in a guerilla warfare fashion. As those victories
accumulated, its chances of becoming an international g iant would
improve.25 Similarly, Lei Jun—founder and CEO of Xiaomi—reflected
that the founding and growth of the company followed the idea of
protracted war. He told staff members, “For Xiaomi’s mobile phone busi-
ness, we must lose the illusion of quick victory, tolerate the slightest
misjudgment of the situation, and we must not let go of competition for
a minute and a second, and we must fight a ‘protracted war.’”26
Subject 30 of our interviewed entrepreneurs said, “In my process of
starting a business, I was particularly depressed at a certain stage and
encountered too much resistance. At that time, I read Mao’s ‘On the Pro-
tracted War’ over and over again. It can really be said that I have gained
confidence and obtained new thoughts each time I read it, because t here
are two [Chinese] words in it that are very important, that is, persistence
Mao’s Military Thought and Business Strategy 131
[the two words are 坚持, jian chi in Chinese]. Persistence is important in
many of our lives.” Existing research has also shown that persistence
and confidence are critical for business success.27
The protracted war strategy is often used in combination with sur-
rounding cities from the countryside and concentrating advantageous
force to annihilate the enemy.28 Mao’s speeches and statements often fo-
cused on grit, stamina, and the virtues of hard work. Many Chinese entre-
preneurs have adopted phrases from them, such as, “The future is bright,
but the road is tortuous and full of difficulties,” and “Make up your mind,
don’t be afraid of sacrifice, overcome all difficulties, and strive for victory,”
as their mottos. For example, subject 3 said, “I deeply agree with many of
Chairman Mao’s Quotations, such as the revolutionary tradition of hard
work. I was doing the same and actually these two words are vividly re-
flected in myself.” Subject 15 said that “Chairman Mao’s saying that ‘there
is nothing difficult in the world if people are determined to achieve it’
means perseverance and we should never give up quickly.”
The doctrine of protracted war is often applied by Chinese business-
people and even the government in negotiations.29 For example, when
the United States and China normalized their relations in the late 1970s,
a tactic a dopted by the Chinese side was to prolong the negotiations,
which led their American counterparts to become impatient and eager
to make a deal. As a result, the US side paid insufficient attention to the
Chinese translation of “The U.S. government acknowledges the Chinese
position that there is but one China and Taiwan is part of China.” “Ac-
knowledges” was used to refer to knowledge and understanding (renshi
dao [认识到] in Chinese), but the Chinese side translated “acknowledges”
as cheng ren (承认), which means “recognizes and assents,” a much stron-
ger term.30
Along these lines, a fter this agreement was signed, MIT political sci-
entist and sinologist Lucian Pye remarked, “In contrast to American
practices, the Chinese do not treat the signing of a contract as signaling
a completed agreement; rather, they conceive of the relationship in lon-
ger and more continuous terms, and they will not hesitate to suggest
modifications immediately on the heels of an agreement.”31 The Chinese
government also used this protracted approach in the more recent US-
China trade talks, but the US negotiators had learned their lesson and
reportedly secured more benefits.32
132 Mao’s Ideological and Military Principles
O R GA N
I ZATI ONAL PRI NCI P L E S BA SED ON MAO’S
T H EO RY OF THE P E OPL E ’ S MI LITA RY
Consumer Orientation
Mao’s Theory of the People’s Military also clarifies for whom the
CCP’s troops are fighting. This is an application of “serving the people”
and “mass line,” emphasizing that the only purpose of the p eople’s military
is to stand closely with the Chinese people and serve them w
holeheartedly.
134 Mao’s Ideological and Military Principles
Mao said that “without a p eople’s military, then we w ill have nothing of
the people.”38 As noted earlier, this principle informs entrepreneurs’
consumer-oriented focus, especially since Deng Xiaoping’s economic
reform.
Our interviewed entrepreneurs acknowledge this principle. Subject 26
noted, “Chairman Mao said ‘serving the p eople.’ In fact, we as busi-
nesspeople are essentially serving our customers as a way of serving the
people. . . . Just like when we are a company, I also serve companies,
employees, society, and customers. Everything is everyone’s business,
and your pride is my pride. In this way, the self-arrogance and the ten-
dency of being supercilious in our hearts will disappear, and there will
be a sense of awe. This is why the company has been established for so
many years, and I have received help from so many people, because I
have a mentality of serving others, and others w ill help me.” Similarly,
subject 23 said that “Mao’s idea of connecting to popular masses is very
useful in our company. Issues regarding marketing, e-commerce, and
production in our company are basically handled by the employees
themselves. I listen to everyone.”
Several entrepreneurs we interviewed reinterpreted Mao’s quotes, as-
signing new meanings to them in the context of employer-employee
relations. For example, subject 7 repurposed the phrase “fighting the
landlord and dividing land,” which originally referred to Mao’s eradi-
cation of the exploitative land rent system, for the context of profit shar-
ing. “We have overcome many difficulties to establish this platform
and the market,” he said. “After the platform has been built, we then
share our results to everyone and also create values together. After that,
we w ill share some of the benefits h ere, and then let our employees live
a better life.”
349-99188_Rothfels_ch01_3P.indd 6
III THE EFFECTS OF MAO’S
MASS CAMPAIGNS: THE
G REAT LEAP FORWARD,
THE CULTURAL
REVOLUTION, AND THE
THIRD FRONT
The imperialist U.S. will not wait for us to complete the Third Front
Construction [which will provide China with military potential].
—Mao Zedong
Mass Parade in the Mao Era
“Chinese National Day Parade,” Getty Images, January 1, 1960. Bettmann via
Getty Images.
7 The Great Leap Forward
and Resource Use
ecause of resource scarcity during the
B Great Famine . . .
I learned to
manufacture treasure from existing scraps.
—Lu Guanqiu, founder and CEO of Wanxiang Group, the largest
automotive components manufacturer in China
* Chairman Mao Zedong launched the G reat Leap Forward campaign with the goal of
transforming agrarian Chinese society into an industrialized one in a short period of time.
Yet his unrealistic expectations, lack of knowledge of economic development, and overopti-
mistic attitude resulted in one of the most serious human tragedies in the twentieth century—a
famine in which tens of millions of Chinese starved to death. We in no way discount what an
incredible tragedy the famine was or suggest that some unexpected benefits to those who
survived could to any extent make up for the millions of lives lost or somehow mitigate
Mao’s culpability. In this chapter, we want to systematically examine the oft-expressed idea
that experiences during the G reat Leap Forward famine led to a generation of Chinese entre-
preneurs who use resources efficiently, as they were forced to do so during that time.
139
140 The Effects of Mao’s Mass Campaigns
the time the largest holder of universal joint–related patents and a major
dealer of automotive components—twenty years later, Wanxiang acquired
Zeller. Wanxiang now controls four publicly traded firms in China and
earns $8 billion in annual revenues.
Lu’s innovations are an exemplar of “exaptation,” the ability to use
features or capabilities developed for one environment or purpose in
another. “Eating tree bark and grass roots,” he said, “made me aware
that the biggest problem is how to utilize resources efficiently.”5 Schol-
ars have studied how many fortunes have been built on exaptation.
For example, the CD-ROM was developed to record and replay sound
without physical contact between parts, but since it stored large quan-
tities of data, it could be adapted by the computer industry to store all
kinds of data. The magnetron was invented for radar applications
during the Second World War, but it later was found to heat food and
thus became a core component of microwave ovens.6 Our prior work
has shown that the capabilities that US banks acquired when they
began opening intrastate branches were adapted to allow them to ac-
quire out-of-state banks once interstate branching became l egal.7 Many
studies have found that exaptation benefits entrepreneurs and that suc-
cessful entrepreneurs like Lu employ it to transform their enterprises
across different industries—for example, moving from one industry
(agricultural machines) to another (automotive components)—and shift
them from domestic markets to global markets.8
There are many other such examples—for instance, Cao Dewang,
chairman of the Fuyao Group.9 Cao was born in 1946 and forced to
drop out of school in 1960 b ecause of the famine. He helped his f ather
sell pipe tobacco but could not continue because the Cultural Revolu-
tion, which started in 1966, prohibited such businesses. Cao then
switched to selling fruit. Cao recalled that he had to get up at three
o’clock every morning and carry three hundred pounds of fruit to a mar-
ket that was dozens of miles away from home. In the summer he had to
stay out in the extreme heat and could not return home until late at
night. Through such hard experiences, Cao saved about $19,000, which
he used in 1976 to acquire a state-owned glass factory that had experi-
enced seven years of significant losses. After achieving profitability, Cao
repurposed the facilities to become an auto glass maker. In time, he
sought and received international investments, which he used to expand
into Hong Kong and the United States.
142 The Effects of Mao’s Mass Campaigns
With more than ten thousand workers around the world, Fuyao Glass
is valued at about $10 billion today, including its US subsidiary in Ohio
that was featured in the Academy Award–winning documentary Amer-
ican Factory. As Cao reflected, “The G reat Leap Forward famine made
me stronger” and “gave me creativity so that I can think outside the
box and solve problems in a different way.”10
Consistent with the stories of Lu and Cao, our statistical analysis of
a database of Chinese entrepreneurs found that surviving the G reat Leap
Forward and the resulting famine provided some Chinese entrepreneurs
with a mindset that enabled them to achieve future success by utilizing
their resources more efficiently.11 Another example is Wang Shi, founder
of China Vanke, at one time the country’s biggest property developer.
Wang’s firm used to sell appliances, scientific instruments, garments,
watches, and soft drinks, and he was able to transform the resources
gained into success in the real estate market. In his words, “I need to
leverage whatever resource I have for my businesses, and it is critical to
use resources efficiently.”12
As noted earlier, entrepreneurs make this connection themselves, de-
scribing how they boiled b elts and other leather belongings to feed their
families and otherwise recycled, repurposed, and adapted and exapted
items. Frugality became second nature to them. By repeatedly repurpos-
ing and saving, individuals tended to develop a frugal mindset and an
ability to repurpose something designed to serve one purpose for new
ends. We in no way intend to put a gloss on this tragic period of Chi-
nese history, but simply to understand from a social science perspective
how it changed some of the individuals who lived through it and, more
broadly, how it affects entrepreneurship in China to this day.
quality?” he asked. “We should strive for this possibility.”13 Some se
nior leaders, such as Zhou Enlai (the prime minister) and Liu Shaoqi
(the vice president), were more cautious about the Chinese economy and
understood that the fast growth rate was more a result of reconstruction
after the Second World War. But Mao disparaged their opinions and
suppressed others’ opposing views. After that, few dared to correct him.
Mao held a grudge against Joseph Stalin, who had intervened in the
CCP, and he hoped to gain equal status with the USSR. But he did
not have enough confidence to confront Stalin directly.14 With Nikita
Khrushchev, it was a different story.
In Moscow in 1957, during his commemoration of the fortieth anni-
versary of the October Revolution, Khrushchev asserted that the Soviet
Union could surpass the United States in agricultural and industrial pro-
duction in fifteen years. After the Korean War and the 1956 crises in Po-
land and Hungary, Mao gained a sense of superiority over Khrushchev.
While he initiated the Great Leap Forward under the slogan of “catching
up with and surpassing the United Kingdom and the United States,”15
more recent studies suggest his real aim was to supplant Khrushchev and
the Soviet Union as the leader of the global communist movement.16
On November 13, 1957, the People’s Daily published an article enti-
tled “Initiate All Our P eople to Discuss the Forty Outlines [1956–67
National Agricultural Development Program] and Set Off a New Up-
surge in Agricultural Production.” “After the agricultural cooperation,”
the article said, “we have the conditions and need to make a g reat leap
forward on the production front.” The article claimed—quite incorrectly,
as it turned out—that China’s agricultural yields would increase dra-
matically and that sales of that surplus would subsidize China’s rapid
industrialization. So began the G reat Leap Forward.
K EY A S P EC TS OF THE G
RE AT L E AP FORWA R D
AN D T H E G RE AT FAMI NE
livestock. The people’s commune system forced them to hand over their
land and livestock as well as all their personal belongings, including pots
and pans and tables and chairs. All farmers would eat in communal din-
ing halls. Meals were free and compensation was uniform within the
commune based on average yield. This institutional design was meant
to motivate farmers by eliminating inequality and ensuring that no one
would go hungry. But many farmers slaughtered their poultry and live-
stock in order not to have to share them with others. Meanwhile, the
distribution system dampened farmers’ incentives and encouraged free
riding, while the communal dining halls encouraged them to eat more
than they needed. All of these factors caused a sharp decline in crop
yields.17
Because officials who disagreed with Mao were punished, most over-
reported agricultural yields. Liu had tried to talk to Mao about the
unrealistic goals at first but was criticized. Later, he ingratiated himself
with Mao, proposing the antiscientific and senseless slogan, “How bold
the p eople are, how productive is the land.” Many people’s communes
overreported their rice yields by a hundred times, claiming they pro-
duced 33.456 tons (30,351 kilograms) of rice per acre. However, this
was impossible; by 2020 the world-record yield for hybrid rice was only
10.342 tons (9,382 kilograms) per acre.18
As would be expected, the official dailies published more than two
thousand articles promoting the G reat Leap Forward in different indus-
tries in China; the People’s Daily, controlled by the central government,
published one article every three days over the three-year period. One
published on August 27, 1958, featured Liu’s slogan in its headline:
“How Bold the P eople Are, How Much Yield We Have (Situation of the
Great Leap Forward of Agricultural Production in Shouzhang County,
Shandong Province).” This slogan became an iconic phrase in the
movement that went against scientific assessments.
As elaborated e arlier, a main approach of the G
reat Leap Forward was
agricultural collectivization as p eople’s communes. We tracked mentions
of the term “people’s commune” in different provincial dailies (fig. 7.1).
Scholars have found that officials’ overreporting of agricultural yields
correlated with the likelihood of their being promoted.19 Such trends
are quite apparent from the frequency of the term “agricultural produc-
tion per mu” (亩产; mu is the Chinese agricultural area unit, about
17 percent of an acre) in Chinese newspapers at the time (fig. 7.2). Also
800
700
Frequency of “people’s commune”
600
500
400
300
200
100
0
54 55 56 57 58 59 60 61 62 63 64 65 66
Year
250
200
Frequency of “agricultural
production per mu”
150
100
50
0
54 55 56 57 58 59 60 61 62 63 64 65 66
Year
commonly used was the term “signaling satellites.” Mao perceived the
Soviet Union’s launch of Sputnik as proof of the superiority of commu-
nism. In this context, “satellite” is metaphorically used to suggest agri-
cultural yields would skyrocket.
And they did, at least in local officials’ false reports. On June 8, 1958,
the P eople’s Daily reported that Suiping County in Henan Province had
obtained an average wheat yield of 1,007.5 kilograms per mu, a number
that increased to 1,178.5 kilograms per mu on June 9 in Guchen County
in Hubei, and 1,197.0 kilograms per mu on June 11 in another Hebei
county. As other counties competed to report the greatest yield, the num-
ber rose to 4,292.7 kilograms per mu. Reported rice yields were driven to
delusional heights by the competition as well: the number started at a
substantial but realistic 1,637.5 kilograms per mu in a county in Fujian
but rose to 30,215.8 kilograms in a county in Guangdong.
Mao was initially skeptical, but he allowed himself to be convinced
by his sycophantic advisers. The renowned scientist Qian Xuesen (also
known as Hsue-Shen Tsien), a mathematical physicist who had taught
at MIT and CalTech and worked on the Manhattan Project, curried
favor with Mao by saying that the reported yields were theoretically
possible.20 The most exaggerated report, from Xushui County in Hebei
Province, claimed that its rice yield was 661.4 tons (0.6 million kilo-
grams) per mu—a figure that was about ten thousand times greater than
possible. But by late 1959, Mao could no longer deny the truth. On Jan-
uary 14, 1961, at the Ninth Plenary Session of the Eighth Conference
of the Chinese Communist Party, the end of the G reat Leap Forward
was announced. Mao was publicly criticized by Liu, and he also self-
criticized, accepting much of the blame for the catastrophe.
The second major part of the Great Leap Forward was steel manufactur-
ing. Mao believed that since collectivization would dramatically increase
agricultural production, rural labor could be transferred to manufacturing.
Steel output would have to be dramatically increased. Mao and the CCP
put forward the wildly unrealistic goal of doubling it within a year. Steel
production became China’s top priority, and around ninety million people,
or two-fifths of its labor force, w
ere deployed. Millions of backyard fur-
naces were fired up and many people melted down their cooking utensils
to help meet the goal (fig. 7.3). Many people donated their iron products—
such as handles and cooking utensils—to increase steel output.
The Great Leap Forward 147
However, these furnaces could not produce steel but only less refined
pig iron, which was mostly useless for industrial applications. Worse still,
because labor was transferred to produce steel, there was a shortage of
farmworkers; about 10 percent of crops could not be harvested. The esti-
mated daily per-capita availability of food (1,500 calories) dropped well
below the average requirement (2,100 calories); death rates spiked to
2.5 percent, 3.7 percent, and 2.5 percent of the population in 1959, 1960,
and 1961, respectively, compared with 1.1 percent for the years 1956
through 1958 (fig. 7.4).21 Crop yields dropped by more than 25 percent,
cotton yields by 35 percent, oil crops by more than 50 percent, and pork
production by 56 percent. Tens of millions of Chinese died of hunger.
Moreover, it is estimated that 140,000 to 200,000 refugees fled from
mainland China to Hong Kong illegally because of the famine.
148 The Effects of Mao’s Mass Campaigns
2,500 30
25
2,000
1,500
15
1,000
10
500
5
0 0
1955 1956 1957 1958 1959 1960 1961 1962 1963 1964
Death rate Calories
Figure 7.4 Death Rate and Average Caloric Intake of Chinese during the Great
Leap Forward
Data source: Ashton, Basi, Kenneth Hill, Alan Piazza, and Robin Zeitz, “Famine in
China, 1958–61,” Population and Development Review 10, no. 4 (1984): 615, 617.
Accounts from entrepreneurs and our analysis suggest that the fam-
ine experience, tragic though it was, inculcated two important qualities
in entrepreneurs: greater frugality and efficiency in the use of existing
resources and a penchant for repurposing seemingly useless resources.
0.7
0.6
Ratio over revenue
0.5
0.4
0.3
0.2
0.1
0
Cost over revenue Personal expense over revenue
Experienced the Great Leap Forward in their early life
Did not experience the Great Leap Forward in their early life
Figure 7.5 Costs, Personal Expenses, and Entrepreneurs’ Great Leap Forward
Experience
Data source: Chinese Private Enterprise Survey. Calculated by the authors. Costs
and personal expenses are divided by total revenues.
Repurposing Resources
Another effect of the G reat Leap Forward famine is that it forced
some future entrepreneurs to think outside the box and repurpose the
limited resources they had. This ability is particularly important for new
ventures, as they are often underfunded in their early stages. Compared
with cost reduction, repurposing is a more indirect method of utilizing
resources efficiently, as it involves reallocating resources that had been
intended for a different purpose to a more productive end. For many,
repurposing was a matter of desperation (for example, boiling and eat-
ing leather belts).32
But in the cases of Lu Guanqiu of the Wanxiang Group and Cao De-
wang of Fuyao, it was transformative. Many of our interviewed entre-
preneurs who experienced the Great Leap Forward also expressed this.
Around 30 percent of them described repurposing or exapting their
firms’ existing capabilities for new uses. For example, subject 26 invested
money in etiquette training for her employees so they could better serve her
customers. Later, she repurposed that capability by providing etiquette
training to other firms and individuals. Similarly, subject 27 invested a
152 The Effects of Mao’s Mass Campaigns
g reat deal of time and money into establishing a data analysis depart-
ment for his company. L ater, he repurposed that capability when he
extended his firm’s business into consulting. Likewise, subject 30
spent a lot of resources to train his employees to learn product and op-
erational design for his agricultural business. This later became the ba-
sis of his brand management department.
Many entrepreneurs who experienced the Great Leap Forward repur-
posed foreign investment into global expansion (and vice versa). As
elaborated earlier, the CCP-government has had a two-step macroeco-
nomic development strategy since the reform: first attracting foreign
capital and then letting domestic firms go global to compete in the inter-
national market. Foreign investment and international expansion involve
similar capabilities in a firm, and they fall under similar administrative
auspices in terms of the CCP-government’s policy and regulative regimes.
As such, the skills and connections developed in one arena can be repur-
posed for use in the other. For example, venture capital from developed
countries often brings opportunities for new market entry, and entre-
preneurs might reconfigure their resources and organizational processes
to support international expansion. Entrepreneurs who experienced
the Great Leap Forward famine tend to be more adept at redeploying
resources to leverage opportunities, gain access to finances and lower-
cost capital, and solicit trust and reduce uncertainty within potential
host markets.
Thus, Cao leveraged his connections to foreign investors to obtain
sufficient funds for international expansion, and Lu sent his employees
to learn from foreign investors. Receiving foreign funding from venture
capitalists can also help establish reputations, as firms from emerging
markets such as China’s often lack credibility. Wang Dianjie, who was
born in 1956, is the founding CEO of the multinational garment com
pany Xianglong. He has suggested that his early experiences with hard-
ship helped him turn foreign investment in his firm into a reputational
advantage.33
We show evidence based on the nationwide survey of Chinese entre-
preneurs as well (fig. 7.6). Entrepreneurs who experienced the G reat
Leap Forward famine in their early lives were 4.4 percent (9.4 percent
versus 5.0 percent, or 89.4 percent in relative terms) more likely to lever-
age foreign venture capital into international expansion than those who
did not experience the famine (i.e., the likelihood of investing abroad
The Great Leap Forward 153
0.1
0.09
0.08
Ratio of transformation
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
Experienced the Great Leap Did not experience the Great
Forward in their early life Leap Forward in their early life
As terrible a human tragedy as the Great Leap Forward and the subse-
quent famine were, some of their survivors drew benefits from their
hardships. Indeed, while the negative effects of such crises are signifi-
cant, research—including our own prior academic papers—has dis-
cerned potential silver linings. For instance, a recent finance article
shows that early-life exposure to natural disasters—earthquakes, vol-
canic eruptions, tsunamis, hurricanes, floods, and fires—can make CEOs
more entrepreneurial and resilient. The rationale is that having lived
through disaster, they are better able to navigate risk and more confi-
dent in their ability to do so. In addition to detailed statistical analyses,
the article’s authors cite a number of compelling anecdotal examples,
such as Apple’s Steve Jobs and Tim Cook, who both witnessed numer-
ous deaths due to natural disasters and as a result, they claim, became
greater risk-takers and more adventurous.38 Another paper shows via
statistical analysis what many Chinese entrepreneurs who lived through
the famine intuit: that the rate of entrepreneurship in the counties that
were the hardest hit during the famine is the highest.39
More recently, the world was struck by the COVID-19 pandemic, the
impacts of which w ill likely be felt for years. History has witnessed many
such crises and disasters, and the lessons they teach us are grim. The
media frequently compares COVID-19 with the 1918 influenza pan-
demic, which infected more than five hundred million people and killed
seventeen million to fifty million globally.40 Social scientists have found
that survivors experienced lifelong consequences that might be associ-
ated with the 1918 pandemic, including reduced educational attainment,
increased rates of physical disability, and lower incomes and socioeco-
nomic status. They also found that people who were exposed to influ-
enza in utero w ere more likely to suffer from poorer health and have a
higher mortality rate.41 There is abundant evidence for other long-lasting
The Great Leap Forward 155
HUANG NUBO WAS BORN IN 1956. In 1960, his f ather, Huang Junfu,
was accused of being a counterrevolutionary. Unable to bear the stigma,
he committed suicide. During the Cultural Revolution (1966–76), five
types of “enemies of the people” were singled out for persecution—
landlords, rich farmers, counterrevolutionaries, bad influencers, and
capitalist sympathizers (called rightists in China). People were assigned
to those categories based on their class backgrounds and family origins,
so their children, like Huang, w ere labeled future anticommunists.
Huang frequently engaged in fistfights to maintain his dignity. To lose his
stigma, he denounced his father and joined the Red Guard—the para-
military youth organization that aimed to guard its “Red God” Mao
Zedong and further the revolution. He attended many “struggle ses-
sions,” where class enemies were publicly tortured and humiliated, and
once used his “iron fists” to punch a former landlord, who died soon a fter.
All of this imbued him with a deep cynicism about the Chinese sys-
tem. For “people who lived through the Cultural Revolution,” Huang
later wrote, “there is no use trying to figure out who is a human and
who is a ghoul. . . . The Cultural Revolution taught my generation that
you must act like a wolf in order to survive.”1 When the Cultural
156
The Cultural Revolution 157
Revolution was over and universities reopened, Huang was the first
student from his province to be admitted to Peking University. After
graduating, he rose through the ranks in the party. In 1995 he became an
entrepreneur and launched the Beijing Zhongkun Investment Group.
Evidence suggests that entrepreneurs who came of age during the
Cultural Revolution tend to be less law abiding, since the decade-long
political campaign sabotaged laws and regulations and encouraged con-
tempt for Chinese institutions. According to the Annual Report of En-
trepreneurs’ Corruption Crimes, the majority of present-day corruption
cases were committed by people alive during the Cultural Revolution.2
Some reports explicitly attribute those offenders’ crimes to the “original
sin” of the Cultural Revolution.3
Since 2015, the Chinese government has passed regulations target-
ing p eople who ignore court orders to pay their debts, labeling them
“defaulters” and the “shameless” and banning them from plane travel,
applying for loans and credit cards, and promotions. Huang, like many
of his generation, has been on the defaulters list ten times and has had
to sell a significant portion of his property.4
Many Chinese entrepreneurs sought to leave the country after they
became rich, e ither b
ecause they feared for their personal and financial
security or because they had committed crimes and wanted to escape
punishment. As his business grew, Huang kept a lookout for opportu-
nities to escape.5 At one point, he offered to pay $160 million for a lease
on land in Iceland that he proposed to develop into a tourist site (Ice-
land rejected his offer).6 At the time, Huang expressed his fears that the
Cultural Revolution would recur, saying that the “harm” it had brought
to “his heart” could never be undone.7 The real estate developer Chen
Tianyong, who also lived through the Cultural Revolution, escaped to
Malta, declaring that he had lost his faith in China u nder the Chinese
Communist Party (CCP) government. Hundreds of other Chinese en-
8
trepreneurs have fled from China over the past decade, fearing that
President Xi Jinping will start a new Cultural Revolution.9
In this chapter, we explore the lasting effects of the Cultural Revolu-
tion, one of the most critical periods in China since the communist take-
over in 1949. Entrepreneurs who lived through this epoch are more
likely to bribe and commit other crimes, to default on their debts, and
to expatriate. The damage it did to China’s institutional credibility is
almost incalculable.
158 The Effects of Mao’s Mass Campaigns
tween August and September 1966, 1,772 p eople were killed by Red
Guards in Beijing, including many teachers and principals, 33,695
households suffered confiscation, and 85,196 families were forced to
leave their homes. More than 100,000 p eople died of persecution in
Guangxi Province.
Mao encouraged the violence, admonishing a Red Guard leader
named Song Binbin that she should change her name from Binbin
(meaning “polite, refined, and courteous”) to Yaowu (to be violent and
militant). On August 5, 1966, Song led a group of Red Guards into the
High School for Female Students Attached to Beijing Normal Univer-
sity (now the Experimental High School Attached to Beijing Normal
University), and they beat the principal, Bian Zhongyun, to death, the
first recorded killing of the Cultural Revolution (see photo of female
Red Guards performing their loyalty to Mao in fig. 8.1). Violence
162 The Effects of Mao’s Mass Campaigns
between factions loyal to Mao was common as well, with weapons that
ran the gamut from sticks and bricks to rifles, grenades, and even tanks
that were stolen from arsenals. Chongqing, Luzhou in Sichuan Prov-
ince, and Xuzhou in Jiangsu Province essentially entered a period of civil
war, and nationwide, there w ere more than seven million casualties and
237,000 deaths before Mao realized that the situation had gotten out
of control and issued a notice on July 3, 1968, to end such violence.18
Tens of millions of youths w ere affected by the Cultural Revolution.
Countless adolescents joined the Red Guards when they entered middle
or high school, eager to follow Mao by denouncing their teachers, den-
igrating knowledge, and torturing anyone they thought of as anti-Mao,
counterrevolutionary, capitalist, or feudalist. These youths w
ere the ex-
ecutive forces for confiscation and class struggle sessions, and their vio
lence was justified by Mao’s saying that revolution is innocent and
rebellion is reasonable.19 Since universities w ere shut down, professors
were sent to the countryside or factories to do manual labor. Jobs in
cities became scarce because the national priority was “continued rev-
olution,” not economic construction, and most employers stopped hir-
ing. To deal with the masses of idle students, Mao initiated the send-down
movement in 1967, relocating tens of millions of youths living in ur-
ban areas to poor villages, where they joined peasants living in poverty
and starvation so they could better understand the hardships farmers
experience and apply their knowledge to farming, eliminating the dif-
ferences between urban and rural areas and between m ental and phys-
ical work. One of the millions of young adults who were sent to the
country was Xi Jinping, whose father had fallen out of f avor with Mao
again. The sudden influx of youths created problems in many villages,
which lacked adequate food for their own needs. Fistfights and even
armed fighting were common.
The huge urban-rural differential and the poor organization of work
in rural areas resulted in chaos. Many of these urban children could not
live through hardship. For example, Xi ran away, but he was later per-
suaded to return by his uncle; ultimately, he stayed in the country for
seven years. When his father was rehabilitated, Xi became a Worker-
Peasant-Soldier student at Tsinghua University.20 But he was an excep-
tion; only those whose parents w ere high-ranking officials or who
performed very well in the send-down movement could return from the
countryside.
The Cultural Revolution 163
2004, Tang was prosecuted for bribery, insider trading, and illegal fund-
raising. He was sentenced to eight years in prison and his firm had to
pay a fine of $700 million, which bankrupted it.28 Another prominent
case was that of Mou Qizhong, a high-profile businessman and writer.
Born in 1941, Mou was a Red Guard and communist and wrote an es-
say, “Where China Should Be G oing,” to promote radical revolution.
Nonetheless, he fell afoul of the authorities and was sentenced to death
for his writings. Although he ultimately only spent four years in prison
and was released in 1979, he had lost all faith in China’s institutions.
The first business he started exploited the price differences in China’s
dual-track economic reform, in which commodities w ere priced low
within the plan but one needed government connections to get them.
By bribing officials, Mou was able to become rich by buying commod-
ities at the low inside price and reselling them for a profit.29 He kept
his freewheeling ways and in 2002 was found guilty of foreign exchange
fraud, for which he received a life sentence.30 He was paroled in 2016.
Yang Bin, who founded the gigantic conglomerate Shenyang Ouyang,
was born in 1960 and was orphaned when both parents died a fter be-
ing tortured. In 1997 Yang shopped his business ideas on greenhouses
and high-tech agriculture around and secured a contract with the Shen-
yang government. Yang deceived investors by overstating his business’s
wealth and cheated banks on loans of billions of dollars. When his firm
went public, he was ranked second on the Hurun Richest People list.
But it was all flimflam. Soon a fter, it was exposed that the business ex-
periences Yang claimed to have w ere fake and his businesses did not
involve high-tech agriculture. He was arrested for the crimes of falsely
reporting capital registration, the illegal possession of agricultural land,
contract fraud, and bribery.31
We used data on all Chinese publicly traded companies (not state-
owned enterprises) to examine how CEOs’ Cultural Revolution expe-
riences (that is, during their primary to senior high school stages, ages
six to eighteen) affected their tendency (i.e., likelihood) to become in-
volved in financial misconduct (for example, financial fraud, intentional
misrepresentation, insider trading, and stock price manipulation). On
average, CEOs with Cultural Revolution experiences are 2.7 percent
(5.7 percent versus 3.0 percent, or 90 percent in relative terms) more
likely to be involved in financial misconduct than those without them
(fig. 8.2). The statistical effect is substantial.
166 The Effects of Mao’s Mass Campaigns
0.07
0.05
0.04
0.03
0.02
0.01
0
Experienced the Cultural Did not experience the Cultural
Revolution in their early life Revolution in their early life
safety.43 Many entrepreneurs make sure that their c hildren have pass-
ports from the United States, Canada, or Australia. For example, Hua-
wei founder Ren Zhengfei’s d aughter, Yao Anna (Annabel Yao), is
reportedly a US citizen. 44
It is all the more important that we understand the effects of the Cul-
tural Revolution because reports suggest that a new one may be brew-
ing in China today. As discussed in previous chapters, Xi Jinping is
reviving Maoist ideas and imitating Mao in a number of significant—
and ominous—ways. The state-controlled media has begun referring to
Xi as the “great helmsman” and “people’s leader,” honorifics that w ere
previously reserved for Mao. Much as Mao did in his final decades, Xi
is creating a cult of personality around himself that ensures that his
mistakes will be systematically ignored or, as in Mao’s day, attributed
to the p eople who carried out his policies, such as Liu, Deng, Lin, and
the Gang of Four. Even the official verdict on the Cultural Revolution
and Mao, issued on June 27, 1981, did not specifically lay the blame at
his feet. The document, “Resolutions on Several Historical Issues of the
Party since the Founding of the People’s Republic of China,” merely
stated that the “ten-year ‘Cultural Revolution’ was a period of civil tur-
moil that was wrongly launched by the leaders and used by counter-
revolutionary groups to bring serious disasters to the party, the country,
and the people of all ethnic groups.”46
To further solidify his power, Xi has prosecuted many rival leaders
who could pose challenges to his rule—for example, Zhou Yongkang,
who was a member of the standing committee of the CCP’s Politburo
and so one of the top seven leaders of China. In the past, the CCP norm
was that standing committee members should not be charged with
crimes, but Xi saw to it that Zhou was tried for accepting bribes, abus-
ing power, and disclosing state secrets, and Zhou was sentenced to life
imprisonment and had his property confiscated as a result.
Xi has undertaken a massive anti-corruption movement that is unpre
cedented in the CCP. So far, some two million government officials
have been prosecuted.47 To find a precedent in Chinese history, you
would have to go back eight centuries to the reign of Zhu Yuanzhang,
the first emperor of the Ming dynasty (1368–1644), who prosecuted
around 150,000 officials.48
Xi’s anti-corruption campaign can be seen as a part of his power
struggle with former president Jiang Zemin, which intensified after Xi
took office. CCP governance norms are such that prior supreme lead-
ers hold significant power after stepping down, and Jiang had acted as
172 The Effects of Mao’s Mass Campaigns
a shadow ruler since he was succeeded in late 2002. But Xi could not
become an absolute leader u nder such a setup. Because Zhou was a
key member of Jiang’s faction, Xi took him down.49 Anecdotal evidence
suggests that the anti-corruption campaign has focused especially on
members of the Jiang faction, who are prominent in Shanghai and
Jiangsu Province, where Jiang first established his power base, and Jilin
and Liaoning Provinces, where Jiang’s trusted aide Wang Min built his
faction. Like Zhou, many of Jiang’s allies—and Xi’s targets—work in
the petroleum industry and in the public security bureau, procurator-
ate, and court that Zhou formerly controlled.50 Xi has also established
new groups to carry out his governance, which resembles the Central
Cultural Revolution Group, which has taken over some of the areas that
used to fall under the auspices of Premier Li Keqiang’s State Council. Xi
also relies heavily on Vice Prime Minister Liu He, who was his schoolmate
in middle school.
After the Cultural Revolution, Deng and the CCP-government ac-
knowledged some of the issues created by the permanent employment of
cadres—a problem that the Soviet Union had failed to grapple with effec-
tively. Many long-standing political officials were too old to work but re-
mained in their roles—or, like Konstantin Chernenko in the USSR, rose to
supreme leadership but became fatally ill. Deng abolished the permanent
employment of political officials in China and asked other senior leaders
to retire when he did. These retired officials then formed the Central Advi-
sory Commission to help the new generation of officials. In return, an
unwritten norm for the CCP system was that national leaders could rec-
ommend one of their c hildren to become a political official at the provin-
cial level. Deng’s son Deng Pufang was appointed chairman of China’s
Disabled Persons’ Federation, a provincial-level position, and later was
promoted to vice chairman of the Chinese People’s Political Consultative
Conference, a national position. Xi Zhongxun’s son Xi Jinping was ap-
pointed governor of Fujian and Zhejiang Provinces and later became pres-
ident and general secretary of the CCP. Jiang’s son Jiang Mianheng was
appointed president of Shanghai Tech University (a provincial-level posi-
tion), and Hu Jintao’s son Hu Haifeng is currently a party secretary of the
city of Lishui (prefectural level). Xi, however, seems interested in reversing
this rule and g oing back to Mao’s precedent of no term limits.
Relatedly, since Deng the custom has been for the leader to serve no
more than two five-year terms, and for the prior leader to designate the
The Cultural Revolution 173
176
The Third Front Construction 177
dustries there. For example, there are now thirty-three defense firms in
Xiaogan’s High-Tech Industrial Development Zone, all of them founded
by former technicians.2
In this chapter, we examine how the Third Front helped create a foun-
dation for private entrepreneurship and market development in China.
First, it scattered many military and industrial firms across the country,
which were later taken private. Second, it distributed human capital
much more widely. But it had negative consequences as well. Because
the underlying logic of the initiative was to locate facilities in places that
were difficult to access, many quickly became obsolete and were de-
serted. China’s rust b elt—that is, a region that has experienced indus-
trial decline, population loss, and urban decay—is an unanticipated
legacy of the Third Front Construction.
T H E T H I R D FRONT CONSTRUCTI ON
Figure 9.1 Cities Involved in the Third Front Construction (in dark shade)
Data source: Authors’ coding of different cities involved in the Third Front
Construction.
Soviet troops looted many of those facilities, a fter the founding of the
People’s Republic of China, the USSR had built 156 major industrial
projects on the Chinese side of the border. After the Sino-Soviet split,
Mao was rightly concerned that they might try to take them back.
China’s coastal regions, another area of significant industry, w
ere vul-
nerable to US bombers. After the Gulf of Tonkin incident on August 2,
1964, during the Vietnam War, the Seventh Fleet was deployed around
China’s Hainan Island. To China’s east lay Taiwan, from which the Kuo-
mintang could launch an attack.
Eastern Gansu, northwest Guangxi, Guizhou, Henan, Hunan,
Ningxia, Qinghai, Shaanxi, south Shanxi, Sichuan (including Chong
qing), Yunnan, and parts of Hebei provided China with a strategic rear-
guard (fig. 9.1). All of those regions had been less touched during the
The Third Front Construction 179
Factories that made cannons, tanks, artillery shells, and other materiel
were established in China’s north Shanxi Province. Panzhihua Steel Base
in Sichuan Province later became a national firm.
Because the locations w ere chosen for noneconomic reasons, con-
struction could be exceedingly costly. The 012 Airplane Factory/Base
in Hanzhong had twenty-eight production units, spanning two districts
and seven counties. One unit was spread across seven villages. This made
coordination particularly difficult.7 Investment in these projects ac-
counted for as much as one-half of China’s spending in 1971; the over-
all cost was $25 billion, more than a third of China’s spending over the
fifteen years of the program.8
Following the US-China rapprochement, the military purpose of t hese
projects waned. Given their unprofitability—many accounts have stated
that these investments w ere “too soon and too much”—the Chinese
government gradually wound the initiative down.9 After the reform and
opening up in 1978, the government followed a “shut down, cease,
merge, transform, and move” strategy to deal with the plants, especially
those in mountainous areas or those established in caves where mobil-
ity between facilities was limited. Hundreds of thousands of workers
lost their jobs, typically in plants. The result was a Chinese rust b elt.10
For example, Plants 5433 (a factory for tank shell assembly) and 5443
(a factory for tank shell stamping machines) in Yuncheng, Shanxi Prov-
ince, were both shut down b ecause travel between the facilities was so
11
costly. Other plants w
ere privatized, laying the foundation for private
entrepreneurship in those regions. For example, Shaanxi Auto Gear
General Works became privatized as Shaanxi Fast Auto Drive Com
pany and the manager Li Dakai became the new owner.
Some military firms entered the civilian market. Jialing Motors, one
of the largest motor makers in China, used to make tanks, and the
Changhong Group, one of the biggest television makers in China, used
to manufacture wireless and electronic devices. Some firms moved from
their obscure locations to cities.
As with the G reat Leap Forward and the Cultural Revolution, the
Third Front Construction project’s influence was far reaching. Many
firms, including private ones, are direct legacies of this mass campaign,
and those once-remote regions continue to benefit from the influx of spe-
cialized labor, technical skill, and know-how. On the other hand, it also
left a negative legacy of industrial and urban abandonment and decay.
The Third Front Construction 181
EN T ER P R I SE A
FTE R THE THI RD FRONT
C O N S T RU CTI ON
t hese characteristics. As Wang Danfu put it, “Working for Third Front
Construction firms provided me with precious experience and skills for
a high-tech start-up, as there has always been an apprentice model where
senior employees tend to coach junior ones.”17 More importantly, each
plant in the Third Front Construction initiative was a relatively isolated
and independent community where almost everyone knew each other.
This helped build networks and social capital, which made it possible
for entrepreneurs to bootstrap—that is, obtain resources from relatives,
friends, and others to fund their ventures.18 Wang’s initial capital came
from his colleagues and was obtained without any formal contracts or
IOUs.
Cities involved in the Third Front Construction have enjoyed high en-
trepreneurship rates b ecause they are seeded with physical and h
uman cap-
ital. Mianyang and Bazhong are neighboring cities in Sichuan Province.
While the former is near a mountain, the other is built on a plain and thus
did not qualify for the guiding principle of “easy to hide and close to
mountains.” Mianyang is now a high-tech city with numerous start-ups,
while Bazhong has a low entrepreneurship rate and a less vigorous
economy.19 Similarly, Jingmen, in Hubei Province, is one of the most in-
novative and entrepreneurial cities in China.20 In contrast, nearby Suizhou,
which did not participate in the Third Front, has a much lower entrepre-
neurship rate due to its lack of infrastructure. Traditional economic the-
ory would predict that all of these places would suffer from slow economic
development due to their geographic al disadvantages.21 But in these and
other cases, the traditional model was turned upside down.
We obtained data from a research team at the National School of De-
velopment at Peking University to examine more systematically how
cities’ Third Front involvement affects their entrepreneurship. The team
surveyed Chinese firms of different sizes, industries, and ages in e very
city in China and created a database that includes the number of new
firms; the extent of foreign, venture capital, and private equity invest-
ment; and patent and trademark registrations, providing an overall in-
dex of entrepreneurship and innovation that is adjusted for city size
(population and area).22
Many cities involved in the Third Front Construction have rates of
entrepreneurship that are comparable to the most developed east coast
cities (fig. 9.2). On average, based on the scale, cities involved in the
The Third Front Construction 183
58
56
Index of entrepreneurship
54
52
50
48
46
44
Third Front city Not a Third Front city
Third Front Construction are 22.4 percent (= 56.4 / 46.1 − 1) more ac-
tive in entrepreneurship activities than cities that w
ere not involved in
this campaign.
The industrial foundation left by the Third Front Construction clearly
provided resources for Deyang and Shiyan to transform and adapt to
the new economic era. Shiyan was built from scratch—before Mao’s ini-
tiative, there was no such city in Hubei Province. To establish the Sec-
ond Automobile Manufacturing Plant, the CCP-government moved
more than thirty design organizations and thirty professional factories
from major industrial provinces along the coast and the Yangtze River
to Shiyan. Eventually, more than one hundred thousand p eople were re-
located. From the 1980s to the mid-1990s, many small firms founded
by former employees of China’s Second Automobile Manufacturing
Plant (now called Dongfeng Motor Corporation) emerged to produce
automotive components and other related products. With further help
from the city government, which worked to attract foreign investment
and help small and medium-size enterprises with financing, land, and
tax rebates, Shiyan became one of the most innovative cities in China
and a model of industrial transformation.23
184 The Effects of Mao’s Mass Campaigns
The Third Front campaign also came at a significant cost. For one,
significant resources were invested in operations that turned out to be
too costly to sustain.24 More importantly, a lot of the Third Front re-
gions now make up China’s rust b elt. This includes Chongqing (origi-
nally part of Sichuan Province but an independent provincial-level
municipality since 1998), Deyang, Mianyang, and Panzhihua in Sich-
uan; Guiyang, Liupanshui, and Zunyi in Guizhou Province; Shiyan,
Xiaogan, and Yichang in Hubei Province; Lanzhou, Jiayuguan, and
Tianshui in Gansu Province; Baoji, Hanzhong, and Xi’an in Shaanxi
Province; and o thers.
While Shiyan and Hefei, in Anhui Province, w ere successfully trans-
formed into centers of high-tech and financial business services, Pan-
zhihua, in Sichuan Province, a major city for steel production during
the Third Front Construction, has suffered from a population outflow
and many of its plants have been shut down and deserted. Some were
transformed into industry relics in a bid to attract tourists. Panzhihua’s
government is making other efforts to attract people, such as providing
subsidies to those who settle there and give birth to second and third
c hildren.25 Similarly, the CCP leaders of Hanzhong, in Shaanxi Prov-
ince, are trying to upgrade and transform their heavy industries.26
Besides entrepreneurship activities, what other approaches might help
these cities revive? Some cities in the United States, Western Europe, and
Japan have made comebacks—for example, Cleveland and Pittsburgh.27
Historically and globally, t here are two fundamental models for indus-
trial transformation: industrial deepening, which is focused on enhanc-
ing capabilities fostered by prior industries, and industrial widening
models, which place significant focus on wholly new industries.
In an example of the former, California began its development in ear-
nest in the nineteenth century when it built railroads, deepening its in-
dustry base. After the Second World War, when the United States faced
the problem of excess industrial capacity, Silicon Valley became the main
engine for the Third Industrial Revolution. Similarly, Pittsburgh focused
on high-tech, education, tourism, and other service industries a fter its
steel industry became unsustainable. Its robotics industry is particularly
strong worldwide and was built on its engineering expertise at well-
The Third Front Construction 185
Unlike the handful of existing studies and accounts of the Third Front
Construction, which argue that its investments w ere mostly wasted, we
argue that the industrial foundation it laid in the Chinese hinterlands
has enabled a significant amount of private enterprise, mostly through
the privatization of existing plants by former employees. At the same
time, we recognize that the initiative also created a vast rust b elt once
it was abandoned.
What are some of the implications of the Third Front Construction
for doing business in China? First, most current foreign investors con-
centrate on coastal regions like Beijing, Shanghai, and southeast China
(for example, Guangdong Province), which are arguably overdeveloped
and have begun experiencing some population outflows.32 As we have
shown in this chapter, foreign businesspeople and investors should se-
riously consider opportunities in former Third Front cities, such as Xi’an
in Shaanxi Province. The CCP-government’s latest grand policy for de-
veloping the western regions, Guiding Opinions of the Central Commit-
tee of the Chinese Communist Party and the State Council on Promoting
the Development of the West in the New Era and Forming a New Pattern
(Guiding Opinion for short), highlights Xi’an’s advantages in electronic
information, high-end equipment, aerospace, energy and chemical en-
gineering, and advanced materials. The government aims to provide
support for solving key bottlenecks in national strategic areas and in-
dustrial development, especially aircraft manufacturing. This may rep-
resent enormous opportunities for Western air companies, such as Boeing
and Airbus, which can enter into business partnerships with potential
suppliers in Xi’an.
The Guiding Opinion also suggests that b ecause of their industrial
foundations and special geographical locations, Chengdu, Chongqing, and
Xi’an are likely to become international gateway hubs and metropolitan
cities like Beijing and Shanghai.33 Chengdu recently won the opportunity
to build the National Artificial Intelligence Innovation Application Pilot
Zone; international artificial intelligence and other high-tech firms
might consider partnering with some of its firms. The cities of Chengdu,
The Third Front Construction 187
349-99188_Rothfels_ch01_3P.indd 6
IV THE EFFECTS OF
MAO’S SOCIALIST
INSTITUTIONS:
POL ITIC AL AND
ECONOMIC SYSTEMS
Any [military] company with a CCP branch has high morale and
bravery in combat, and the chief officer can also receive effective
democratic supervision.
—Mao Zedong
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349-99188_Rothfels_ch01_3P.indd 6
10 The Political System
and Private Enterprises
in China
We should delegate power from central to local. . . . Political centralization
and economic decentralization should coexist.
—Mao Zedong
191
192 The Effects of Mao’s Socialist Institutions
content was banned from the media and replaced with revolutionary
songs, and there was a crackdown on organized crime, including the
persecution of entrepreneurs and businesspeople and confiscation of
their property, among them Li Jun of the Chongqing Junfeng Property
Limited Company. Many entrepreneurs left Chongqing as a result, and
others were frightened to do business t here. Chongqing grew, but mainly
as a result of state investment.
Bo’s childhood friend Wang Shi, founder of Vanke, at one time the
largest real estate enterprise in China, put it best. “During the period of
singing the red and fighting the evil [organized crime and corruption],
a large number of Chongqing entrepreneurs in manufacturing and ser
vice industries were forcibly imprisoned and their property was confis-
cated,” he said. “Even the lawyer who defended them was wrongly
sentenced to imprisonment.” Those actions, he continued, not only
“violated the principles of the rule of law” but “have had a negative im-
pact on entrepreneurs. They’ve given me the cold sweats.”3
Wang Yang preceded Bo as Chongqing’s party secretary and later be-
came party secretary of Guangdong Province, the vibrant manufacturing
center in southern China. Wang was a leader of liberal reform within the
CCP and a leading advocate of the free market economy; he even extolled
the advantages of American individualism.4 When he was mayor of the
city of Tongling in Anhui Province in 1991, he had written in the Tongling
Daily that China’s economic reforms should be continued, even a fter the
1989 Tiananmen Square Massacre. Wang’s Guangdong Model thus fo-
cused on depoliticizing the economy and society and promoting business
and economic activities. Thanks to his achievements in Guangdong Prov-
ince, Wang gained a seat on the Politburo Standing Committee.5
This chapter provides historical perspective on Mao’s ideas about
communist governance and how they are implemented at the local level.
Unlike Europe, which has been divided into different countries for all
of its recorded history, China has maintained a strong centralized gov-
ernment since it was unified by Qin Shi Huang in 221 BCE. Before
then, it experienced a short feudalist period and perennial wars just as
Europe and other parts of the world did (in the Warring States period,
475–221 BCE). Qin Shi Huang realized the enfeoffment system that
distributes land to male heirs to establish their own kingdoms was prob-
lematic, so thereafter, Chinese nobles had honorary titles but did not
control land.6 Political centralization persisted for most of the next two
The Political System 193
millennia with rare and short interruptions, such as the Northern and
Southern dynasties (420–589 CE), the Five Dynasties and Ten Kingdoms
period (907–79 CE), and more recently, the confrontations between the
Beiyang government in the north and the Kuomintang government in
the south (1925–28). Confucianism, which urges sincere allegiance to
the monarch, became a spiritual and political norm. The authoritarian
regime adopted by the CCP can thus be seen as a continuation of the
long Chinese tradition of absolute monarchy with a centralized politi
cal structure. It is likely that if the Kuomintang had stayed in power, it
would have instituted a similarly authoritarian regime. That is in fact
what it did when it moved to Taiwan, where democratization did not
begin until 1987.
But this brief comparison of Chongqing and Guangdong suggests,
within this centralized system, t here are large regional variations in the
ways that businesses and governments interact, and economic decen-
tralization amplifies the importance of lower-level politicians. Local pol-
iticians’ ideas and ideologies and their zeal for political promotion
influence their policies.
Local leaders—like Bo and Wang—compete against one another for
political promotion, frequently based on economic performance, and
they are granted considerable discretion over the h andling of economic
affairs within their jurisdictions, so long as they are fully obedient to
their supervising authority. As a result, localities such as provinces and
cities have become the nexus of China’s economic growth, and their top
leaders are portrayed as essentially chairpersons and CEOs of their gov-
erned locales. In the words of a longtime observer of China’s car indus-
try, “Think of it [the city of Shanghai] as Shanghai Inc., with the mayor
as the chairman and CEO.”7 But as we elaborated in e arlier chapters,
politicians, like all p
eople, are influenced by their early experiences. So,
politicians with a strong Maoist imprint that is antagonistic to Western
capitalism are thus less likely to build connections with entrepreneurs
or implement policies that are conducive to the growth of the private
economy.
Because so many Western commentators wrongly portray China and
the CCP as akin to the Soviet Union, we specifically compare the two
systems. China’s more decentralized system was able to accommodate
Deng Xiaoping’s gradual introduction of reforms, whereas the USSR
and the other countries in the Eastern Bloc used shock therapy to change
194 The Effects of Mao’s Socialist Institutions
their systems all at once, with very different consequences.8 In our recom-
mendations that flow from this chapter, we advise foreign firms to consider
local politicians’ backgrounds when making location decisions—and
to leverage the competition among local governments.
Political Centralization
Top-down control is a basic characteristic of a Leninist party with a
strong centralized hierarchy that dictates the political process.10 In
China, the central or national-level authority selects provincial-level
party leaders (party secretaries and CCP committee members). Then
those provincial-level leaders select prefectural-level party leaders. Con-
tinuing in this fashion, leaders are determined down to the lowest, town-
ship level.
CCP-government leaders at the provincial level decide who to appoint
as city-or prefectural-level political leaders (fig. 10.1). This group in
turn forms that level’s CCP standing committee, including the party sec-
retary (the top-ranked official), the government leader (for example, the
city mayor, the second most senior official, who is at the rank of vice
party secretary), and other vice party secretaries. In this way, the political
leadership of geographic entities follows a politically centralized logic,
which contrasts with the structure of most Western countries, where
national-, provincial-or state-, and local-level officials are elected from
the bottom up by voters in their respective jurisdictions, and there are
no superordinate-subordinate relationships between different levels of
government. For example, US president Joe Biden recommended that
New York State governor Andrew Cuomo resign following the revelation
of his sexual abuse scandal rather than removing him from office, which
he did not have the authority to do.11 In contrast, Jiang Chaoliang, the
The Political System 195
Ministry 1 Ministry 2 …
Provincial Provincial
…
bureau 1 bureau 2
City CCP committee/government
City City
…
bureau 1 bureau 2
County CCP committee/government
County County
…
bureau 1 bureau 2
Economic Decentralization
To understand how a geographic entity like a province or city man-
ages the economy within its jurisdiction, it is important to understand
in more detail how political appointment proceeds in China. As noted,
political leaders are appointed by the level above them. They then ap-
point the directors of the different bureaus or agencies within their ju-
risdictions. Among other responsibilities, such as city management, the
economy, environmental protection, science and technology, and trans-
portation, these directors have responsibility for the different industries
within the locale, as well as its overall economic development. In other
words, the management of the economy follows a decentralized logic.13
While this structure existed before China’s opening, following 1978,
196 The Effects of Mao’s Socialist Institutions
cases the collapse of their entire economy. The strategy followed was a
whole-scale reform, collectively known as shock therapy that was in-
tended to transition the planned economy in these countries into a free
market one through the sudden release of price, currency, and tariff con-
trols and regulations; the immediate elimination of state subsidies to
state-owned firms; and even privatization of t hese firms. However, such
a sudden transformation led to chaos. B ecause of this, many p
eople be-
lieved that b ecause the Iron Curtain had fallen, the “Bamboo Curtain”
would be next—that China’s economic liberalization efforts would
infect and ultimately undermine its political system. The Tiananmen
Square protests in 1989 suggested that that was the case. But China’s
economic transition turned out to be much smoother and, so far, more
successful than the USSR’s. And as we have argued in t hese pages, much
of Mao’s legacy remains intact.
Consistent with existing scholarly work, we suggest that one reason
for this difference is the unique multidivisional form of China’s social-
ist institutions described e arlier.20 As Xi Zhongxun (father of Xi Jinping)
told Deng Xiaoping in 1979, “In a country as big as China, each prov-
ince has its own characteristics, and should be developed according to
the characteristics of the province.”21
Under the Soviet model, each industry was managed separately, so
different regions and republics tended to become highly specialized. In-
crementalism was impossible, as changes in one republic and its flag-
ship industries would affect the other republics and their industries via
interconnected supply chains. Thus, incremental and region-wide reform
of this sort was much more logistically difficult and would lead to sig-
nificant industrial gaps in many regions. As the economist Grigory Yav-
linsky put it at the time, the Soviet Union “needs to be built anew, not
reformed.”22 And so he proposed the 500 Days Program, a shock ther-
apy regime that aimed to change it from top to bottom in less than two
years, which ultimately led to the collapse of the USSR.23
Under China’s decentralized economic institutional arrangement, an
incremental, region-by-region, market-oriented reform was more feasi-
ble. As Deng asserted, “We should reform incrementally from one re-
gion . . . and then spread to the whole country.”24 Deng first introduced
capitalist practices, such as establishing free-trade zones, allowing pri-
vate firms to engage in manufacturing for exportation, and introducing
market mechanisms to determine workers’ wages, in Guangdong Province
200 The Effects of Mao’s Socialist Institutions
while keeping the other provinces under a planned economy. If the ex-
periment failed, the CCP-government could roll it back. If it succeeded,
it could be gradually applied to other provinces.
As recent research has shown, the Chinese leaders did initially con-
sider a shock therapy–like approach.25 As described in e arlier chapters,
the initial plan was to quickly deregulate prices in 1988. Yet word got
out before the official announcement, and there was a rush to stockpile
goods, which created bank runs and hyperinflation.26 This failed policy
and the Tiananmen Square Massacre in 1989, which resulted in the purg-
ing of many of the leaders who had promoted faster liberalization, such
as Zhao Ziyang, solidified the CCP-government leaders’ determination
that reforms be implemented gradually.27
Of course, not all politicians are the same. Specifically, while there
are strong incentives for politicians to be probusiness, their life histo-
ries also shape their attitudes.33 The imprinting we described earlier
should apply to politicians just as much as it does to entrepreneurs, and
our statistical research bears this out. Politicians with a strong Maoist
imprint—those who joined the party before the 1978 economic reform—
were more antagonistic to business.34 Specifically, politicians who
joined the CCP in the Maoist era (before 1978) were less likely to make
connections with entrepreneurs—for example, by inviting them to one
of the two nominal legislative councils in China. As with entrepreneurs,
these cognitive frameworks may trump their self-interest. Even though
the promotion of economic growth is beneficial for their c areers, some
politicians—specifically t hose with a deeper Maoist imprint—are resis-
tant. For example, Bo Xilai’s use of “red” songs to motivate the popu-
lace and his policies (e.g., using state banks to invest and finance
small-and medium-size firms and developing cheap government-funded
housing for low-income farmers) reflect a deep Maoist imprint. His op-
erations w ere harmful to the Chongqing economy and many entrepre-
neurs fled from Chongqing, and he ended up being sentenced to life in
prison.
Wang Yang’s imprinting was different. Early on, he was a teacher at the
May Seventh Cadre School in Suxian, Jiangsu Province. Mao established
the May Seventh Cadre Schools as labor camps that combined hard agri-
cultural work with the study of his writings in order to “reeducate” cad-
res and intellectuals. Wang became disillusioned with Maoism and the
Cultural Revolution a fter seeing how poorly the interned p eople w ere
treated. In 1979 he was sent to the CCP’s Central Party School to learn
the most updated communist theories of political economy. This experi-
ence firmed up his belief in economic reform. When he later became the
party secretary of Guangdong Province, the economy was vibrant under his
leadership.35 Wang is now one of the seven top leaders in China.
We next investigate in more detail the intuition that political leaders
with a Maoist imprint would be more antagonistic t oward business and
market-related ideas. Since party secretaries and mayors are in charge
of the socioeconomic affairs of their jurisdictions, their subjective feel-
ings have objective consequences. Consistent with this, prior research
shows patterns of probusiness and antibusiness behavior among local
202 The Effects of Mao’s Socialist Institutions
64
Index of entrepreneurship
62
60
58
56
54
52
50
Overall Number of new Number of foreign Number of venture
entrepreneurship and firms (index) investments (index) capital and private
innovation score equity investments
adjusted for population (index)
Party secretary joined the CCP after 1978
Party secretary joined the CCP before 1978
politicians who were imprinted by Maoism before and after the reform
in 1978.36 Since the CCP-government has a dyadic leadership structure,
with the party secretary and mayor as the top leaders of the CCP com-
mittee and city government, respectively, we tracked both. As discussed
earlier, the party sits above the government, so the party secretary is the
most senior official in the jurisdiction.
We first examined data obtained from the National School of Devel-
opment at Peking University. On average, party secretaries who joined
the CCP before 1978 are more antagonistic toward entrepreneurship
(as reflected in the index of number of new firms in their jurisdictions),
foreign investment (as reflected in the index of number of foreign in-
vestments), and index of numbers of venture capital and private equity
investments that incubate entrepreneurship (fig. 10.3). These individu-
als, based on our prior work, might still maintain a Maoist mindset that
perceives private business, especially foreign investment, as at odds with
communism. The overall index of entrepreneurship and innovation in
their jurisdictions is also smaller (10.15 percent less) for party secretar-
ies who joined the CCP before 1978.
We also determined the data pattern for mayors (fig. 10.4), which is
consistent with that for party secretaries. On average, mayors who
The Political System 203
66
64
Index of entrepreneurship
62
60
58
56
54
52
50
48
Overall Number of new Number of foreign Number of venture
entrepreneurship and firms (index) investments (index) capital and private
innovation score equity investments
adjusted for population (index)
Mayor joined the CCP after 1978 Mayor joined the CCP before 1978
joined the CCP before 1978 are also more antagonistic toward entre-
preneurship, foreign investment, and venture capital and private equity
investments. The overall index of entrepreneurship and innovation is
also smaller for mayors who joined the CCP before 1978. Statistical
analysis supports this pattern.37
Second, a typical probusiness policy is the establishment of develop-
ment or tax-free zones (also called special economic zones) to attract the
establishment of new firms, either domestic or foreign. Even the leaders
of the small town of Sanzao in the city of Yancheng, Jiangsu Province,
with around fifty thousand people, established such a zone.38 Firms
founded in these zones enjoy streamlined administrative procedures (for
example, registration), better access to bank loans and other financial
instruments, and tax rebates.39 Party secretaries are 79.9 percent less
likely (= 2.72 / 13.5 − 1) to implement probusiness policies such as estab-
lishing a special economic zone if they joined the CCP in the Maoist pe-
riod than those who joined after 1978 (fig. 10.5). Similarly, mayors are
around 81.1 percent less likely (= 2.31 / 12.22 − 1) to establish a special
economic zone if they joined the CCP in the Maoist period than those
who joined a fter 1978. Our statistical analysis also provides evidence for
this phenomenon.40
204 The Effects of Mao’s Socialist Institutions
16
Third, politicians can raise their profiles and attract new businesses
to their jurisdictions by developing ties to the CEOs of publicly traded
firms in their cities. One way to do this is to appoint successful busi-
nesspeople to the National People’s Congress or the Chinese People’s
Political Consultative Conference.41 The leaders of the city of Kunshan
of Jiangsu Province attracted several businesspeople to invest there by
giving away such memberships (this came to light because of a scandal:
one of t hose leaders was the CEO of a metal-producing firm that failed
to provide necessary safety measures; an explosion in their plant killed
and wounded numerous workers).42
On average, party secretaries who joined the CCP before 1978 had
1.74 (or 48.3 percent) fewer business-government ties than those who
joined the CCP after 1978. Similarly, mayors who joined the CCP be-
fore 1978 had 1.06 (or 33.2 percent) fewer business-government ties
than those who joined the CCP after 1978 (fig. 10.6). Using statistical
analysis, we found further supportive evidence for this phenomenon.43
Neoliberal economists typically portray governments, particularly
communist governments with “command economies,” as Hobbesian
Leviathans, all-powerful political entities that must be tamed lest they
destroy the businesses that they seek to control.44 Governments lack the
fine-grained data that are needed to allocate resources efficiently, and
The Political System 205
4.00
Number of ties to businesspeople
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Party secretary Mayor
Joined the CCP after 1978 Joined the CCP before 1978
had produced its first set of cars.51 Musk thanked the Chinese govern-
ment and people emotionally while criticizing the US government and
people.52 Tesla also established its only non-US research facility in
Shanghai. Many Chinese have reacted very positively to Tesla; some
even worry that their local brands, such as NIO and Xpeng, will be in
trouble.53 Microsoft also actively cooperated with rather than defied the
Chinese government and as a result has dominated the Chinese market
for decades.54 While their pliancy has earned them some critiques do-
mestically, we think it is important to recognize them as examples of
companies that have successfully entered and expanded in China. Under-
standably, some firms may not want to follow their example, although if
that is the case, perhaps they should rethink their ambitions in China.
In the next chapter, we will explore how the socialist system manifests
itself in private firms in China. We specifically focus on the two typical
ways that the CCP-government controls the private sector—state owner
ship and party branches. These can also be traced back to the experi-
ences and influence of Mao.
11 The Socialist Economy and
Private Firms in China
The purpose of the socialist revolution is to liberate productive forces. The
shift from private and individual ownership to the socialist collective one
regarding agriculture and the handicraft industry and from capitalist
ownership to socialist ownership of private industry and commerce inev-
itably greatly liberated productive forces. This creates social conditions for
the development of industrial and agricultural production.
209
210 The Effects of Mao’s Socialist Institutions
example was the famous banker Rong Yiren (fig. 11.1), who “volun-
tarily” relinquished his property to the CCP and later occupied impor
tant positions in the party-state system (for example, vice president).
Rong was worried about his capitalist identity and asked Mao whether
he was subject to class struggle. Mao said that “in the unique Chinese
context, these contradictions could be nonconfrontational and solved
in a peaceful way.”3 A major consequence of such transformation was
that all service industries became state owned.
Mao was intensely focused on industrializing China. The country
was so undeveloped in that respect, Mao reflected, that “China could
not even manufacture matches or nails, as a result they were called
‘foreign made’ matches and nails.”4 Soviet aid was especially impor
tant in the early days of the P eople’s Republic; at one point there w
ere
156 major development projects u nder way that were approved and
supported by Joseph Stalin. China’s entire manufacturing industry was
state owned.
The Socialist Economy 211
COEs, and those who started their businesses from scratch (that is,
greenfield).
The first source of private firms is farmers, leaders of agricultural pro-
duction teams, and heads of villages who transformed their agricul-
tural collectives into township- village enterprises.16 Some of these
enterprises later developed into gigantic business groups and multina-
tional enterprises. For example, Lu Guanqiu was a farmer before he
founded the Wanxiang Group—now the largest automotive components
manufacturer in China—in 1969. In that year, the CCP-government al-
lowed each township government (called p eople’s communes then) to
own one agricultural machinery factory, and Lu successfully won the
bid. By 1988, he had gained full control of the township-village firm.
Some scholars suggest that the unprecedented economic growth in
The Socialist Economy 215
We welcome state ownership in our firm; it helps us apply for [and receive]
bank loans.
—Xiao Guoying, founder and CEO of
Zhejiang Huagang Dyeing and Weaving Group25
60
Percentage of respondent entrepreneurs
50
40
30
20
10
0
No difficulty With some difficulty With a lot of difficulty
Entrepreneurs without state ownership Entrepreneurs with state ownership
Figure 11.2 State Ownership and Level of Difficulty of Financing for Private
Firms
Data source: Chinese Private Enterprise Survey. Calculated by the authors.
60
40
30
20
10
0
Entrepreneurs without Entrepreneurs with
state ownership state ownership
Discrimination against privately owned firms
Excessive collateral requirements
Figure 11.3 State Ownership and Reason for Difficulty of Securing Bank Financing
for Private Firms
Data source: Chinese Private Enterprise Survey. Calculated by the authors.
14.4
14.2
Government appropriation of profits
14.0
13.8
(percentage)
13.6
13.4
13.2
13.0
12.8
12.6
12.4
Without state ownership With state ownership
(investment) (investment)
More and more private firms are following the CCP (fig 11.5). The
Chinese government now mandates the establishment of CCP branches
in private firms (“branch” is sometimes translated as “cell” or “organ
ization”; we prefer “branch” and use it throughout this book). Accord-
ing to a recent report from China’s Federation of Industry and Commerce,
they now exist in more than half of China’s private firms.64 As noted
earlier, CCP branches act to socialize new members and help the firm’s
226 The Effects of Mao’s Socialist Institutions
government policies for their survival and success, and the CCP branch
facilitates communication between the government and private firms.
Plus, they serve a number of h uman resource functions.
One role of the CCP branches is to quickly socialize and train new mem-
bers by trying to understand their needs and mapping a clear career path
for them. Fuyao Glass provides comprehensive training for new employees
and tries to incorporate them into its “family.” The company’s CCP branch
performs a socioeconomic background check of new employees to un-
derstand their current status and provides bonuses, interest-free loans,
and free medical and other services for those living in poverty.76
CCP branches also provide an avenue for individuals to interact with
each other, nurturing a sense of belonging and solidarity. The Beijing
Jing’aogang Group, a $1 billion business conglomerate, has a strong
CCP branch that organizes entertainment activities to get employees to-
gether. It also provides free housing for employees living outside Beijing.77
Our interviewed entrepreneurs agreed that the CCP branch enhances
company cohesion. For example, subject 13 said, “Our company has
also established a CCP branch. I think it leads to a sense of belonging-
ness. . . . This should be a good thing.”
Additionally, CCP branches tend to have a mentoring model in which
more experienced CCP members help new employees. The Hengtong
Group pairs three to five non-CCP and new employees with one CCP
mentor, who meets with them on a regular basis for skill training. In
this way, firms’ technical experience can transmit from employees of
older generations to those of new ones.78
CCP branches might also have a modeling effect: CCP members’ devo-
tion and hard work can incentivize others. The Hengtong Group’s branch
showcases highly productive employees and offers them bonuses as well.79
Around twenty CCP members in Dongguan Zelong Cable, a private cable
producer, worked u nder the leadership of the branch secretary Ye Zhide to
obtain important patents, eating and sleeping in their offices until the push
was successful, which incentivized hundreds of non-CCP members to do
the same. Many other private firms in the city of Dongguan also use CCP
members as “pioneers” to motivate other employees.80
Our interview subject 1 said, “I think it is precisely b ecause of the
CCP branch and the fact that a company has CCP members that we can
use this core force to influence another group of people,” and “I feel
that it is precisely because our company has more than ten or twenty
The Socialist Economy 229
35
30
Percentage of respondent
25
entrepreneurs
20
15
10
5
0
Employees Employees Employees Employees Employees
receiving receiving receiving receiving receiving
medical old-age unemployment work injury birth
insurance insurance insurance insurance insurance
Without a CCP branch With a CCP branch
Our larger point is that foreign observers should not perceive the Chi-
nese political and economic system through overly ideological lenses or
take what may appear to be unusual features out of context. To under-
stand the business environment in China, one should accept it as a whole
and unique system, and aim to understand the roles of all its different
elements.
349-99188_Rothfels_ch01_3P.indd 6
Conclusion
The longer you can look back, the farther you can look forward.
—Winston Churchill
233
234 Conclusion
have been wrong about China’s f uture over the years is that they have
failed to account for its history—in particular the legacy of Mao.
Mao’s effects on China and the Chinese population have been perva-
sive. Our perspective is built on imprinting theory, the ways that the
ideas and experiences that individuals are exposed to at critical junc-
tures in their lives shape their later development. We specifically apply
this perspective to China’s business leaders, showing that three key ideo-
logical principles that they w ere exposed to during Mao’s reign—
nationalism, frugality, and a devotion focus—persistently influence their
ideas about internationalization, cost strategy, and social responsibil-
ity, while Mao’s military strategies shaped their thinking about business
strategy and organization. Mao’s theory of socialist construction and
the mass campaigns that applied it, such as the Great Leap Forward and
the Cultural Revolution, influence entrepreneurs’ attitude toward re-
source use and their institutional confidence to this day. Another key
campaign from the Mao era, the Third Front Construction, has had last-
ing effects on regional entrepreneurship. Mao left his imprint on Chi-
na’s institutional structures, specifically its centralized political system
and decentralized economic system. Overall, we stress that Mao and the
CCP play the role of a fulcrum in China—all reforms and changes, be
they to the state or to the market, stem from those systems. As both
Mao and Xi have stated, “The CCP leads everything.”
In this concluding chapter, we lay out at a macro level the “first princi
ples” of Chinese governance, in both the business and political realms.
This leads to the articulation of a “Chinese management model” derived
from our examination of the lasting influence of Mao. After that, we
summarize the policy implications for the United States and the West
in general, and venture a view of China’s future.
We all have our own sets of a priori assumptions that shape our de-
cisions and approaches to different situations. The West’s general reluc-
tance to examine the long-standing effects of Chinese communism and
socialism from a neutral social science perspective stems from such un-
conscious biases. In the United States, for instance, there have been two
major “red scares.” Throughout the Cold War with the Soviet Union,
communist ideas were infused with negative connotations—a tendency
Conclusion 235
Xi’s Mao revival may stifle business innovation and slow economic
growth, given the size and scope of China’s current economic position,
the regime has a large margin for error.12 We need to be prepared to
coexist with this competitor, as US trade representative Katherine Tai
argued in late 2021 and US secretary of state Blinken emphasized mul-
tiple times in his May 2022 speech.13 Our perspective helps flesh out
what Tai’s model of “durable coexistence” might entail.
PRINCIP
LES OF B USI NE SS
Resource Consciousness
Resource consciousness is also an important principle for doing busi-
ness in China and with Chinese business partners. As we showed, Mao
emphasized the principle of frugality, drawing on an important element
of traditional Chinese culture that has persisted for thousands of years.
Many Chinese entrepreneurs pay particular attention to cost cutting, a
principle that is emphasized in Chinese business schools.19 Although
business education was only introduced to China a fter the reform, many
Chinese entrepreneurs learned frugality through Mao’s example.
240 Conclusion
Furthermore, the Great Leap Forward and the resulting famine made
a generation of Chinese aware of the preciousness of resources, analo-
gous to how the G reat Depression inculcated a sense of thriftiness in
the generation that came of age during it. China was resource poor in
the 1970s, when the reform began and many Chinese entrepreneurs
were starting out. While Ren Zhengfei of Huawei and Liu Yonghao of
the New Hope Group are billionaires, they are notoriously thrifty and
expect their firms to pay particular attention to cost cutting. Repurposing
and transforming what seems useless into something valuable is another
expression of resource consciousness. As we have seen, Lu Guanqiu of
Wanxiang transformed scrap metals into an agricultural machine fac-
tory, and Cao Dewang adapted his facilities for auto-glass making.
Furthermore, and as discussed in prior chapters, socialist institutions in
China prioritize state-owned enterprises when allocating resources, es-
pecially better access to bank financing and government funding. Pri-
vate entrepreneurs have to make the most of what they have, concentrating
their weaker forces, in Mao’s military formulation, to annihilate their
enemies (win the competition).
Context Consciousness
A key argument of our book is that Western analysts try to under-
stand China without context, ignoring its strong Maoist roots and other
contextual factors. Since Mao and the CCP came to rule China in 1949,
the CCP-government has emphasized its exceptionalism in the same
ways that the United Kingdom and the United States have over the last
two centuries. Mao departed from the Soviet Union’s model, develop-
ing a socialist system and economy “with Chinese characteristics.”
Consider the Maoist strategy, described in earlier chapters, of sur-
rounding cities from the countryside, which recognizes the fundamen-
tally rural nature of the Chinese population. Mobilizing farmers in
villages was seen as an aberration of orthodox communism; Joseph
Stalin and Chinese Bolsheviks scorned Mao for his ignorance of “real”
Marxism-Leninism.
But just as the Chinese-specific military strategy allowed the CCP to
win its war against the Kuomintang, firms that a dopted the approach
have enjoyed success. For example, Pinduoduo was founded in 2015
and grew rapidly to earn more than $200 billion by reaching out to
Conclusion 241
eople. For example, our research has shown that Chinese entrepreneurs
p
tend to focus more on guanxi (the system of social connections and re-
lationships that facilitates business and other dealings) in their busi-
nesses, sometimes even setting aside rivalries to respond to the interests
of society as a w hole. Archrivals Jack Ma and Pony Ma have cooperated
on various philanthropic c auses, for example.26 Chinese and Japanese en-
trepreneurs tend to avoid litigation, preferring informal negotiations.27
Shi Yuzhu utilized the social norm of filial devotion to popularize his
famous melatonin product Brain Platinum.
The Cultural Revolution sabotaged China’s institutions and respect
for the rule of law; as we saw, many entrepreneurs who experienced it
have sought to escape China to avoid legal sanctions. Indeed, the re-
form and opening up w ere enabled by a group of farmers who illegally
broke up their agricultural collective. Similarly, private firms w ere tech-
nically illegal until 1992, but many successful firms were founded, such
as TCL (founded in 1981), Haier (founded in 1984), Huawei and Wa-
haha (founded in 1987), and the Giant Group (founded in 1992).
Guanxi and personal connections are particularly important for busi-
ness venturing in China, as we have shown in our discussion of the
Third Front Construction. Social capital enables the high entrepreneur-
ship rate in many Third Front cities, where many new businesses are
funded informally by coworkers and potential customers.
Interestingly, many Chinese retain this deeply ingrained emphasis on
informal norms even a fter immigrating to the United States. An exam-
ple is the Abacus Federal Saving Bank, founded by Thomas Sung and
his US-born d aughters, which was the focus of an Oscar-nominated doc-
umentary. It had become a norm in Sung’s community to use cash in
28
order to evade taxes, with the consequence that p eople did not have
formal credit histories. Abacus utilized informal networks and connec-
tions to understand potential borrowers’ creditworthiness. For example,
when a restaurant owner came to Abacus to get a loan for refurnishing,
Sung did not need to see any documents b ecause he ate in the restau-
rant and so knew very well the borrower’s risk of default. This became
a serious legal issue when Abacus sold its mortgages to Fannie Mae,
which had strict rules on loan qualifications.
The economic traditions of this Chinese community confused the jury
when Abacus’s case went to trial. In the community, many loans were
not enforced by law but governed and managed by the social network.
Some loan defaults were forgiven as gifts among friends or relatives.
Conclusion 243
S erious conflicts w
ere arbitrated by “big men”—figures with high social
status—rather than courts. Importantly, this norm runs deeper than
Mao’s influence, as the members of this community had mostly migrated
to the United States when the Kuomintang was still the ruling party.
Persistence
Mao constantly elevated the need to be persistent—have grit, patience,
a strong work ethic, diligence, and so on—and the doctrine is an impor
tant traditional value of the Chinese people as well. Many quotes from
Mao, as we have shown, have become mottos of inspiration for entre-
preneurs, especially those on hard work, diligence, and perseverance,
such as “A single spark can start a prairie fire.” Similarly, Mao’s theory
on protracted war also suggests being confident, perseverant, and pa-
tient. As discussed in e arlier chapters, the US government became im-
patient during its initial negotiations with the CCP-government in the
late 1970s, but it applied the principle of patience during the recent US-
China trade talks. Potential Chinese business partners should consider
trying to collect information, analyze details, and create long-term re-
lationships before moving ahead. This might be time consuming and
seemingly without purpose.29 Overall, our own and others’ research,
such as Lucian Pye’s, suggests that negotiators must practice patience,
accept prolonged periods of no movement as normal, and discount Chi-
nese rhetoric about the dire consequences of disagreement.30
Although China has become more and more globalized and many young
people have overseas experience, as we have discussed, family social-
ization and intergenerational transmission ensure the persistence of both
Mao’s imprint and that of traditional Chinese culture. The Chinese ed-
ucational system and red tourism both portray Mao as a saint, and his
quotes have worked themselves into the Chinese language—much as
turns of phrase from William Shakespeare and the King James Bible
have implanted themselves in English—and so are powerful carriers of
Mao’s legacy for generations to come.
At the same time, socialist institutions and the CCP-government de-
liberately promote Maoism as a Chinese tradition. For example, in 2012,
the then Chinese president, Hu Jintao, elaborated core socialist values
based on traditional Chinese virtues such as harmony, patriotism,
244 Conclusion
PRINCIP
L E S OF G OVE RNANCE
Economic Decentralization
We have underlined the importance of economic decentralization in
China, which gives local officials discretionary power to implement pol-
icies (provided they are consistent with the overarching ideology of the
central government and supreme leaders). Unlike his rival Chiang Kai-
shek, who was a micromanager, Mao delegated more power to his front-
line commanders. Upon their retirement from the military, many became
regional leaders and their troops staffed the regional and provincial
bureaus.
While po liti
cal decentralization makes lower- level officials wary
when leadership transitions occur, economic decentralization embold-
ens them to implement local policies focused on the goals set by the
central government. Research has shown that local leaders compete
with one another to deliver economic results and the winner is likely to
be promoted to the next level of government.42 A negative example of
this, discussed earlier, is that local officials who lied about agricultural
yields to please Mao during the G reat Leap Forward w ere often re-
warded with promotions.
This setup in some ways resembles Western federalism. But a distin-
guishing characteristic in China is that local governments are still po
litically bound by their supervising authority, and thus political issues
often trump economic ones. In addition, the intense economic compe-
tition among local officials can trigger negative spillover effects, such
as pollution (officials have a tendency to promote growth by relaxing
environmental regulations), internal trade barriers, and local protection-
ism.43 Studies have found that fees for interprovincial trade are some-
times higher than international tariffs.44 As we have elaborated, firms
Conclusion 247
Ideological Pragmatism
Mao’s classic article “On Practice”—widely taught in party schools
of the Soviet Union—establishes his idea of seeking truth from facts,
which means that theory must fit with reality, and if not, theory needs
to be changed. This pragmatic approach laid the groundwork for Deng
Xiaoping’s economic reforms.
Deng further developed Mao’s doctrine, arguing that “socialism can
have a market and capitalism can have a plan,” and “a good cat can
catch mice, regardless of whether it is black and white.”45 By calling “the
market economy within the Chinese socialist system” a market econ-
omy, Chinese leaders have sought common ground with liberal democ-
racies for economic cooperation (though Xi has increasingly emphasized
the “socialist” attribute in his economic discussions).46
Another important aspect of ideological pragmatism is the CCP-
government’s response to public opinion. It is as likely to quash com-
munist discussion that is too hard-line as it is capitalist discussion. For
example, a famous leftist website called Wuyouzhixiang (Land of noth-
ingness) was suspended for one month due to its promotion of a new
Cultural Revolution; although Xi resembles Mao in many aspects, he
also likely understands that a true Cultural Revolution, with massive
persecutions and killings as well as nationalization of private property,
would undercut the CCP’s rule. At the same time, the CCP-government
has been supportive of Wuyouzhixiang’s propaganda against the West,
which it deems is needed.47
To fuel nationalism and counter the Trump administration’s “bully-
ing” positions, the CCP-government popularized a recent movie, The
Battle at Lake Changjin, in which the best corps of the Chinese army
(with twelve divisions) surrounded the US Marines’ legendary First
Division during the Korean War. Though the marines ultimately escaped
the siege, they w ere astonished to discover that some of the Chinese
troops had frozen to death while still holding their r ifles in the firing
position. The movie was a powerful piece of the CCP’s propaganda
showing that China could stand up to even the most powerful enemies,
that the war essentially ended the “century of humiliation,” and that
248 Conclusion
Historical Existentialism
Mao was an enthusiastic student of Chinese history; as such, he based
many of his ideas about governance on the experiences of Chinese em-
perors.53 Mao was said to read The Twenty-Four Histories (that is, the
Orthodox Histories), the dynastic histories spanning from 3000 BCE
to the Ming dynasty of the seventeenth c entury, e very day and published
his comments on them.54 In the same spirit, the CCP-government often
uses history to justify and legitimize its rule and policies, a practice we
Conclusion 249
raises morale and counters the criticisms of China and Mao in the
Western media.62 This book in many ways pays homage to the princi
ple of studying history to understand the present, although our approach
has been to take a social scientific perspective and delve into contem-
poraneous accounts, as opposed to relying on the CCP’s recent politi
cally driven interpretations.
Moderatism
The final elements of Chinese governance that we emphasize are mod-
eration, harmony, and modesty, which stem from the guiding Confu-
cian principle of “the Doctrine of the Mean.”63 It means to not bend to
one extreme or another, to maintain balance and harmony, to be cau-
tious and gentle, and to show no contempt for inferiors.64 In his speak-
ing and writing, Mao recognized this point, saying, “Being excessive is
too left-leaning [hard-line communist] and being deficient means too
right-leaning [capitalist]. We need to find an optimal status, which is
what the Doctrine of the Mean suggests,” and “this thought is indeed a
great discovery of Confucius . . . a g reat achievement, an important cat-
egory of philosophy, and it deserves a good explanation.” However,
Mao also attacked Confucianism for “lacking the idea of development
and seeing objects as static.”65 Of course, Mao himself engaged in ex-
tremism, such as by initiating the Great Leap Forward and the Cultural
Revolution. Accordingly, even the CCP-government’s overly rosy assess-
ment of Mao has labeled these campaigns as wrong decisions that vio-
late the principle of moderatism.66
Moderatism has many applications for domestic affairs. Leaders are
evaluated along a three-seven divide—that is, if 70 percent of a person’s
deeds contribute to the CCP-government and 30 percent are detrimen-
tal, then one’s overall contributions dominate one’s errors. The CCP-
government has used this standard to judge Mao. In contrast, scholars
have suggested that Russia’s traditions are more inclined to extremism
and that Russian words related to the Doctrine of the Mean (золотая
середина) are seen as pejorative.67
Moderatism is also reflected in China’s international relations and
foreign policies, which have traditionally sought cooperation rather than
confrontation. For example, since Deng’s period in 1978, China has
focused on economic development rather than exporting communist
Conclusion 251
may block his ambitions. This will become clearer in late 2022, when the
CCP holds its Twentieth National Congress. Importantly, as of this
writing Xi and senior CCP leaders have not agreed on his successor, who
according to tradition should be young (born in the 1960s or later) and
appointed as a vice president during the national congress.82
Economically, gross domestic product growth is unlikely to return in
the near f uture to the 10 percent annual rate that it had enjoyed for so
long, and given the current size of China’s economy, it may never do so
in the near future. While systemic factors are contributing to the decline
in the growth rate—for example, China’s gradually disappearing low-
cost advantage, the movement of the manufacturing industry to Vietnam
and other countries, the trade war with the United States, a slow-down
of investment, challenges from COVID and more—they also suggest
that Xi’s ideas and principles could be having negative effects. His anti-
corruption movement and tightening up of political centralization are
dampening local politicians’ efforts to promote economic growth in
their jurisdictions; lower-level officials are increasingly worried about
making mistakes, as the consequences can be dire.
Entrepreneurs are also facing more uncertainty; many fear that their
assets may be confiscated and that they may be imprisoned or worse.
Recent examples include the Ant Financial and DiDi investigations and
state takeovers of ByteDance and Sina Weibo. While it is unlikely that
Xi w ill nationalize the entire private sector, the reform and privatiza-
tion of state-owned enterprises that started in the early 2000s is likely
to be further delayed and even reversed, and further controls may also
be exerted on private firms.
Xi is clearly focused on Mao’s idea of independence through indus-
trial strength. While his 2021 crackdowns on Tencent’s videogame
Honor of Kings (calling it “spiritual opium”) and China’s private edu-
cation sector (in order to make education more egalitarian) are seen as
Maoist and antimarket, writers have also suggested that Xi wants to
focus on developing industries that are more directly related to China’s
independence, such as semiconductors, electric vehicle batteries, com-
mercial aircraft, and telecommunications equipment.83
Importantly, the private sector increasingly supports the CCP, which
had grown stronger and may appear to Xi to be less vulnerable to capital
ist forces. As we have shown through discussion of our interviews with
Chinese entrepreneurs, they are generally supportive of the CCP and ad-
Conclusion 257
mire Mao. That makes sense to us, as their thoughts have been shaped by
the CCP and Mao’s ideas; such imprints are enduring and hard to change.
In private discussions, many Chinese are supportive of Xi’s strongman
leadership. And as we have elaborated, w hether entrepreneurs are com-
munists or not, they recognize the benefits that CCP branches bring.
The CCP and the Chinese people are increasingly coupled, and the
education system, state propaganda, and Xi’s rhetoric linking traditional
Chinese values and Maoism ensure that this w ill continue into the next
generation. In Xi’s words, “Cultivating and promoting the core values
of socialism must be based on the excellent Chinese traditional cul-
ture.”84 Meanwhile, the CCP-government has equated Maoist doctrines
such as the mass line with the wisdom of Lao Tzu (“Rulers should think
from the perspective of the p eople”) and Mencius (“To win support for
a regime, one has to win the hearts of the people”).85
Internationally, Xi is likely to maintain his hawkish posture. Biden
has called Xi a “real rough guy” and said that he “doesn’t have a demo
cratic bone” in his body.86 US academics and strategists have debated
China’s ambitions. For instance, some reject the idea that China has any
grand strategy to replace the United States and rebuild an international
order in favor of China, pointing out that China’s overarching goals
seem different from those of the Soviet Union in that the CCP has been
refraining from spreading “Chinese-style” communism to other parts
of the world.87 Rather, China has focused on legitimizing its authori-
tarian, one-party rule, promoting it as more superior than liberal de-
mocracy, thus posing an ideological challenge to the West.88
Others doubt the veracity of Xi’s and China’s claims about China’s
lack of interest in international influence, suggesting instead that it is
seeking to replace the United States in the international order. For ex-
ample, Xi used a speech at the United Nations General Assembly to ad-
vance a “Chinese Model” as an alternative to the one developed by the
United States and the West, promoting its “Global Development Initia-
tive” to help developing countries with debt suspension and develop-
ment aid and pledging $3 billion to support COVID-19 response and
economic recovery in developing countries.89 Meanwhile, Xi has been
pressing China’s influence in the developing world as the leader of a
“community with a shared future for mankind.” The concept has been
used by the CCP to describe win-win situations through cooperation
and to denigrate hegemonic politics and unilateralism, which is how the
258 Conclusion
CCP describes its Western rivals. Xi has also been encouraging the de-
velopment of China-centric institutions and programs such as the Belt
and Road Initiative, the Asian Infrastructure Investment Bank, the New
Development Bank, and recent trade agreements such as the Regional
Comprehensive Economic Partnership.90 These points are somewhat
reminiscent of a global “surround the cities from the countryside” strat-
egy and suggest that Xi is clearly committed to developing a model for
China that is independent of the West.
Indeed, the hegemonic provision of public goods such as defense, se-
curity, and health products is a common strategy in international poli-
tics.91 Now that China is providing such public goods, and digital
authoritarian tools, many people believe that it has the ambition to es-
tablish its hegemony; some analysts claim that China is using the
United Nations to advance its foreign policy.92 Writers have frequently
reckoned with Xi’s vision and ambition, suggesting that Xi hopes to
place China on the central stage and may even attempt to fundamen-
tally transform the international order rather than merely requesting
more influence within the existing international system.93 Meanwhile,
there have been reports on how entities related to the Chinese govern-
ment or the CCP are using money to infiltrate US institutions and shape
academic and political conversation about China to make it more fa-
vorable.94 Overall, its hawkish position, the establishment of China-
centric institutions that might reshape the international order, the recent
militarization of the South China Sea with an eye toward Taiwan, and
other actions provide grounds for cynicism about China’s claim of a
strictly peaceful rise.95
In sum, to better understand this complex geopolitical situation and
plan for the f uture, we do need to know China better, starting from the
first principles of its ideology, which we elaborated earlier and argue
were enduringly shaped by Mao.96
C O N C L UD I NG RE MARKS
Our motivation for writing this book is our belief that the United States
and the West more generally need to come to grips with the fact that
China, under CCP rule, will be an active competitor in economic and
other realms well into the future and that, just as US trade representative
Tai suggested, we must prepare for a period of “durable coexistence,” a
sentiment echoed by Blinken’s frequent statements that we will need to
Conclusion 259
Kristof, who lived in China for many years and knows the country well,
and who won a Pulitzer Prize for his reporting on the Tiananmen Square
Massacre in 1989, got it wrong. Back in 2013, he confidently predicted
that “Xi Jinping w ill spearhead a resurgence of economic reform, and
probably some political easing as well. Mao’s body will be hauled out
of Tiananmen Square on his watch, and Liu Xiaobo, the Nobel Peace
Prize-winning writer, will be released from prison.”100 Kristof has cer-
tainly changed his tune; we only note this as an example of how wrong
so many Western assumptions about China, even from those who are
quite knowledgeable about the country, have proved to be. To truly un-
derstand China, we must set our ideological biases and our hopes aside
and, in Mao’s words, derive “truth from facts.” We need to appreciate
the context and the history of modern China, and the way that Mao
has haunted it as an “infallible” ghost who w ill not go away.
Democracy is not coming to China; its institutions and its culture are
deeply imbued with authoritarian socialism. While those born a fter
Mao’s reign, and especially during the US-China honeymoon period of
1979 to 1989, might be more liberal and cosmopolitan, neo-Maoist
movements; the growth of the economy under the communist regime;
the economic catastrophe of 2008 and 2009, which hit democracies
heavily; and the United States’ tougher posture all ensure that it will
stay that way.101 Beijing has strengthened its control and consolidated
the power of the CCP in private firms. China’s senior leaders and thought
leaders are determined to follow a unique path—the “Chinese Model”—
that is starkly different from that of Western democracies. Inspired by Xi,
many Chinese have embraced the Chinese Dream, a dream to revive
China’s splendid past and make China great again.
A hawkish stance on China is one of the last areas of consensus be-
tween Democrats and Republicans. More and more US strategists, re-
gardless of party affiliation, have converged on the idea of containing
China. But their strategic thinking is based on a shallow and often wrong
understanding of how China thinks and operates. By engaging with Chi-
na’s context and history, particularly Mao and the Maoist legacy, we
have described China as it is rather than how those strategists want it
to be. We do not claim to provide strategies for how to “beat China”
but instead offer a better way to understand it—and, ultimately, to pro-
ductively live with it.
Methodological Appendix
261
262 Methodological Appendix
• Marquis, Christopher, Laura Velez Villa, and Lynn Yin. 2012. “China
Greentech Initiative (CGTI).” Harvard Business School Case 412105,
February.
• Marquis, Christopher, Zucheng Zhou, Mo Chen, and Heng Fan.
2012. “Building a Community at Semiconductor Manufacturing In-
ternational Corporation.” Harvard Business School Case 413083,
November.
• Marquis, Christopher, and Nancy Dai. 2011. “China Environment
Fund: Doing Well by Doing Good.” Harvard Business School Case
410142; Teaching Note 411098, May.
• Marquis, Christopher, Nancy Dai, Dongning Yang, and Hong Wu.
2011. “State Grid: Corporate Social Responsibility.” Harvard Busi-
ness School Case 410141; Teaching Note 412006, July.
• Marquis, Christopher, Nancy Hua Dai, and Lynn Yin. 2011. “Chair-
man Zhang and Broad Group: Growth Dilemmas.” Harvard Business
School Case 412095, December.
• Marquis, Christopher, Lynn Yin, and Dongning Yang. 2011. “COS
CO: Implementing Sustainability.” Harvard Business School Case
412081, November.
• Marquis, Christopher, G. A. Donovan, and Yi-Kwan Chu. 2010.
“Swire Beverages: Implementing CSR in China.” Harvard Business
School Case 410021; Teaching Note 410129, April.
We presented our ideas at a number of public venues, including interna-
tional conferences, symposia (some of which are listed here), podcasts, and
foreign expert advisory panels for Chinese prime minister Li Keqiang in
2018 and 2020:
• Marquis, Christopher. 2019. “Red Guards to Red Entrepreneurs:
How Mao Era Thought Seeps into Modern Chinese Business.” In
China EconTalk, podcast, edited by J. Schneider. https://supchina.com
/podcast/chinaecontalk-with-special-guest-christopher-marquis/ [re-
trieved on April 15, 2022].
• Qiao, Kunyuan, and Christopher Marquis. 2019. “Internal Logics of
Control: A Study of the Relationship between Internal and External
CSR in China.” Paper presented at the Academy of Management An-
nual Meeting Symposium, Boston, MA.
• Marquis, Christopher, and Kunyuan Qiao. 2018. “What Does Not
Starve You Makes You More Economical: A Study of Resource Scar-
city Imprint of Chinese Entrepreneurs.” Paper presented at the Acad
emy of Management Annual Meeting, Chicago, IL.
• Marquis, Christopher, Kunyuan Qiao, M. Diane Burton, Ryan Allen,
Santiago Campero Molina, Prithwiraj Choudhury, and Aleksandra
264 Methodological Appendix
Qualitative Materials
Our qualitative evidence comes from two main sources. First, in most of
the chapters, we present short case studies of well-known entrepreneurs
and other leaders in China that demonstrate many of the ideas we have
developed from our larger-scale, quantitative research. We gathered in-
formation on t hese individuals from a wide range of online sources and
news reports, including ones published by the BBC, CNN, the New York
Times, the Wall Street Journal, and Chinese-language media such as Sina
Finance and Sohu Finance.
In addition to these rich secondhand materials, we also recruited a sam-
ple of entrepreneurs and interviewed them to obtain unique firsthand in-
sights into our area of research. We received approval from the Cornell
Institutional Review Board for Human Participant Research Office (Proto-
col ID# 2004009526) before starting this process, and we notified partici-
pants that their identities would be kept confidential and they may choose
not to answer some of the questions if they agreed to be interviewed.
We then began our sampling process, enlisting the help of the Univer-
sity of Electronic Science and Technology of China and chambers of
commerce and business associations in different cities and provinces to
recruit representative entrepreneurs. These entrepreneurs are all more
than forty-four years old and thus may have experienced the Cultural
Revolution. To ensure that these entrepreneurs are comparable, we re-
stricted our sample to entrepreneurs whose businesses employed more
than one hundred people with total assets of above 5 million Chinese yuan
(US$720,000). Furthermore, their ventures should not be controlled by
the government (that is, state investors or entities are not the controlling
owners), and we did not recruit companies in the finance industry, which
has a different mode of operation from manufacturing firms, consistent
Methodological Appendix 265
I am a professor at Cornell University. Hope you and your family are well
in this uncertain period.
我是康奈尔大学的一名教授。希望您和您的家人在这一段时间安康。
I am in the process of doing a book on the unique model of entrepre-
neurship that has developed in China, with the aim of communicating to
global audiences this important aspect of the China development miracle.
As current data show, t here have been more than fifteen million entrepre-
neurs, who contribute over 50% tax revenue, 60% GDP, 70% innovation,
80% urban employment, and establish 90% of all firms in China. How-
ever, there have been relatively few systematic studies on private entrepre-
neurs in China, leaving us with a fragmented understanding of this important
economic engine in the world.
我正在写一本关于中国企业家的书,希望向全球读者介绍中国发展奇迹的
这一重要方面。正如现在的数据显示,中国有超过1500万位企业家,他们贡
献了超过50%的税收、60%的国民生产总值、70%的税收和80%的城镇就
业,并且90%以上的企业都是民营企业。但是当先鲜有对中国民营企业家系
统的研究,阻碍了我们对这一世界经济引擎全面的了解。
The focus of the research w ill be on not just the importance of economic ac-
tivity, but also how the political and party systems in China intersect with com-
panies to provide a more sustainable and socially responsible economic system.
本研究不仅聚焦于企业家对于经济活动的重要性,而且希望从制度层面了
解党和政府如何与民营企业合作,从而发展出一套可持续的、对社会负责的
经济系统。因此,中国的经验和模式将对世界经济有重要的启示作用。
Briefly, we w
ill ask the questions about their background, e.g., their self-
image, motivation of becoming an entrepreneur, and important historical
events in China they still remember. We also want to know a bit more about
their firms, e.g., strategies they think important and how their life experi-
ence may play a role in these strategies. I have also attached a draft ques-
tionnaire. All their personal information w ill be kept strictly confidential,
but we may share de-identified data in presentations of our research, e.g.,
stating their quotes.
266 Methodological Appendix
简而言之,我们希望了解企业家的背景,比如他们如何描述自己、希望成
为企业家的动机以及他们依旧记得的在中国发生的历史时刻。我们同时希望
理解他们的企业,比如他们认为哪些战略重要、他们的生活经历如何影响这
些战略的制定等。我在信末附上了问卷草稿。他们的所有信息将会被严格保
密,但是我们可能会在书中引用除去他们身份信息之后的表述。
We are specifically interested in entrepreneurs / 我们具体希望采访如下的
企业家:
1. Whose firms are still private (not controlled by State‑owned Assets
Supervision and Administration) and not in finance-related indus-
tries (e.g., online financing platform); 他们的企业依旧是民营的(并
没有被国资委控股)并且不在金融行业(如融资平台)
;
2. Employ more than 100 p eople or with an asset of above 5 million
Chinese Yuan/RMB / 雇佣超过100名员工、总资产在500万元以上;
3. Whose age is above 44年龄超过44岁
We hope that we can work with you to identify appropriate member entre-
preneurs and help us gain access to them. Thank you for your consideration.
我们希望您能够帮助我们招募合适的商会成员企业家并作引荐以便我们采
访。感谢您的时间。
If you have any questions or would like any further information, please
feel free to contact me via email at cmarquis@cornell.edu.
如果您有任何疑问或者需要更多的信息,请不吝发邮件至 cmarquis@
cornell.edu垂询。
Sincerely,
此致
敬礼
Christopher Marquis / 孟睿思
Quantitative Databases
We developed five databases to understand entrepreneurship and business
and market development in China and to ground our ideas in evidence,
drawing on state-of-the-art social scientific methods: survey data of private
entrepreneurs and their ventures, data of publicly traded firms that are en-
trepreneur controlled, data on politicians’ backgrounds, a database of
newspaper articles and keywords, and city-level data on entrepreneurship
and an innovation index.
Data on Politicians
We manually collected data on politicians’ life, education, and employment
at the city level, which is the finest-grained level that most existing studies
use.5
We obtained data from Zecheng Net (http://www.hotelaah.com/liren/),
Chinese Economy (http://district.ce.cn/), and Renmin Net reports on t hese
officials’ individual histories (for example, http://www.sh-pilots.com.cn
/Party/showart.aspx?aid=3985&sid=29). We also used Wikipedia, Baidu
Methodological Appendix 273
Baike, Xinhua Net, websites of different provinces and cities, Google, Baidu,
and statistical yearbooks of different provinces to supplement the data when
they w ere missing from the primary sources. The data include politicians’
province, city, name, birth, hometown, years of inauguration and departure,
next position, w hether they were promoted or demoted, the year of join-
ing the CCP, educational attainment, and their work experience in the pro-
vincial and central governments. Due to data availability, our city-level data
start in 2000 and end in 2018.
We assembled two datasets, one that covers city party secretaries and one
that covers city mayors.
349-99188_Rothfels_ch01_3P.indd 6
Notes
introduction
1. Based on the World Bank data at https://data.worldbank.org/country/china
[retrieved on July 1, 2021].
2. Cheng, Jonathan, “China Is the Only Major Economy to Report Economic
Growth for 2020,” https://www.wsj.com/articles/china-is-the-only-major-economy
-to-report-economic-growth-for-2020-11610936187 [retrieved on July 1, 2021];
Yao, Kevin, and Gabriel Crossley, “China Tops Forecasts with 8.1% Growth in 2021
but Headwinds Loom,” https://www.reuters.com/markets/asia/chinas-q4-2021-gdp
-grow-faster-than-expected-2022-01-17/ [retrieved on January 18, 2022].
3. National Security Strategy 2017, https://nssarchive.us/national-security
-strategy-2017/ [retrieved on July 1, 2021].
4. Hayashi, Yuka, “U.S. Trade Balance with China Improves, but Sources of
Tension Linger,” https://www.wsj.com/articles/u-s-trade-deficit-narrowed-in-december
-as-exports-outpaced-imports-11612532757 [retrieved on July 1, 2021]; Arreddy,
James, “Former Chinese Party Insider Calls U.S. Hopes of Engagement ‘Naive,’ ”
https://w ww.w sj .com /a rticles /former-chinese -p arty -insider-c alls -u -s -hopes -of
-engagement-naive-11624969800 [retrieved on January 22, 2022].
5. “Remarks as Prepared for Delivery of Ambassador Katherine Tai Outlining
the Biden-Harris Administration’s ‘New Approach to the U.S.-China Trade Rela-
tionship,’ ” https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021
/october/remarks-prepared-delivery-ambassador-katherine-tai-outlining-biden
-harris-administrations-new [retrieved on October 14, 2021]; Kurlantzick, Joshua,
“Nonstop Party: The Surprising Persistence of Chinese Communism,” http://archive
.boston.com/bostonglobe/ideas/articles/2009/11/22/the_surprising_persistence_of
_chinese_communism/ [retrieved on January 18, 2022].
275
276 Notes to Page 2
13. “Xi Jinping: Speech at the Celebration of the Centenary of the Founding of
the Chinese Communist Party,” http://www.gov.cn/xinwen/2021-07/01/content
_5621847.htm [retrieved on July 10, 2021].
14. Wei, Lingling, “Xi Jinping Aims to Rein in Chinese Capitalism, Hew to Mao’s
Socialist Vision,” https://www.wsj.com/articles/xi-jinping-aims-to-rein-in-chinese
-capitalism-hew-to-maos-socialist-vision-11632150725 [retrieved on April 1, 2022];
McDonald, Joe, “China Chases ‘Rejuvenation’ with Control of Tycoons, Society,”
https://apnews.com/article/technology-lifestyle-asia-beijing-xi-jinping-1a03a0ad1
9397face74b2e2dd2130d33 [retrieved on September 28, 2021]. However, Xi also
has established the Beijing Stock Exchange for small and medium-size enterprises,
especially those specializing in technology and innovation. Tom Hancock, a sea-
soned Bloomberg reporter, voiced his suspicion: see https://twitter.com/hancocktom
/status/1440183242208931850 [retrieved on September 28, 2021].
15. “Bernie Sanders on China,” https://feelthebern.org/bernie-sanders-on-china/
[retrieved on April 1, 2022]; Sanders, Bernie, “Washington’s Dangerous New Con-
sensus on China,” https://www.sanders.senate.gov/op-eds/washingtons-dangerous
-new-consensus-on-china/ [retrieved on April 1, 2022]; Kai, Jin, “How Trump Fu-
eled Anti-Asian Violence in America,” https://thediplomat.com/2021/06/how-trump
-fueled-anti-asian-violence-in-america/ [retrieved on April 1, 2022]; “Rubio Deliv-
ers Lecture on How the Bipartisan Economic Consensus Is Destroying American
Greatness,” https://www.rubio.senate.gov/public/index.cfm/2021/12/rubio-delivers
-lecture-on-how-the-bipartisan-economic-consensus-is-destroying-american-great
ness [retrieved on January 22, 2022]; Blinken, Antony J., 2022, “The Administration’s
Approach to the People’s Republic of China,” https://www.state.gov/the-adminis-
trations-approach-to-the-peoples-republic-of-china/ [retrieved on May 27, 2022].
16. Douthat, Ross, “James Bond Has No Time for China,” https://www.n ytimes
.com/2021/10/16/opinion/james-bond-china.html [retrieved on November 20,
2021]; Farhi, Paul, and Jeremy Barr, “The Media Called the ‘Lab Leak’ Story a ‘Con-
spiracy Theory.’ Now It’s Prompted Corrections—and Serious New Reporting,”
https://www.washingtonpost.com/lifestyle/media/the-media-called-the-lab-leak
-s tory -a -c onspiracy -t heory -n ow -i ts -p rompted -c orrections - -a nd -s erious -n ew
-reporting/2021/06/10/c93972e6-c7b2-11eb-a11b-6c6191ccd599_story.html [re-
trieved on April 1, 2022]; Devlin, Kat, Laura Silver, and Christine Huang, “U.S.
Views of China Increasingly Negative amid Coronavirus Outbreak,” https://www
.pewresearch .org/global/2020/04/21/u-s-views-of-china-increasingly -negative
-amid-coronavirus-outbreak/ [retrieved on April 1, 2022]; Yuan, Li, “The Army of
Millions Who Enforce China’s Zero-Covid Policy, at All Costs,” https://www.nytimes
.com/2022/01/12/business/china-zero-covid-policy-xian.html [retrieved on Janu-
ary 18, 2022].
17. Blinken, “The Administration’s Approach to the People’s Republic of China.”
18. Li, Eric, “The CCP’s Greatest Strength Is ‘Self- Reinvention,’ ” https://
foreignpolicy.com/2021/07/02/ccp-reinvention-anniversary-youth-popularity/ [retrieved
on July 11, 2021].
19. For a summary, see Barboza, David, “Clyde Prestowitz on the China Fal-
lacy,” https://www.thewirechina.com/2021/06/13/clyde-prestowitz-on-the-china
-fallacy/ [retrieved on July 10, 2021].
278 Notes to Pages 6–10
20. Quoted on p. 4 of Mitter, Rana, and Elsbeth Johnson, “What the West Gets
Wrong about China: Three Fundamental Misconceptions,” Harvard Business Re-
view 99, no. 3 (2021): 2–8.
21. Osnos, Evan, “Huntsman, China, and the Bears,” https://www.newyorker
.com/news/evan-osnos/huntsman-china-and-the-bears [retrieved on September 29,
2021].
22. Mitter and Johnson, “What the West Gets Wrong.” Also see Li, Eric, “CCP’s
Greatest Strength.”
23. Mamta, Badkar, “This Chart Busts the Myth That China’s Economy Is Driven
by Gov’t-Owned Businesses,” https://www.businessinsider.com/chart-debunks-state
-owned-enterprises-myth-2012-4 [retrieved on July 1, 2021].
24. “China Focus: Private Enterprises Help Bolster China’s High- Quality
Growth,” http://www.xinhuanet.com/english/2019-08/27/c_138342609.htm [re-
trieved on July 1, 2021].
25. He, Amy, “Tencent Named One of Most Innovative Companies,” http://usa
.chinadaily.com.cn/epaper/2015-12/03/content_22617535.htm [retrieved on July 1,
2021].
26. Wright, Arthur F., Confucianism and Chinese Civilization (Stanford, CA:
Stanford University Press, 1975); Pan, Zhongdang, Steven H. Chaffee, Godwin C.
Chu, and Yanan Ju (eds.), To See Ourselves: Comparing Traditional Chinese and
American Cultural Values (New York: Routledge, 2019); Levenson, Joseph Rich-
mond, Confucian China and Its Modern Fate (Berkeley: University of California
Press, 1972); Jacobs, L., G. Guopei, and P. Herbig, “Confucian Roots in China: A
Force for Today’s Business,” Management Decision 33, no. 10 (1995): 29–34.
27. The original sentence is, “A spectre is haunting Europe—the spectre of com-
munism.” Marx, Karl, and Friedrich Engels, Manifest Der Kommunistischen Partei/
Manifesto of the Communist Party, translated by Samuel Moore (Waiheke Island,
UK: Floating Press, 1848/1888), 1.
28. “Ren Zhengfei: Huawei Culture Is the CCP Culture,” https://www.d wnews
.com/%E4%B8%AD%E5%9B%BD/59724653/%E4%BB%BB%E6%AD%A3
%E9%9D%9E%E5%8D%8E%E4%B8%BA%E6%96%87%E5%8C%96%E5
%B0%B1%E6%98%AF%E5%85%B1%E4%BA%A7%E5%85%9A%E6%96
%87%E5%8C%96 [retrieved on July 1, 2021].
29. “Summary of Zhengfei Ren’s Interview with a German TV Station: I Have
Put Life and Death Aside,” http://m.us.sina.com/gb/finance/sinacn/2019-09-23/detail
-ifzpekac4630761.shtml [retrieved on July 1, 2021].
30. Ren, Zhengfei, “My Father and Mother,” 2001, https://www.douban.com
/note/187496301/ [retrieved on July 1, 2021].
31. Ren, Zhengfei, “My Father and Mother.”
32. “Demystify Ren Zhengfei’s First Marriage,” https://www.sohu.com/a
/344946647_654590 [retrieved on July 1, 2021].
33. “What Kind of Person Is Ren Zhengfei?” https://www.zhihu.com/question
/52941324 [retrieved on July 1, 2021].
34. “EU Ranks Huawei as the World’s 2nd Highest Investor in R&D,” https://
www.huawei.com/en/news/2021/12/european-commission-huawei-investor [re-
trieved on April 4, 2022]; Li Na, “Huawei to Spend More Than USD20 Billion on
Notes to Pages 11–14 279
University Press, 2003); and Marquis, Christopher, and Kunyuan Qiao, “Waking
from Mao’s Dream: Communist Ideological Imprinting and the Internationaliza-
tion of Entrepreneurial Ventures in China,” Administrative Science Quarterly 65,
no. 3 (2020): 795–830. However, Dickson did not find significant differences in their
political opinions. Yanfei Sun, “Private Entrepreneurs Are in a Historical Turning
Point and Might Become Nova in Political Realm,” http://finance.sina.com.cn/g
/20031121/1445529948.shtml [retrieved on July 1, 2021]. We calculated this num-
ber as a product of 8.4 million entrepreneurs in China and approximately
40 percent of them being CCP members according to Chinese Private Enterprise
Survey data.
47. “Summarizing Internet Companies with Communist Party Branches: There
Are Many Actually Besides Baidu, Alibaba, and Tencent,” http://tech.sina.com.cn/i
/2017-07-01/doc-ifyhrxtp6420838.shtml [retrieved on July 1, 2021].
48. “Analysis Report.”
49. Thomas, Neil, “Party Committees in the Private Sector: Rising Presence,
Moderate Prevalence,” https://macropolo.org/party-committees-private-sector-china
/?rp=m&fbclid=IwAR1bDHDjgNqDp9J8GwNLAbRo3hMHTktQocwJXbUb7T
h08Zu0ObJ9bDuctL8 [retrieved on May 8, 2022].
50. “Path of Entrepreneurship and Innovation of a Communist Entrepreneur—
Cui Genliang, Party Secretary and Chairman of Hengtong Group,” http://dangjian
.people.com.cn/n1/2016/0509/c117092-28336175.html [retrieved on July 2, 2021].
51. Borst, Nicholas, “The Party on the Inside: The CCP and Chinese Compa-
nies,” https://www.thewirechina.com/2021/05/09/the-party-on-the-inside-the-ccp
-and-chinese-companies/ [retrieved on July 1, 2021].
52. Li, Hongbin, Lingsheng Meng, Qian Wang, and Li-An Zhou, “Political Con-
nections, Financing and Firm Performance: Evidence from Chinese Private Firms,”
Journal of Development Economics 87, no. 2 (2008): 283–99; Truex, Rory, “The
Returns to Office in a ‘Rubber Stamp’ Parliament,” American Political Science Re-
view 108, no. 2 (2014): 235–51.
53. Li, Hongbin, Pak Wai Liu, Junsen Zhang, and Ning Ma, “Economic Returns
to Communist Party Membership: Evidence from Urban Chinese Twins,” Economic
Journal 117, no. 523 (2007): 1504–20.
54. “Twenty Years of Political Recognition of Private Entrepreneurs, Who Are
Hoping to Further Improve Their Political and Economic Status,” http://finance.s ina
.com.cn/china/hgjj/20121106/144313591956.shtml [retrieved on July 1, 2021].
55. Marquis and Kunyuan, “Waking from Mao’s Dream.”
56. “Ren Zhengfei: I Am a CCP Member”; “Jack Ma Said to Surrender Alipay
to the Government,” http://news.ifeng.com/a/20180112/55059108_0.shtml [re-
trieved on July 1, 2021]. In this book, “CCP-government” refers to the coupled
entity representing both the CCP as a party and the Chinese government, given China’s
party-state system.
57. Sun, Yanfei, “The Rise of Protestantism in Post-Mao China: State and Reli-
gion in Historical Perspective,” American Journal of Sociology 122, no. 6 (2017):
1664–725.
58. We use the terms “socialism” and “communism” interchangeably. According
to the CCP’s teaching, socialism is a specific, primitive stage of communism, which
Notes to Pages 17–21 281
can refer to the end state of the utopian society Marx described or a consistent
ideology.
59. “Xi Jinping Talks about Market Economy: The Attribute ‘Socialism’ Must
Not Be Forgotten,” http://cpc.people.com.cn/xuexi/n1/2019/0128/c385476
-30592929.html [retrieved on August 7, 2021].
60. Malmendier, Ulrike, and Stefan Nagel, “Depression Babies: Do Macroeco-
nomic Experiences Affect Risk Taking?,” Quarterly Journal of Economics 126, no. 1
(2011): 373–416; Giuliano, Paola, and Antonio Spilimbergo, “Growing Up in a Re-
cession,” Review of Economic Studies 81, no. 2 (2014): 787–817; Schoar, Antoi-
nette, and Luo Zuo, “Shaped by Booms and Busts: How the Economy Impacts CEO
Careers and Management Styles,” Review of Financial Studies 30, no. 5 (2017):
1425–56.
61. See, for example, “Nan Cunhui Questions Schneider Electric and Delixi
Group Company Limited Merger,” https://business.sohu.com/20070108/n2474
69516.shtml [retrieved on July 1, 2021].
62. Johnson, Victoria, “What Is Organizational Imprinting? Cultural Entrepre-
neurship in the Founding of the Paris Opera,” American Journal of Sociology 113,
no. 1 (2007): 97–127; Meacham, Jon, American Gospel: God, the Founding F athers,
and the Making of a Nation (New York: Random House, 2007).
63. Raynard, Mia, Michael Lounsbury, and Royston Greenwood, “Legacies of
Logics: Sources of Community Variation in CSR Implementation in China,” in Re-
search in the Sociology of Organizations, edited by Michael Lounsbury and Eva
Boxenbaum, 243–76 (Bingley, West Yorkshire, UK: Emerald Group, 2013).
64. “Study Outline of Xi Jinping’s Thought of Socialism with Chinese Charac-
teristics for a New Era,” http://theory.people.com.cn/GB/68294/428935/index.html
[retrieved on Apr 21, 2022].
65. Stahl, Günter K., and Rosalie L. Tung, “Towards a More Balanced Treat-
ment of Culture in International Business Studies: The Need for Positive Cross-
Cultural Scholarship,” Journal of International Business Studies 46, no. 4 (2015):
391–414; Nisbett, Richard, The Geography of Thought: How Asians and Western-
ers Think Differently . . . and Why (New York: Simon and Schuster, 2004).
66. “A Little More Plan or a Little More Market Is Not the Fundamental Differ-
ence between Socialism and Capitalism,” http://cpc.people.com.cn/n/2013/0819
/c69710-22616543.html [retrieved April 21, 2022].
67. “Xinhua Insight: China Embraces New ‘Principal Contradiction’ When Em-
barking on New Journey,” http://www.xinhuanet.com/english/2017-10/20/c
_136694592.htm [retrieved on July 26, 2021].
68. Weber, Max, The Religion of China: Confucianism and Taoism, translated
by Hans H. Gerth (New York: Free Press, 1915/1951).
69. Fairbank, John King, The United States and China, 4th ed. (Cambridge, MA:
Harvard University Press, 1983).
70. Marquis and Qiao, “Waking from Mao’s Dream.”
71. Quoted in Crane, Brent, “The China Bull,” https://www.thewirechina.com
/2021/10/24/the-china-bull/ [retrieved on November 20, 2021].
72. Fukuyama, Francis, The End of History and the Last Man (New York: Free
Press, 1992).
282 Notes to Pages 22–23
73. Hochuli, Alex, and George Hoare, The End of the End of History: Politics in
the Twenty-First Century (Winchester, UK: Zero Books, 2021).
74. Chang, Gordon G., The Coming Collapse of China (New York: Random
House, 2001); Chang, Gordon G., “The Coming Collapse of China: 2012 Edition,”
Foreign Policy, December 29, 2011; Beckley, Michael, and Hal Brands, “The End
of China’s Rise: Beijing Is Running Out of Time to Remake the World,” https://www
.foreignaffairs.com/articles/china/2021-10-01/end-chinas-rise [retrieved on Janu-
ary 1, 2022].
75. Dickson, Bruce J., The Party and the People: Chinese Politics in the
21st Century (Princeton, NJ: Princeton University Press, 2021); Orville, Schell, “Life
of the Party: How Secure Is the CCP?,” https://www.foreignaffairs.com/r eviews
/review-essay/2021-06-22/life-party [retrieved April 4, 2022].
76. Marquis, Christopher, and Yanhua Zhou Bird, “The Paradox of Responsive
Authoritarianism: How Civic Activism Spurs Environmental Penalties in China,”
Organization Science 29, no. 5 (2018): 948–68; Heurlin, Christopher, Responsive
Authoritarianism in China: Land, Protests, and Policy Making (Cambridge: Cam-
bridge University Press, 2017).
77. Huntington, Samuel P., The Third Wave: Democratization in the Late Twen-
tieth Century (Norman: University of Oklahoma Press, 1991).
78. Wang, Zhenmin, “Constitutional Politics: The Road to Permanent Peace and
Stability on How the Communist Party Can Escape from the Historical Cycle,”
Tsinghua China Law Review 6, no. 1 (2013): 1–22.
79. “Xi Jinping: We Should Not Simply Use GDP to Determine Heroes,” http://
www.xinhuanet.com//world/2013-10/07/c_117609149.htm [retrieved on June 24,
2021]; Blanchette, Jude, “Xi’s Confidence Game: Beijing’s Actions Show Determi-
nation, Not Insecurity,” https://www.foreignaffairs.com/articles/asia/2021-11-23/xis
-confidence-game [retrieved on January 1, 2022].
80. Kygne, James, and Yu Sun, “China and Big Tech: Xi’s Blueprint for a Digital
Dictatorship,” https://www.ft.com/content/9ef38be2-9b4d-49a4-a812-97ad6d70ea6f
[retrieved on October 1, 2021].
81. Chen, Qingqing, and Yuzhu Yan, “Sullivan’s Remarks Suggest Softer Tone
on US-China Ties, but ‘Words Alone Are Not Enough,’ ” https://www.globaltimes
.cn/page/202111/1238448.shtml [retrieved on November 20, 2021].
82. Their theory argues that human society was initially organized in a primitive
egalitarian form. With the advancement of technology, p eople started to save and
private ownership of the means of production emerged. At the same time, prisoners
of wars from different residential groups became slaves and a slavery system
emerged. The further advancement of iron products and the plow required free
labor, and more p eople were incentivized to own land for agricultural production,
giving rise to feudalism. The Industrial Revolution then led labor to work in facto-
ries and thus capitalism emerged. Capitalists’ exploitation of labor fueled class strug
gle, and with the advancement of technology, society would finally evolve into a
utopian communist one in which p eople could get whatever they wanted and pri-
vate ownership would disappear. Marx and Engels, Manifest Der Kommunistischen
Partei. See also Engels, Friedrich, The Origin of the Family, Private Property, and
the State: In the Light of the Researches of Lewis H. Morgan (Chicago: Charles H.
Notes to Pages 23–26 283
Kerr, 1884/1902); and Marx, Karl, and Friedrich Engels, Die Deutsche Ideologie/
The German Ideology, edited by Christopher John Arthur (New York: International
Publishers, 1846/1970).
83. In Chinese textbooks, absolute monarchy with political centralization that
lasts for thousands of years is actually still called “feudalism.” However, a key dis-
tinction is that such Chinese feudalism only grants titles rather than fiefs to lords
to prevent development of independent power and possible rebellion. Periods with
granted fiefs were very short (e.g., 206–154 BCE).
84. “Xi Jinping: A Clear-Cut Stand against Historical Nihilism,” https://www
.hrbmu.edu.cn/dsxx/info/1033/1132.htm [retrieved on November 20, 2021].
85. “National P eople’s Congress Closing: Xi Jinping’s Speech Emphasizes ‘the
Party Leads Everything,’ ” https://www.bbc.com/zhongwen/simp/chinese-news
-43468026 [retrieved on July 26, 2021].
86. “ ‘Questions and Answers on the Party’s Mass Line Study’ Series 1,” http://
qzlx.people.com.cn/n/2014/0221/c376102-24429902.html [retrieved on July 26,
2021].
87. “Deng Xiaoping: Let Some P eople Get Rich First,” http://cpc.people.com.cn
/GB/34136/2569304.html [retrieved on May 23, 2022].
88. “Xi Jinping: Decisive Victory to Build a Moderately Prosperous Society in
an All-Round Way and Win the Great Victory of Socialism with Chinese Char-
acteristics for a New Era—Report at the 19th National Congress of the Commu-
nist Party,” http://www.xinhuanet.com//politics/2017-10/27/c_1121867529.htm
[retrieved on July 11, 2021].
89. “ ‘Do Not Forget the Original Intention, Keep in Mind the Mission’ Theme
Education Summary Conference Held,” http://www.xinhuanet.com/politics
/bwcxljsm/ [retrieved on April 21, 2022]; “Xi Jinping: Speech at the Educational
Summary Conference on the Theme of ‘Do Not Forget the Original Intention, Keep
in Mind the Mission,” http://www.xinhuanet.com/politics/leaders/2020-06/30/c
_1126177651.htm [retrieved on July 26, 2021].
90. “Xi Jinping: Speech at the Celebration”; Mitter and Johnson, “What the
West Gets Wrong.”
91. Gruin, Communists Constructing Capitalism; Gruin, “Communists Con-
structing Capitalism.”
92. “The New Version of ‘The History of the CCP’ Downplays the Cultural Rev-
olution, and the Content of Extolling Xi Accounts for a Quarter,” https://www.rfa
.org/mandarin/yataibaodao/zhengzhi/xx-04142021124852.html [retrieved on July 1,
2021].
93. “Xi Jinping: Speech at the Celebration.”
94. Mai, Jun, “Xi Jinping Asks: Why Do Chinese Officials Lack Initiative and
Wait for Orders from the Top?,” https://sg.news.yahoo.com/xi-jinping-asks-why
-chinese-042938587.html [retrieved on July 23, 2021].
95. Magnier, Mark, “The Underrated Influence of Modern Neo-Maoists on Chi-
na’s Communist Party,” https://www.scmp.com/culture/article/3016066/still-alive
-and-kicking-underrated-influence-neo-maoists-todays-china [retrieved on April 4,
2022]; Shephard, Christian, “China’s Neo-Maoists Welcome Xi’s New Era, but Say
He Is Not the New Mao,” https://www.reuters.com/article/us-china-congress
284 Notes to Pages 26–33
-maoists/chinas-neo-maoists-welcome-xis-new-era-but-say-he-is-not-the-new-mao
-idUSKBN1CX005 [retrieved on April 4, 2022]; Wu, Zuolai, “Comment on China:
Is Xi Jinping the Version 2.0 of Mao Zedong?,” https://www.bbc.c om/zhongwen
/simp/focus_on_china/2013/10/131007_cr_xijinping_maozedong [retrieved on July 1,
2021].
96. Malmendier and Nagel, “Depression Babies”; Giuliano and Spilimbergo,
“Growing Up in a Recession”; Marquis, Christopher, and Kunyuan Qiao, “Com-
munist Ideological Imprinting and Internationalization: A Study of Chinese Entre-
preneurs,” paper presented at the Academy of Management Proceedings, Atlanta,
GA, 2017; Marquis, Christopher, and Kunyuan Qiao, “What Does Not Starve You
Makes You More Economical: A Study of Resource Scarcity Imprint of Chinese
Entrepreneurs,” paper presented at the Academy of Management, Chicago, IL, 2018;
Marquis and Qiao, “Waking from Mao’s Dream”; Marquis, Christopher, Kunyuan
Qiao, M. Diane Burton, Ryan Allen, Santiago Campero Molina, Prithwiraj Choud-
hury, and Aleksandra Joanna Kacperczyk, “Individual Imprinting: Life History
Matters,” Academy of Management Proceedings 2018, no. 1 (2018): 14868; Wang,
Danqing, Fei Du, and Christopher Marquis, “Defending Mao’s Dream: Politicians’
Ideological Imprinting and Firms’ Political Appointment in China,” Academy of
Management Journal 62, no. 4 (2019): 1111–36.
97. “Regional Distribution of Best Private Enterprises in China: Jiangsu and Zhe-
jiang Took the Lead and Chongqing Surpassed Tianjin,” https://finance.sina.c om
.cn/china/2019-08-29/doc-iicezueu2028692.shtml [retrieved on July 1, 2021].
98. Blinken, “The Administration’s Approach to the People’s Republic of China.”
99. Another example is Xi’s reversal of Deng’s isolationist policy of “hiding strength
and biding time.” Rather, Xi focused on enhancing China’s influence by initiating the
Belt and Road Initiative, which is also reminiscent of Mao’s ideal of exporting com-
munist revolution and China’s influence to developing areas like Africa.
2. Naughton, Barry, and Susan Shirk, “China Policy and the American Presidency,”
in Sinica, podcast, edited by Kaiser Kuo, SupChina, Brooklyn, aired February 6,
2020, https://supchina.com/podcast/china-policy-and-the-american-presidency/ [re-
trieved April 4, 2022].
3. “To Understand Today’s China, One Must Understand the Chinese Communist
Party,” http://www.qstheory.cn/qshyjx/2021-12/03/c_1128127015.htm [retrieved
on January 22, 2022].
4. “Mao Zedong in the Eyes of Xi Jinping,” http://dangjian.com/gcsy/d jxx
/201701/t20170105_3991430.shtml [retrieved on January 29, 2022].
5. The Wolf Warrior style is concentrated in Chinese diplomats. See Martin, Pe-
ter, China’s Civilian Army: The Making of Wolf Warrior Diplomacy (Oxford: Ox-
ford University Press, 2021). For communist countries and many other countries
around the world, foreign affairs are reflections of their domestic issues. The tough
Wolf Warrior style is related to the CCP-government’s intention to contain the threat
of the capitalist world.
6. “Xi Jinping: Speech at the Celebration of the Centenary of the Founding of
the Chinese Communist Party,” http://www.gov.cn/xinwen/2021-07/01/content
_5621847.htm [retrieved on July 10, 2021].
7. Gao Hua [高华], 红太阳是怎样升起的——延 安整风运动的来龙去脉 / How the
Red Sun Rises: The Origin of Yan’an Rectification Movement (Hong Kong: Chi-
nese University of Hong Kong Press, 2000).
8. Levine, Marilyn A., The Found Generation: Chinese Communists in Europe
during the Twenties (Seattle: University of Washington Press, 2017). Many CCP
leaders, such as Deng Xiaoping, were involved in this program.
9. The anniversary was then moved to July 1 since Mao had misremembered the
actual date of the first meeting of the CCP. He remembered it as a day in July, and
for convenience, when it settled in Shaanxi Province, the CCP celebrated its anni-
versary on July 1. Later, some CCP members investigated the founding and discov-
ered the exact date.
10. Many communist leaders used aliases in case authorities arrested them. Mao
Zedong also went by Li Desheng, Yang Ziren, and twenty-four less-known aliases.
11. “How Mao Zedong Broke ‘Marxism-Leninism Cannot Come out from the
Poor Ravines,’ ” http://www.zgdsw.com/mobile/newsx.asp?id=572 [retrieved on Oc-
tober 2, 2021].
12. See the recent confusion at Yeung, Jessica, “US Lawmakers Want to Stop
Calling Xi Jinping a President. But W ill He Care?,” https://www.cnn.com/2020/09
/08/asia/xi-jinping-title-us-bill-intl-dst-hnk/index.html.
13. Dwivedi, G. G., “An Expert Explains: The PLA and Its Relationship with
China’s Communist Party,” https://indianexpress.com/article/explained/peoples
-liberation-army-communist-party-of-china-6562035/ [retrieved on October 16,
2021].
14. “CPC ‘Commands the Gun,’ Says Xi as He Asks Chinese Military to Expedite
Modernisation Process,” https://economictimes.indiatimes.com/news/defence/cpc
-c ommands-t he-g un-s ays-x i-a s-h e-a sks-c hinese-m ilitary-t o-e xpedite
-modernisation-process/articleshow/84924462.cms?from=mdr [retrieved on Octo-
ber 16, 2021].
286 Notes to Pages 38–41
ments in capitalist countries may also intervene in their markets like Franklin D.
Roosevelt’s New Deal.
29. “Resolutions on Several Historical Issues of the Party since the Founding of
the People’s Republic of China,” http://www.people.com.cn/item/20years/newfiles
/b1040.html [retrieved on April 23, 2022]; “Maoism,” http://www.xinhuanet.com
/politics/yj18d/mzdsx.htm [retrieved on April 23, 2022]; “Eternal Monument • Red
Memory: The Scientific System of Mao Zedong Thought (Part 1),” http://www.g ov
.cn/test/2007-09/06/content_739169.htm [retrieved on April 23, 2022]; “Eternal
Monument • Red Memory: The Scientific System of Mao Zedong Thought (Part
2),” http://www.gov.cn/test/2007-09/06/content_739161.htm [retrieved on April 23,
2022]; “The Central Committee of the Chinese Communist Party and the State
Council Issued the ‘Opinions on Strengthening and Improving Ideological and Po
litical Work in the New Era,’ ” http://www.gov.cn/zhengce/2021-07/12/content
_5624392.h tm [retrieved on July 23, 2021]. These three major aspects have six ma-
jor applications. The first concerns approaches for communist revolutions in
China, which Mao developed based on the special characteristics of China and fo-
cused on mobilizing farmers, who constitute the majority of Chinese people. The
second concerns socialist institutions and construction, such as the frugality princi
ple and the politically centralized and economically decentralized structure. The
third application concerns military strategies, which many Chinese entrepreneurs
adopt. The fourth application concerns policy for socialist institutions, including
agricultural collectivization during the Great Leap Forward, class struggle during
the Cultural Revolution, and industrial relocation during the Third Front Construc-
tion. The principle that ideological and political work should adhere to the CCP
ideology and serve the people or popular masses is the fifth application, which con-
cerns the ideological environment. The sixth application is the construction of
communism and management of the CCP, including the principle of responding to
the CCP’s call and adhering to key rules such as serve the people, closely connect
to the popular masses, work hard, be frugal, and resist erosion by capit alist thoughts.
30. “CCP Member: Today in History,” https://news.ruc.edu.cn/archives/320670
[retrieved on April 23, 2022].
31. Quoted on pages 159, 166 of Mao, Zedong, Quotations from Chairman
Mao Zedong [in Chinese] (Beijing, China: P eople’s Liberation Army General Politi
cal Department, 1966).
32. Mao, Tse-tung, Quotations from Chairman Mao Tse-Tung (Worcestershire,
UK: Read Books, 2013).
33. Mao, Quotations from Chairman Mao Zedong, 160–61.
34. Mao, Quotations from Chairman Mao Zedong, 160.
35. “The Essence and Characteristics of Mao Zedong’s Mass Line Thought,”
http://theory.people.com.cn/n/2013/1225/c40531-23946088.html [retrieved on Feb-
ruary 1, 2022].
36. Mao, Zedong [毛泽东], 毛泽东军事文集 / Collected Works on Military by
Mao Zedong [in Chinese], vols. 1–6 (Beijing: Military Science Press/Central Party
Literat ure Press, 1927–1972); Mao, Zedong [毛泽东], 毛泽东选集(第四卷) / Selected
Works of Mao Tse-Tung [in Chinese], vol. 4 (Beijing: People’s Press [人民出版社],
1960). See also summaries such as “Mao Zedong Military Thought,” http://www
288 Notes to Pages 44–46
.cdsndu.org/html_ch/to_articleContent_article.id=8a28e6d84a9a04ff014a9b359d
a60228.html [retrieved on July 24, 2021].
37. “The Basic Characteristics of Mao Zedong’s Military Thought,” https://www
.1921.org.cn/chapter.html?id=5a9535be947f3212c37b3c24&c=53 [retrieved on
February 1, 2022].
38. Most countries use the Gregorian calendar, whereas Russia uses the Julian
calendar, the former being fourteen days ahead of the latter. So the October Revo-
lution took place on November 7, 1917 (Gregorian calendar) or October 25, 1917
(Julian calendar). Meanwhile, according to more recently disclosed documents and
published books, Mao’s true benchmark might be the Soviet Union, as he wanted
to replace Khrushchev and the Soviet Union as the leader of the global communist
camp. See, for example, Shen, Zhihua [沈志华], 中苏关系史纲 / A Brief History of
Sino-Soviet Relations [in Chinese] (Beijing: Social Science Academic Press [社会科
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39. Meng, Xin, Nancy Qian, and Pierre Yared, “The Institutional Causes of China’s
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41. At that time, t here were three main options for youths: g oing to college and
becoming a Worker-Peasant-Soldier student, joining the military, and going to the
countryside and becoming a sent-down youth. Only very few could go to college
or join the military, typically youths whose parents were high-ranking officials or
who performed very well in the send-down movement. For example, Xi Jinping was
first sent down when his f ather lost power. Then, b ecause of his relatively good per
formance and his father’s regained power, he became a Worker-Peasant-Soldier
student in Tsinghua University.
42. Shen, Brief History.
43. Niu, Jun, “Reevaluation of the U.S.-China Relationship in the 1960s,”
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44. Xia, Fei, “Third Front Construction: A Major Strategic Decision of Mao Ze-
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45. Fan, Jingting, and Ben Zou, “Industrialization from Scratch: The ‘Construc-
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46. Xu, Chenggang, “The Fundamental Institutions of China’s Reforms and Devel-
opment,” Journal of Economic Literature 49, no. 4 (2011): 1076–151. We also are
familiar with economists’ approach to measuring (fiscal) decentralization with the
share of fiscal revenue to be distributed to the central and local governments. The ra-
tionale is that if the local government retains more revenue, then t here is indication of
decentralization. Then, looking historically, the trend of decentralization had gained
momentum since 1958 and particularly from 1970 to 1993 when the central and
provincial governments retained 20 p ercent and 80 p ercent of fiscal revenues, respec-
tively, indicating decentralization. However, we believe a better measure of decentral-
Notes to Pages 47–48 289
ization accounts for the deep structural relations between the central and provincial
governments rather than temporary distribution of fiscal revenue between these two
levels of government, which are subject to negotiations. For example, the fact that
local political leaders (party secretaries) appoint their bureau leaders clearly indicates
a decentralized structure. See, for example, “Changes in the Relationship between the
Central and Local Governments in the Mao Zedong Era,” http://theory.p eople.com
.cn/n/2014/0825/c388253-25532921.html [retrieved on October 2, 2021]; Guan,
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nomic Performance: The Incentive Role of Personnel Control in China,” Journal of
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Barry R. Weingast, “Regional Decentralization and Fiscal Incentives: Federalism, Chi-
nese Style,” Journal of Public Economics 89, no. 9 (2005): 1719–42.
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nese Style: The Political Basis for Economic Success in China,” World Politics 48,
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China Different from Eastern Europe? Perspectives from Organization Theory,” Eu
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gang Xu, “The M-Form Hierarchy and China’s Economic Reform,” European
Economic Review 37, no. 2 (1993): 541–48.
48. Freedman, Josh, “China Takes Federalism Way Further Than the US, and Is
Paying the Price for It,” https://www.vox.com/2015/8/31/9228723/china-safety-net
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49. Mao, Zedong, “On Ten Major Relationships,” April 25, 1956, https://www
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50. “Xi Jinping: We Should Not Simply Use GDP to Determine Heroes,” http://
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51. Kelly, Jason M., Market Maoists: The Communist Origins of China’s Capi
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292 Notes to Pages 52–56
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1651/1947).
29. We will elaborate this idea further later; briefly, the Chinese culture has a
strong tradition of “the spirit of shidafu (士大夫),” which emphasizes a sense of na-
tional pride and service to the nation.
30. Of course, this obedience is not unconditional, as there have been dynastic
transitions and also uprisings such as the Taiping Rebellion. As we elaborated in
the last chapter, the central government’s legitimacy rests on the Mandate of Heaven,
and people have the right to rebel. See Dingxin Zhao’s recent work on how China
came into being as a unified state a fter highly intensive wars: Zhao, Dingxin, East-
ern Zhou China Warfare and the Formation of the Confucian-Legalist State (Shang-
hai: Sanlian, 2006); Zhao, Dingxin, The Confucian-Legalist State: A New Theory
for Chinese History (New York: Oxford University Press, 2015); Zhao, Dingxin,
State and War: A Comparative Analysis of the Chinese and European Historical
Development (Hangzhou, China: Zhejiang University Press, 2015).
31. Quoted in Li, Xu-Hong, and Xiaoya Liang, “A Confucian Social Model of
Political Appointments among Chinese Private-Firm Entrepreneurs,” Academy of
Management Journal 58, no. 2 (2015): 592.
32. Zhang, Jianjun, Christopher Marquis, and Kunyuan Qiao, “Do Political
Connections Buffer Firms from or Bind Firms to the Government? A Study of Cor-
porate Charitable Donations of Chinese Firms,” Organization Science 27, no. 5
(2016): 1307–24; Ma, Dali, and William L. Parish, “Tocquevillian Moments: Char-
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34. Peony Hirwani, “Jackie Chan Says He Wants to Join the Ruling Communist
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36. “Off Track . . . Chairman Mao Badge Was Lin’s Lucky Charm,” http://www
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37. Long, Qiao, “China’s Maoists Mark Death of G reat Helmsman with Tributes,
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38. “Relive the History of Revolution and Inherit the Red Gene,” https://article
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294 Notes to Pages 60–63
39. Hua, Shen, “Starting from the Baby: The CCP Strives to Ensure the ‘Red
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40. Before 1978, high school students had to be vetted for political loyalty be-
fore they were eligible to enter college—hence, good performance in political courses
was critical in that period. Even the granddaughter of Sun Yat-sen, Sun Huifang,
could not enter college b ecause she failed the political review. Deng Xiaoping sus-
pended it in 1978, yet in 2018, it was reinstituted. See Zheng, Qingjun, “The Cul-
tural Revolution Ended for 40 Years, Yet the Political Review Came Back,”
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49. “China Film Bureau Launches Party Celebration Film Festival, at Least Two
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[retrieved on July 1, 2021].
53. “During the ‘May 1st’ Holiday, Red Tourism Booms All Over the Country—
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55. Rowen, Herbert H., “ ‘L’état c’est à moi’: Louis XIV and the State,” French
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56. Meacham, Jon, American Gospel: God, the Founding F athers, and the Mak-
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57. Tumarkin, Nina, Lenin Lives! The Lenin Cult in Soviet Russia (Cambridge,
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58. Hasou, Tawfig Y., The Struggle for the Arab World: Egypt’s Nasser and the
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59. Raynard, Mia, Michael Lounsbury, and Royston Greenwood, “Legacies of
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60. As we mentioned earlier, Mao and the CCP were not totally antagonistic
toward capitalist forces; rather, they wanted to control these forces for their own
benefit. See Kelly, Jason M., Market Maoists: The Communist Origins of China’s
Capitalist Ascent (Cambridge, MA: Harvard University Press, 2021).
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65. Henderson, Jane, “Making a Drama Out of a Crisis: The Russian Constitu-
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66. See Doshi, Rush, The Long Game: China’s Grand Strategy to Displace
American Order (Oxford: Oxford University Press, 2021). He also suggests that
296 Notes to Pages 67–69
Nazi Germany had a grand strategy with a nationalist focus and used the Leninist
approach of state investment to quickly recover the German economy. Deng also
warned about the issues of Gorbachev’s reforms. See “The Major Change in the
Soviet Union and Eastern Europe: Listen to What Xiaoping Said!,” http://fenke
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67. Weber, Isabella M., How China Escaped Shock Therapy: The Market Re-
form Debate (Oxfordshire, UK: Routledge, 2021). We focus more on structural
factors than Weber, suggesting that in addition to the rhetorical strategy that the
CCP a dopted (discussed in the next section), its socialist institutions, which better
enabled reforms region by region, are also important. In the conclusion we also
discuss cultural factors.
68. Xu, Dean, Jane W. Lu, and Qian Gu, “Organizational Forms and Multi-
population Dynamics: Economic Transition in China,” Administrative Science
Quarterly 59, no. 3 (2014): 517–47.
69. Chernyaev, Anatoly Sergeevich, My Six Years with Gorbachev, edited by
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71. Weber, How China Escaped. The same situation occurred in the Soviet Union,
where the more conservative Soviet leaders strongly opposed liberal and market-
related rhetoric. As we mentioned in the foregoing section, the radical rhetoric—
especially that ridiculing communism, Soviet leaders, and Soviet heroes—was also
responsible for the disintegration of the USSR.
72. The careful and gradual economic liberalization is organically connected to
its tight political control. For example, Deng suggested that the CCP can always
stop and reverse any economic reforms—e.g., those concerning securities and the
stock market—that might threaten its governance. See “The Origin of Chinese Stock
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Marquis and Qiao, “Waking from Mao’s Dream.”
75. “What Is the Difference between Privately O wned and People-Owned
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76. Blanchette, China’s New Red Guards, 46.
77. Hua, Min, “Entrepreneurs Are Different from Capitalists,” http://www
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78. Marquis and Qiao, “Waking from Mao’s Dream”; Marquis, Christopher, and
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79. Martin, Peter, China’s Civilian Army: The Making of Wolf Warrior Diplo-
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82. The suit style originated in the West, but Sun Yat-sen (Sun Zhongshan)
adapted it (creating the Zhongshan suit), and Mao adapted it again (creating the
Zhongshan suit of Maoist style).
83. Blanchette, China’s New Red Guards.
84. Wang, Shiming, and Yongyue Yu, “On the Theoretical Source and Develop-
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‘Common Prosperity’ W ill Affect the World,” https://www.bbc.com/zhongwen/simp
/chinese-news-58830610; Buckley, Chris Alexandra Stevenson, and Cao Li, “Warning
of Income Gap, Xi Tells China’s Tycoons to Share Wealth,” https://www.nytimes.com
/2021/09/07/world/asia/china-xi-common-prosperity.html [retrieved on October 15,
2021].
85. Martin, China’s Civilian Army.
86. Yan, Xuetong, “Becoming Strong—the New Chinese Foreign Policy,” https://
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87. “People’s Liberation Army Daily: You Must Not Eat the CCP’s Meals and
Smash the CCP’s Pot,” http://cpc.people.com.cn/n/2014/1224/c78779-26268924
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88. Yuan, Li, “ ‘Who Are Our Enemies?’ China’s B itter Youths Embrace Mao,”
https://www.nytimes.com/2021/07/08/business/china-mao.html [retrieved on
July 13, 2021].
89. For example, “Selected Works of Mao Zedong, vol. 1,” https://book.douban
.com/subject/2224879/ [retrieved on July 13, 2021]; “Selected Works of Mao Ze-
dong, vol. 4,” https://book.douban.com/subject/1085872/ [retrieved on July 13,
2021]; “Selected Works of Mao Zedong, vol. 5,” https://book.douban.com/subject
/1916533/ [retrieved on July 13, 2021].
90. Blanchette, China’s New Red Guards, 10–11, 94–96.
91. See, for example, “Zhao Dingqi: The Class Issue Has Become a Race Issue.
No Wonder Black Americans Cannot Find a Way Out—to discuss with Dr. Lin
Yao,” https://www.guancha.cn/zhaodingqi/2020_07_27_559050.shtml [retrieved on
July 13, 2021]; “The Death of the Black Is a Manifestation of Increasingly Acute
Class Contradictions in the United States,” http://zhurengong.net/index.php?m
=content&c=index&a=show&catid=3&id=8531 [retrieved on July 13, 2021].
298 Notes to Pages 75–77
10. “Xi Jinping: Speech at the Celebration of the Centenary of the Founding of
the Chinese Communist Party,” http://www.gov.cn/xinwen/2021-07/01/content
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11. “CCP Member: Today in History,” https://news.ruc.edu.cn/archives/320670
[retrieved on April 23, 2022].
12. Mao, Zedong, Quotations from Chairman Mao Zedong [in Chinese] (Beijing,
China: People’s Liberation Army General Political Department, 1966), 159, 166.
13. “India Asked Chiang Kai-shek for Help during the Sino-Indian War but Was Re-
fused,” https://www.sohu.com/a/317596996_100248928 [retrieved on July 2, 2021].
14. Maddison Historical Statistics, https://www.rug.nl/ggdc/historicaldevelop-
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15. Kennedy, Andrew Bingham, “Dreams Undeferred: Mao, Nehru, and the Stra-
tegic Choices of Rising Powers,” PhD diss., Harvard University, 2007.
16. Ash, Alec, “China’s New Nationalism,” https://www.thewirechina.com/2021
/08/08/chinas-new-nationalism/ [retrieved on August 26, 2021].
17. “Mao’s Visit to Soviet Union in 1949: Enthusiastic to Go but Dismal to Re-
turn,” http://news.ifeng.com/special/60nianjiaguo/60biaozhirenwu/renwuziliao
/200908/0817_7766_1305972.shtml [retrieved on July 2, 2021].
18. Acheson, Dean, “Speech on the Far East,” https://teachingamericanhistory
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19. We provide this simplified description of the Sino-Soviet alliance as just one
detail of the historical backdrop of our study.
20. “Mao’s Visit to Soviet Union.” However, Mao and the CCP had been de-
fending Stalin to some extent. Chen, Jian, Mao’s China and the Cold War (Chapel
Hill: University of North Carolina Press, 2010).
21. Encyclopedia Britannica, s.v. “Holomodor,” https://www.britannica.com
/event/Holodomor [retrieved on July 5, 2021].
22. The reasons for the Sino-Soviet split are detailed and complex. For a fuller
summary and analysis, see Li, Mingjiang, Mao’s China and the Sino-Soviet Split:
Ideological Dilemma (Oxfordshire, UK: Taylor and Francis, 2013); and Chen, Mao’s
China. We come back to this issue in later chapters.
23. Merriam-Webster’s Dictionary, s.v. “paper tiger,” https://www.merriam
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24. Mao, Quotations from Chairman Mao Zedong, 159, 166.
25. Liang, Hao, Rong Wang, and Haikun Zhu, “Growing Up u nder Mao and
Deng: On the Ideological Determinants of Corporate Policies,” SSRN, 2019, https://
papers.ssrn.com/sol3/papers.cfm?abstract_id=3494916 [retrieved on April 7, 2022].
26. Mao, Quotations from Chairman Mao Zedong, 166–67.
27. “Interview with American Journalist Anna Louise Strong,” https://www
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28. Duriau, Vincent J., Rhonda K. Reger, and Michael D. Pfarrer, “A Content
Analysis of the Content Analysis Literature in Organization Studies: Research
Themes, Data Sources, and Methodological Refinements,” Organizational Research
Methods 10, no. 1 (2007): 5–34; Hannigan, Timothy R., Richard F. J. Haans, Key-
van Vakili, Hovig Tchalian, Vern L. Glaser, Milo Shaoqing Wang, Sarah Kaplan,
300 Notes to Pages 83–85
http://www.mofcom.gov.cn/aarticle/b/f/201102/20110207403117.html [retrieved on
July 2, 2021]; and others suggesting that foreign firms might endanger forestry indus-
try (“Be Alert to How Foreign Investment Intervenes Our Forestry Industry and
Harms National Security,” http://lvse.sohu.com/s2008/foresthazard/ [retrieved on
April 23, 2022]) and the legal profession (“Chinese L awyers’ Service Was Taken by
Foreigners and This Might Endanger National Security,” http://world.h uanqiu.com
/exclusive/2013-12/4652044.html [retrieved on July 2, 2021]).
39. Li, Bingheng, “Hubei Capital Market,” http://www.sfahb.net/Upload_My
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40. Marquis, Christopher, and Kunyuan Qiao, “Waking from Mao’s Dream:
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Ventures in China,” Administrative Science Quarterly 65, no. 3 (2020): 795–830.
41. We used ordinary least squares to perform our analysis. First, other things
being equal, entrepreneurs who are CCP members on average use 0.257 more
nationalism-related words, and the effect is statistically significant (p = .000). The
effect amounts to 19.7 percent of the mean level of the usage of nationalism-related
words (1.303). Second, entrepreneurs’ sense of nationalism is negatively related to
firms’ internationalization—both attracting foreign investors and g oing abroad to
explore foreign markets. Third, CCP membership not only affects firms’ interna-
tionalization through the nationalist mindset but also shapes firms’ international-
ization directly. Our published work, a recent finance study, and the new evidence
presented here together show that CCP indoctrination leads to a more nationalist
mindset, which to some extent hinders firms’ internationalization. Liang, Wang, and
Zhu, “Growing Up under Mao”; Marquis and Qiao, “Waking from Mao’s Dream.”
42. Liang, Wang, and Zhu, “Growing Up under Mao”; Marquis and Qiao,
“Waking from Mao’s Dream.”
43. Marquis and Qiao, “Waking from Mao’s Dream.”
44. “People of Jiangsu: Fight to Break the Technological Monopolization by For-
eign Countries, and Optical Fiber Industry and Its Development in China Is Closely
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45. “The Tenth Five-Year Plan of National Economic and Social Development:
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46. “Vice Minister Wang Bingnan Meets with Founder of the Alibaba Group
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47. Research team of the CCP Jiangsu Committee’s United Front Department,
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48. Huntington, Samuel P., The Clash of Civilizations and the Remaking of
World Order (New York: Simon and Schuster, 1996).
302 Notes to Pages 91–92
49. Meisner, Maurice, Mao’s China and After: A History of the P eople’s Republic
(New York: F ree Press, 1999); Wang, Xinzhe, “The Leadership of the Party Is the
Fundamental Guarantee for Taking a New Road of Industrialization with Chinese
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50. “Xi Jinping and the Chinese Dream,” https://web.archive.org/web/2016
0510092423/http://www.economist.com/news/leaders/21577070-vision-chinas-new
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51. Ferdinand, Peter, “Westward Ho—the China Dream and ‘One Belt, One
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52. “Xi Jinping: Speech at the Celebration.”
53. “The Core Meaning of Constructing Contemporary Chinese Discourse Sys-
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trieved on August 10, 2021].
54. King, Gary, Jennifer Pan, and Margaret E. Roberts, “How the Chinese Gov-
ernment Fabricates Social Media Posts for Strategic Distraction, Not Engaged Ar-
gument,” American Political Science Review 111, no. 3 (2017): 484–501.
55. “ ‘Fifty-Cent Party Members’ Have Been Out. China Now Depends on More
Than 20 Million ‘Internet Volunteers,’ ” https://www.rfa.org/mandarin/yataibaodao
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56. “Who Stinks Public Intellectuals?,” http://news.sohu.com/s2012/dianji-1044/
[retrieved on July 2, 2021].
57. “After a Lapse of Many Years, I Saw the Publicly Known Intellectuals and
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58. “ ‘Clarify Origins, Sources, Reasons to Increase Trustworthiness’ Officially
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59. Zhou, Laura, “Chinese Actor Zhang Zhehan Faces Domestic Boycott over
2018 Photos at Japan’s Yasukuni Shrine,” https://www.scmp.com/news/china
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60. Cole, J. Michael, “Does China Have a ‘Blacklist’ of Taiwan ‘Separatists’?,”
https://t hediplomat.c om/2 018/0 5/d oes-c hina-h ave-a-b lacklist-o f-t aiwan
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across the Strait ‘a Dilemma,’” https://www.dw.com/zh/%E6%B0%91%E6%97%8F
%E4%B8%BB%E4%B9%89%E7%AC%BC%E7%BD%A9- %E8%B7%A8%E
8%B6%B3%E4%B8%A4%E5%B2%B8%E7%9A%84%E5%8F%B0%E6%B
9 % B E % E 8 % 8 9 % B A % E 4 % B A % B A % E 8 % B F % 9 B % E 9 % 8 0 % 8 0
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Notes to Pages 92–94 303
61. Yuan, Li, “When Patriotism Becomes a Selling Point: Local Brands See Op-
portunities amid the Wave of Boycott,” https://cn.nytimes.com/china/20210406
/china-xinjiang-local-brands/ [retrieved on July 2, 2021].
62. “Meet NIO, Fall in Love with the Future,” https://www.nio.cn/testimonials
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63. Kygne, James, and Yu Sun, “China and Big Tech: Xi’s Blueprint for a Digital
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[retrieved on October 1, 2021].
64. Candelon, François, Michael G. Jacobides, Stefano Brusconi, and Matthieu
Gombreaud, “China’s Business ‘Ecosystems’ Are Helping It Win the Global A.I.
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65. Mozur, Paul, Jonah M. Kessel, and Melissa Chan, “Made in China, Exported
to the World: The Surveillance State,” https://www.nytimes.com/2019/04/24
/technology/ecuador-surveillance-cameras-police-government.html [retrieved on Oc-
tober 3, 2021].
66. Ash, “China’s New Nationalism.”
67. Johnson, Ian, and Thom Shanker, “Anti-Japanese Demonstrations Broke Out
in Many Places in China,” https://cn.nytimes.com/china/20120917/c17protests/ [re-
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68. Wang, Yiqing, “D&G Caught in ‘Humiliating China’ Storm, Zhang Ziyi and
Other Chinese Celebrities Collectively Boycott,” https://www.bbc.com/zhongwen
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69. “The Government Encourages P eople to Boycott Foreign Brands? Zhao Li-
jian Refutes: Does This Still Need to Be ‘Encouraged’?,” https://www.163.com/dy
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70. Bishop, Bill, “Xi Chairs Symposium with Business Leaders; ‘Xi Thought’
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71. Bishop, Bill, “Xi’s Pudong Speech; Peaceful China and the Knife Handle; Did
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72. Zhang, Raymond, “TikTok Owner’s Big Reason to Strike a U.S. Deal: China
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73. Zhang, Raymond, “China’s Crackdown on Didi Is a Reminder That Beijing
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/dual/ [retrieved on August 26, 2021].
74. He, Laura, “Xi Jinping Wants China’s Private Companies to Fight Alongside
the Communist Party,” https://www.cnn.com/2020/09/22/business/china-private
-sector-intl-hnk/index.html [retrieved on April 7, 2022]; Wei, Lingling, “China’s Xi
Ramps Up Control of Private Sector. ‘We Have No Choice but to Follow the Party,’”
https://w ww.w sj .c om /a rticles /c hina -x i -c lampdown -p rivate -s ector-c ommunist
-party-11607612531 [retrieved on April 7, 2022]; Nagarajan, Shalini, “China’s Xi
Jinping Personally Halted Ant’s Record-Breaking $37 Billion IPO a fter Boss Jack
Ma Snubbed Government Leaders, Report Says,” https://markets.businessinsider
304 Notes to Pages 94–96
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and Lingling Wei, “Chinese Ride-Hailing Giant Didi Could Get State Investment,”
https://www.wsj.com/articles/city-of-beijing-leads-plan-for-state-investment-in-didi
-the-embattled-ride-hailing-giant-11630681353 [retrieved on September 28, 2021].
75. “Xi Jinping Once Again Raised the Concept of ‘Domestic Cycle’ to Deal with
the ‘Unprecedented Pressure’ of the Chinese Economy,” https://www.bbc.com
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76. Wen, Tiejun [温铁军], and Xiaodan Dong [董筱丹], 去依附——中国化解第一
次经济危机的真实经验 / De-attachment: China’s Real Experience in Resolving the
First Economic Crisis [in Chinese] (Beijing: People’s Oriental Publishing [中国东方
出版社], 2019).
77. Liang, Yan, “The US, China, and the Perils of Post-COVID Decoupling,”
https://t hediplomat .c om /2 020 /0 5 /t he -u s -c hina -a nd -t he -p erils -o f -p ost -c ovid
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78. “No Force Can Stop the Chinese People from Achieving Their Dreams,” http://
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79. “The Sino-U.S. Trade War Is in Full Swing; China Takes a Strong Stand and
Pledges to Accompany to the End,” https://hotspot.com.my/article/96402/%E4%B
8%AD%E7%BE%8E%E8%B4%B8%E6%98%93%E6%88%98%E5%85%A
8%E9%9D%A2%E5%BC%80%E6%89%93-%E4%B8%AD%E5%9B%BD%
E7%AB%8B%E5%9C%BA%E5%BC%BA%E7%A1%AC%E8%AA%93%E5
%A5%89%E9%99%AA%E5%88%B0%E5%BA%95 [retrieved on July 2, 2021].
80. Su, Ma, “How Chairman Mao Copes with External Pressure,” http://cpc
.people.com.cn/n1/2018/1130/c223633-30434843.html [retrieved on July 2, 2021].
81. See, e.g., “The Third Sino-American Confrontation: Revisiting ‘Mao Zedong
Thought’ and Looking for a Good Way to Break through the U.S.-China Trade
War,” https://m.gelonghui.com/p/171405 [retrieved on July 2, 2021].
82. Yuan, Li, “After the Floods, China Found a Target for Its Pain: Foreign Me-
dia,” https://www.nytimes.com/2021/07/28/business/china-floods-foreign-media
.html [retrieved on August 26, 2021].
83. “ ‘A Coup for China’: Analysts React to the World’s Largest Trade Deal That
Excludes the U.S.,” https://www.cnbc.com/2020/11/16/rcep-15-asia-pacific-countries
-including-china-sign-worlds-largest-trade-deal.html [retrieved on August 10,
2021].
84. Dogachan, Dagi, “EU’s Refugee Crisis: From Supra-nationalism to Nation-
alism?,” Journal of Liberty and International Affairs 3, no. 3 (2018): 9–19.
85. Muis, Jasper, and Tim Immerzeel, “Causes and Consequences of the Rise of
Populist Radical Right Parties and Movements in Europe,” Current Sociology 65,
no. 6 (2017): 909–30.
86. “Foreign Companies in China Making It Big,” https://www.laowaicareer.com
/blog/foreign-companies-in-china-making-it-big/ [retrieved on July 2, 2021].
Notes to Pages 96–99 305
87. For example, Kai-Fu Lee, in AI Superpowers: China, Silicon Valley, and the
New World Order (Boston: Mariner Books, 2018), uses Google as an example of a
company with a lack of countrification in China that thus failed in the Chinese
market.
88. Germano, Sara, “Nike Chief Executive Says Brand Is ‘of China and for
China,’ ” http://www.ftchinese.com/story/001092985/en?archive [retrieved on Au-
gust 10, 2021].
11. “Frugality by Emperor Wen of Han Dynasty Made Fiscal Plenty,” http://www
.umo7.com/china/xihan/2017/1021/705.html [retrieved on April 23, 2022]; “The
Most Frugal Emperor in Chinese History: Emperor Wen of Han Dynasty,” https://
kknews.cc/history/4llqzeq.html [retrieved on July 2, 2021].
12. Lu, Zhidan [卢志丹], 毛泽东点评历史人物 / Mao Zedong’s Comments on His-
torical Figures [in Chinese] (Beijing: People’s Daily Press [人民日报出版社], 2016).
13. “Mao’s Frugality Is Moving: His Pajamas Were Not Changed for Twenty
Years but with Seventy-Three Patches,” https://www.kunlunce.com/jczc/mzdsx/2017
-12-04/121345.html [retrieved on July 2, 2021].
14. “Kung Hsiang-his: The Life of the Greediest in the Republic of China,”
https://www.bilibili.com/read/cv7854502 [retrieved on October 4, 2021]. Ironically,
Kung was the seventy-fifth-generation descendant of Confucius.
15. “Only Use Her Silk Bed Products in the White House? Why Soong Mei-ling
Loves Silk Products So Much,” https://kknews.cc/history/gmzpvll.html [retrieved on
July 2, 2021].
16. “Know China and Promote Frugality,” http://book.people.com.cn/GB/69399
/107423/160282/9600402.html [retrieved on April 23, 2022]; “Yan’an Stories,”
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July 2, 2021].
17. “It Was Because We Tightened Our Belt That We Developed Atomic Bomb and
Realized Our Industrialization,” https://jmqmil.sina.cn/ifeng/doc-ifymuukv2247452
.d.html [retrieved on July 2, 2021].
18. Zhang, Hua, “Mao Zedong and the Basis of Industrialization of the P eople’s
Republic of China,” http://www.dswxyjy.org.cn/n/2014/0815/c218997-25475431
.html [retrieved on July 2, 2021].
19. Song, Guiwu, “Frugality Should Be One of the Core Values of Socialism,”
http://sgwjjx.blog.sohu.com/307923635.html [retrieved on July 2, 2021].
20. “Hu Jintao on Enhancing Three Types of Awareness and Improving Cadres’
Work Construction,” http://cpc.people.com.cn/GB/67481/80541/index.html [re-
trieved on July 2, 2021]; “Xi Focus: Xi Stresses Stopping Wasting Food, Promoting
Thrift,” http://www.xinhuanet.com/english/2020-08/11/c_1
39282457.htm [retrieved
on July 2, 2021].
21. Tidy, Joe, “Mukbang: Why Is China Clamping Down on Eating Influenc-
ers?,” https://www.bbc.com/news/technology-53840167 [retrieved on July 2,
2021].
22. “Deng Xiaoping: Everything Should Follow the Frugality Principle,” http://
cpc.people.com.cn/n1/2018/1010/c69113-30332596.html [retrieved on July 2,
2021].
23. “Stories of Celebrity Entrepreneurs: The Stingy Ren Zhengfei,” https://www
.jmyhu.com/141945.html [retrieved on July 2, 2021].
24. “Begin with a Borrowed Hen for Eggs, and Become a Top 500 Private Enter-
prise in China 23 Years Later,” https://cj.sina.com.cn/article/detail/2268916473
/463823 [retrieved on July 2, 2021].
25. “Wise Lectures of Entrepreneurs: Liu Yonghao Recalled His Interesting Stories
in Meeting with Chairman Mao in Person,” https://biz.ifeng.com/c/7lwTF0MG2Fs
[retrieved on July 2, 2021]; “Founding His Firm since He Could Not Afford Buy-
Notes to Pages 103–108 307
ing Meat for His D aughter: Starting from Scratch and Now One of the Richest
Persons in China,” https://zhuanlan.zhihu.com/p/27747970 [retrieved on July 2,
2021].
26. “The Seven Years’ Experience in Countryside Was the Starting Point of Xi
Jinping’s Political Career and Mindset,” http://cpc.people.com.cn/n1/2017/0310
/c64387-29135456.html [retrieved on July 2, 2021].
27. Marquis, Christopher, and Kunyuan Qiao, “Will COVID-19 Forge a New
Generation of Gritty Chinese Entrepreneurs?,” https://supchina.com/2020/07/20
/will-covid-19-forge-a-new-generation-of-gritty-chinese-entrepreneurs/ [retrieved on
April 8, 2022].
28. Marquis, Christopher, Kunyuan Qiao, M. Diane Burton, Ryan Allen, Santi-
ago Campero Molina, Prithwiraj Choudhury, and Aleksandra Joanna Kacperczyk,
“Individual Imprinting: Life History Matters,” Academy of Management Proceed-
ings 2018, no. 1 (2018): 14868.
29. “Stories of Venturing.”
30. We used regression analysis (ordinary least squares) to estimate the data and
found that, first, CCP membership is more positively related to entrepreneurs’ mind-
set of frugality, which is reflected in their use of related words. Other things being
equal, entrepreneurs who are CCP members on average use 0.35 more frugality-
related words, and the effect is statistically significant (p = .000). The effect amounts
to 31.6 percent of the mean level of the usage of frugality-related words (1.107).
Similarly, entrepreneurs who are CCP members on average cut down on cost by
around 20 percent more, and the effect is statistically significant (p = .000). Second,
entrepreneurs’ frugal practices—discourse and actual cost-cutting behavior—are
positively related to firms’ performance. The total effect amounts to around 7 percent
of performance increase. Third, CCP membership is directly and positively related
to firm performance: on average, communist entrepreneurs earn 4.4 percent more
profits than noncommunist entrepreneurs, and the effect is substantial.
31. Li, Hongbin, Pak Wai Liu, Junsen Zhang, and Ning Ma, “Economic Returns
to Communist Party Membership: Evidence from Urban Chinese Twins,” Economic
Journal 117, no. 523 (2007): 1504–20.
32. Marquis, Christopher, and Kunyuan Qiao, “What Does Not Starve You
Makes You More Economical: A Study of Resource Scarcity Imprint of Chinese
Entrepreneurs,” paper presented at the Academy of Management, Chicago, IL, 2018.
33. “On the Spirit of Frugality and Entrepreneurs’ Thrift,” http:// www
.gototsinghua.org.cn/wenku/qiyewenhua/mba_89677.html [retrieved on July 2,
2021].
34. Weber, Max, The Protestant Ethic and the Spirit of Capitalism, translated by
Talcott Parsons (New York: Penguin, 1905/2002).
35. Lewis, William Arthur, “Economic Development with Unlimited Supplies of
Labour,” Manchester School 22, no. 2 (1954): 139–91.
36. Lee, Clive Howard, A Cotton Enterprise, 1795–1840: A History of M’con-
nel & Kennedy Fine Cotton Spinners (Manchester: Manchester University Press,
1972).
37. Crouzet, Francois, The First Industrialists: The Problem of Origins (Cam-
bridge: Cambridge University Press, 1985), 5.
308 Notes to Pages 108–109
38. Montag, Ali, “Here’s Why Jeff Bezos Still Drove a Honda Long after He Was
a Billionaire,” https://www.cnbc.com/2018/01/18/why-amazons-jeff-bezos-drove
-a-honda-after-he-was-a-billionaire.html [retrieved on July 2, 2021].
39. Hoffower, Hillary, and Taylor Nicole Rogers, “Mark Zuckerberg Was Just
Spotted Shopping at Costco. Look Inside the Lives of Surprisingly Frugal Million-
aires and Billionaires, from Businessmen like Warren Buffett to A-List Celebs like
Jennifer Lawrence,” https://www.businessinsider.com/frugal-billionaires-millionaires
-lifestyle-money-car-house-habits-net-worth-2019-2 [retrieved on July 2, 2021].
40. “Bite Dalu and Ge Yuesheng Became the Richest Persons of the Post-90s
Generation, and Hurun Claimed That the Average Age of Entrepreneur in China Is
29 Years Old,” http://tech.163.com/18/1010/11/DTOL3SV9000998GP.html [re-
trieved on July 2, 2021]; Mai, Jun, “China’s Communist Party Revisits the Past to
Regroup for Future,” https://www.scmp.com/news/china/politics/article/3122688
/chinas-communist-party-revisits-past-regroup-future [retrieved on July 2, 2021].
41. “Sons of the Former Richest Persons in China,” https://kuaibao.q q.com/s
/20191114A0B15J00?refer=spider [retrieved on July 2, 2021].
42. Wang, Tao, “Unraveling the Puzzle of Inheritance and Governance of Chi-
nese Family Businesses,” https://www.huxiu.com/article/340719.html [retrieved on
April 23, 2022]; Zhou, Ying, and Yongqian Chen, “The Inheritance Test: How to
Escape from the Curse of Wealth Cannot Last over Three Generations,” http://
finance.sina.com.cn/leadership/mroll/20120515/223712071529.shtml [retrieved
on July 2, 2021].
43. “Zong Qinghou: My Daughter Is as Thrifty and Frugal as Me,” http://finance
.sina.com.cn/leadership/crz/20110310/16229507248.shtml [retrieved on August 10,
2021].
44. “The Abacus of oFo’s Small Yellow Car: Through Shopping Cash Back Re-
fund Deposit, Further Squeeze Users,” https://www.sohu.com/a/407301177_128339
[retrieved on August 10, 2021].
45. Busenitz, Lowell W., and Jay B. Barney, “Differences between Entrepreneurs
and Managers in Large Organizations: Biases and Heuristics in Strategic Decision-
Making,” Journal of Business Venturing 12, no. 1 (1997): 9–30; “5 Good Reasons
for Being Frugal That Entrepreneurs Need to Remember When They Succeed,”
https://w ww.c ompletecontroller.c om /5 -g ood -r easons -f or -b eing -f rugal -t hat
-entrepreneurs-need-to-remember-when-they-succeed/ [retrieved on July 2, 2021].
46. Kachaner, Nicolas, George Stalker, and Alain Bloch, “What You Can Learn
from F amily Business,” Harvard Business Review 90, no. 4 (November 2012 ): 1–5.
47. Iaquinto, Anthony, and Stephen Spinelli, Never Bet the Farm: How Entre-
preneurs Take Risks, Make Decisions—and How You Can, Too (Hoboken, NJ: John
Wiley and Sons, 2010).
48. “Lost China’s Richest Man Status in 20 Minutes! The 300 Billion G iants
Cannot Even Afford 730,000 Yuan/Yuan/RMB. They Sell the ‘Money Printing Ma-
chine’ That Makes a Daily Profit of Tens of Millions, and Li Hejun Failed to Keep
Hanergy,” https://www.163.com/dy/article/G733SQMH0534A5GP.html [retrieved
on July 2, 2021].
49. Topping this list seems to be a curse—prior richest people such as Mou
Qizhong, Tang Wanxin, Lan Shili, Gu Chujun, Zhou Yiming, and Huang Guangyu
Notes to Pages 110–112 309
24. Gao, Lei, and Wang, Qi, “Private Enterprises’ Glorious Chapter: Summary
of 25 Years’ Achievements of the Guangcai Initiative in China,” http://www.gov.c n
/xinwen/2019-10/20/content_5442563.htm [retrieved on July 2, 2021].
25. “Cui Genliang: A Communist Entrepreneur Who Dedicated 30 Years to Pov-
erty Reduction,” http://www.jiangsu.gov.cn/art/2018/10/19/art_64354_7844686
.html [retrieved on July 2, 2021].
26. “Model of the Time for Jiangsu, and Stronger Communist Construction
Leads to Stronger Firms: Interviewing Chairman, CEO Zhou Haijiang,” http://www
.xhby.net/js/jj/201907/t20190722_6272190.shtml [retrieved on April 24, 2022];
“Zhou Haijiang Participated in the Symposium Celebrating the Twenty-Fifth An-
niversary of the Guangcai Project,” http://www.chinanews.com/business/2019/10-22
/8986207.shtml [retrieved on July 2, 2021].
27. “Ren Zhengfei: I Am a CCP Member Who Will Fight for Communism for
All My Life and I Will Never Betray,” https://user.guancha.cn/main/content?id
=162048 [retrieved on July 2, 2021].
28. “CCP Representatives’ Conference: Old CCP Member Zong Qinghou—
Want to Build Homes for Employees,” https://zj.zjol.com.cn/news/668818.html
[retrieved on July 2, 2021].
29. “Jinke Real Estate: A Model of China,” http://www.hsmrt.com/huanghongyun
/614.html [retrieved on July 2, 2021].
30. “Jinke Group Donated 110 Million Yuan/Yuan/RMB Again, Adding to Pre-
cise Poverty Reduction,” http://www.cq.xinhuanet.com/2019-08/21/c_1124903791
.htm [retrieved on July 2, 2021].
31. Results show that CCP membership is positively related to entrepreneurs’
focus on devotion, which is reflected in their use of related words. Other t hings be-
ing equal, entrepreneurs who are CCP members on average use 0.041 more
devotion-related words, and the effect is statistically significant (p = .000). The ef-
fect amounts to 53.6 percent of the mean level of the usage of devotion-related
words (0.077). Additionally, CCP membership is positively related to donation over
total revenue: on average, communist entrepreneurs’ donation over revenue is
0.020 percent more than noncommunist entrepreneurs’ in absolute value and
around 17.7 percent in relative terms. We used the Chinese Private Enterprise Sur-
vey to provide further evidence. In this dataset there is no way to measure the lan-
guage of entrepreneurs, so we only directly tested the relationship between CCP
membership and donation over revenue. The results are consistent with those from
the Chinese Stock Market and Accounting Research Database: CCP membership is
positively related to donation over total revenue; on average, communist entrepre-
neurs’ donation over revenue is 0.188 p ercent more than noncommunist entrepre-
neurs’, and the effect accounts for around 74.5 percent of the mean level of donation
over revenue.
32. Liang, Hao, Rong Wang, and Haikun Zhu, “Growing Up u nder Mao and
Deng: On the Ideological Determinants of Corporate Policies,” SSRN, 2019, https://
papers.ssrn.com/sol3/papers.cfm?abstract_id=3494916 [retrieved on April 7,
2022]; Marquis, Christopher, and Kunyuan Qiao, “Waking from Mao’s Dream:
Communist Ideological Imprinting and the Internationalization of Entrepreneurial
Ventures in China,” Administrative Science Quarterly 65, no. 3 (2020): 795–830.
312 Notes to Pages 120–122
33. Mao, Collected Works, vols. 1–6; Mao, Selected Works, vol. 4. See also sum-
maries such as “Mao Zedong Military Thought,” http://www.cdsndu.org/html_ch
/to_articleContent_article.id=8a28e6d84a9a04ff014a9b359da60228.html [re-
trieved on July 24, 2021].
34. See, e.g., Marquis, Christopher, and Kunyuan Qiao, “Communist Ideologi-
cal Imprinting and Internationalization: A Study of Chinese Entrepreneurs,” paper
presented at the Academy of Management Proceedings, Atlanta, GA, 2017; and
Marquis, Christopher, and Kunyuan Qiao, “Waking from Mao’s Dream: Commu-
nist Ideological Imprinting and the Internationalization of Entrepreneurial Ventures
in China,” Administrative Science Quarterly 65, no. 3 (2020): 795–830.
35. “Entrepreneurs under the Influence of Selected Works of Mao Zedong,”
https://zhuanlan.zhihu.com/p/146592060 [retrieved on July 1, 2021]; “Jack Ma:
I Went to Yan’an at the Hardest Time and Decided to Establish Taobao There,”
http://finance.sina.com.cn/chanjing/gsnews/2017-09-06/doc-ifykuffc3980865
.shtml [retrieved on August 15, 2021].
36. “Build a Strong Party to Make the Enterprise Stronger—Cui Genliang, Secretary
of the Party Committee and Chairman of Jiangsu Hengtong Group,” https://www.ccdi
.gov.cn/lswh/renwu/201604/t20160428_120623.html [retrieved on July 1, 2021].
37. See, e.g., Marquis and Qiao, “Communist Ideological Imprinting”; Marquis
and Qiao, “Waking from Mao’s Dream”; and “An Old Party Member’s F amily and
Country Feelings—Interview with Li Shijiang, Chairman of Do-Fluoride Chemical
Co., Ltd.,” http://www.dfdchem.com/News/media/12193/View.html [retrieved on
July 1, 2021].
38. Mao, Zedong, Quotations from Chairman Mao Zedong [in Chinese] (Bei-
jing: People’s Liberation Army General Political Department, 1966), 89.
part iii: the effects of mao’s mass campaigns: the great leap
forward, the cultural revolution, and the third front
Epigraphs: November 13, 1957, People’s Daily, also documented in “Scholar: The
‘Great Leap Forward’ Is Mao Zedong’s ‘Chinese Dream,’ ” https://www.bbc.com
/zhongwen/simp/china/2014/11/141113_great_leap_forward [retrieved on April 24,
2022]; Mao Zedong’s letter to Jiang Qing on July 8, 1966. In “Major Events of
Chinese Communist Party 1966,” http://cpc.people.com.cn/GB/64162/64164
/4416081.html [retrieved on April 24, 2022]; Chen, Donglin, “The Historical Sig-
nificance and Modern Enlightenment of Mao Zedong’s Thought on Three-Front
Construction,” https://www.dswxyjy.org.cn/n1/2019/0228/c423718-30948363
.html [retrieved on April 24, 2022].
2. “Big Guys.”
3. “Starting from 4,000 Yuan/RMB and Reaching 49 Billion Yuan/RMB, with Na-
tional Leaders Visiting the United States Three Times in Four Years, Lu Guanqiu
Spent His Entire Life Telling What the Spirit of Entrepreneurship Is,” https://zhuanlan
.zhihu.com/p/30495452 [retrieved on July 16, 2021]; “Lu Guanqiu of Wanxiang.”
4. “Starting from 4,000 Yuan/RMB.”
5. “Starting from 4,000 Yuan/RMB”; “Wanxiang Annual Ring 30 Years,”
https://business.sohu.com/20080310/n255621457.shtml [retrieved on July 5, 2021].
6. Andriani, Pierpaolo, and Gino Cattani, “Exaptation as Source of Creativity,
Innovation, and Diversity: Introduction to the Special Section,” Industrial and Cor-
porate Change 25, no. 1 (2016): 115–31.
7. Marquis, Christopher, and Zhi Huang, “Acquisitions as Exaptation: The Leg-
acy of Founding Institutions in the US Commercial Banking Industry,” Academy of
Management Journal 53, no. 6 (2010): 1441–73.
8. Ching, Kenny, “Exaptation Dynamics and Entrepreneurial Performance: Evi-
dence from the Internet Video Industry,” Industrial and Corporate Change 25,
no. 1 (2016): 181–98.
9. Kennedy, Mark, “Obama-Backed Documentary on Ohio Factory Wins Academy
Award,” https://abcnews.go.com/Entertainment/wireStory/obama-backed-documentary
-ohio-factory-wins-academy-award-68872312 [retrieved on July 5, 2021].
10. “Cao Dewang’s Early Experience and Venture Journey,” https://zhuanlan
.zhihu.com/p/82258592 [retrieved on April 24, 2022]; “Cao Dewang of Fuyao
Glass,” https://zhuanlan.zhihu.com/p/83919746 [retrieved on April 24, 2022];
Baidu’s elaboration, Cao Dewang, https://baike.baidu.com/item/%E6%9B%B9%E5
%BE%B7%E6%97%BA [retrieved on July 5, 2021].
11. Marquis, Christopher, and Kunyuan Qiao, “What Does Not Starve You
Makes You More Economical: A Study of Resource Scarcity Imprint of Chinese
Entrepreneurs,” paper presented at the Academy of Management, Chicago, IL, 2018.
12. “Wang Shi: Hardships and Sufferings Are Wealth,” https://finance.sina.cn
/chanjing/gsxw/2019-11-02/detail-iicezuev6608505.d.html [retrieved on April 24,
2022]; Towson, Jeffery, “Wang Shi and the Story of Vanke,” https://jefftowson.com
/2018/12/%E7%8E%8B%E7%9F%B3%E4%B8%8E%E4%B8%AD%E5%9B
%BD%E4%B8%87%E7%A7%91%E7%9A%84%E6%95%85%E4%BA%8B
%EF%BC%88%E7%AC%AC%E4%B8%80%E9%83%A8%E5%88%86/ [re-
trieved on July 5, 2021].
13. “Be a Revolutionary Facilitator,” https://www.marxists.org/chinese/maozedong
/marxist.org-chinese-mao-19571009.htm [retrieved on July 5, 2021].
14. “Mao Had a Lifelong Hatred of Stalin and Claimed Stalin Tortured Us Four
Times,” http://mil.news.sina.com.cn/2015-11-24/1126844675.html [retrieved on
April 24, 2022]; “Mao’s Visit to Soviet Union in 1949: Enthusiastic to Go but Dismal
to Return,” http://news.ifeng.com/special/60nianjiaguo/60biaozhirenwu/r enwuziliao
/200908/0817_7766_1305972.shtml [retrieved on July 5, 2021].
15. Qi, Weiping, and Jun Wang, “A Historical Investigation on the Evolutionary
Stage of Mao Zedong’s Thought of ‘Catching Up with and Surpassing the U.K. and
the U.S.,” http://ww2.usc.cuhk.edu.hk/PaperCollection/Details.aspx?id=3683 [re-
trieved on April 23, 2022]. The slogan is sometimes given as “Catching up with the
Notes to Pages 143–150 317
United Kingdom and surpassing the United States” or “Catching up with the United
States and surpassing the United Kingdom”; however, a literal approach to under-
standing this phrase is not the best way to understand Mao’s intentions—the idea
was to catch up and surpass these two most developed countries.
16. Shen, Zhihua [沈志华], 无奈的选择:冷战与中苏同盟的命运 / The Cold War
and the Fate of Sino-Soviet Alliance, 1945–1959 [in Chinese] (Beijing: Social Sci-
ence Academic Press [社会科学文献出版社], 2013).
17. Kung, James Kai-sing, and Justin Yifu Lin, “The C auses of China’s G reat
Leap Famine, 1959–1961,” Economic Development and Cultural Change 52, no. 1
(2003): 51–73; Lin, Justin Yifu, “Collectivization and China’s Agricultural Crisis in
1959–1961,” Journal of Political Economy 98, no. 6 (1990): 1228–52; Lin, Justin
Yifu, “Rural Reforms and Agricultural Growth in China,” American Economic
Review 82, no. 1 (1992): 34–51.
18. Cheng, Peng, “With a Yield of Over 3,000 Jin per Mu, Yuan Longping Broke
the Record Again!,” http://www.nbd.com.cn/articles/2020-11-02/1539174.html [re-
trieved on July 5, 2021].
19. Fan, Ziying, Wei Xiong, and Li-An Zhou, “Information Distortion in Hier-
archical Organizations: A Study of China’s G reat Famine,” working paper, Prince
ton University, 2016.
20. In 1950 Qian Xuesen was arrested as a communist sympathizer and stripped
of his security clearances; in 1955 he was said to have been traded to China for
Korean War prisoners. Li, Rui [李锐] 大跃进亲历记 / The Experience of the G reat
Leap Forward [in Chinese] (Shanghai: Shanghai Far East Press, 1996). However,
Qian’s theory was only applicable to the ideal case with full photosynthesis to grow
rice—for instance, in reality, the effectiveness can be less than 1 percent.
21. Data are from Meng, Xin, Nancy Qian, and Pierre Yared, “The Institutional
Causes of China’s Great Famine, 1959–1961,” Review of Economic Studies 82,
no. 4 (2015): 1568–611. Kung, James Kai-Sing, and Shuo Chen, “The Tragedy of
the Nomenklatura: Career Incentives and Political Radicalism during China’s Great
Leap Famine,” American Political Science Review 105, no. 1 (2011): 27–45.
22. Sun, Zhonghua, “The Origin of Liu Shaoqi’s ‘Thirty-Percent Natural Calam-
ity and Seventy-Percent Man-Made Calamities,’ ” http://cpc.people.com.cn/GB
/64162/64172/85037/85039/5898093.html [retrieved on July 5, 2021].
23. Interestingly, the final, posthumous verdict on Mao also held that overall he
was 70 percent right and 30 percent wrong.
24. In another work, we show, using a cutting-edge statistical analysis, that it
was the G reat Leap Forward rather than the general poor living conditions that
drove this pattern. See Marquis and Qiao, “What Does Not Starve You.”
25. Bianchi, Emily C., and Aharon Mohliver, “Do Good Times Breed Cheats?
Prosperous Times Have Immediate and Lasting Implications for CEO Misconduct,”
Organization Science 27, no. 6 (2016): 1488–503.
26. Ardelt, Monika, “Social Crisis and Individual Growth: The Long-Term Ef-
fects of the G reat Depression,” Journal of Aging Studies 12, no. 3 (1998): 291–314.
27. “The Way to Happiness of Seventy-Year-Old Female Entrepreneur Chen Rui-
feng,” http://www.ptsql.org/hxqj/201909/t20190926_1406444.htm [retrieved on
July 5, 2021].
318 Notes to Pages 150–155
29. “Mou Qizhong’s Life in Prison: Concern about the 18th Congress of CCP
and Wanted to Establish an Internet University a fter Getting Out,” http://news.ifeng
.com/shendu/nfrwzk/detail_2013_01/09/20997850_3.shtml [retrieved on July 5,
2021].
30. “Small Wizard Mou Qizhong,” https://blog.boxun.com/sixiang/000525/7
.htm [retrieved on July 5, 2021]. Xu Jiayin, born in 1958, experienced the Cultural
Revolution and was once the richest man in China. He has also reportedly been
freewheeling, bribing relatives of high-ranking officials such as the former vice pres-
ident Zeng Qinghong and former prime minister Wen Jiabao. Che, Chang, “The Fall
of Evergrande Boss,” https://supchina.com/2021/09/21/the-fall-of-the-evergrande
-boss/ [retrieved on September 28, 2021].
31. “The Richest Man Fell: From Orphan to Rich, from Poor Student to Meet
with Chief Representative of North Korea, and Finally Was Thrown into Prison,”
http://www.360doc.com/content/20/0710/13/8250148_923357960.shtml [retrieved
on July 5, 2021].
32. “The Richest People in China,” https://www.hurun.net/zh-CN/Rank
/HsRankDetails?num=QWDD234E [retrieved on August 16, 2021].
33. “The 35 Richest Chinese on the Hurun Report in 2017 Were Sentenced! Rich
List or Slaughter List?,” https://www.sohu.com/a/48957025_121315 [retrieved on
August 16, 2021].
34. Data are from “Richest P eople in China.”
35. “Huang Nubo Responded.”
36. “The Richest Owner of a Publicly Traded Firm in Sichuan: Became Rich Sud-
denly and Deceived Dispersed and Institutional Investors,” http://finance.sina.com
.cn/stock/s/2019-05-28/doc-ihvhiews5204918.shtml [retrieved on April 24, 2022];
“Inside the Fall of 7 Billion U.S. Dollars Yinji Media: The Mysterious Actual Con-
troller and the Loss of 1 Billion U.S. Dollars during Spring Festival,” https://money
.163.com/19/0917/07/EP8QRB5S00259C76.html [retrieved on July 5, 2021].
37. “Unveiling Success of Jia Yueting: How He Became Chinese Steve Jobs,”
https://zhuanlan.zhihu.com/p/46061759 [retrieved on July 5, 2021]; “Luo Yonghao
Sold 160 Million U.S. Dollars with His Live Chat,” https://t.qianzhan.com/d aka
/detail/200402-5d96ece3.html [retrieved on July 5, 2021].
38. “People Become Beasts—Song Yongyi Talks about the Cannibalism of P eople
in Guangxi during the Cultural Revolution,” https://www.rfa.org/mandarin
/yataibaodao/zhengzhi/ck-04282016105141.html [retrieved on August 16, 2021].
39. “Cultural Revolution Demons.”
40. “Why Are Rich Chinese Entrepreneurs Leaving China?,” https:// www
.asianentrepreneur.org/why-are-rich-chinese-entrepreneurs-leaving-china/ [retrieved
on July 5, 2021].
41. “Liu Chuanzhi’s Feebleness: Hope to Reform the Current Political Institu-
tion but Is Also Dependent upon It,” https://finance.sina.cn/chanjing/gl/2015-03-16
/detail-iavxeafs1805302.d.html [retrieved on July 5, 2021].
42. Xu, Youyu, “The Complex Influence of the Cultural Revolution on China:
Understanding and Reflecting the Cultural Revolution,” http://hxzq.net/aspshow
/showarticle.asp?id=7666 [retrieved on July 5, 2021].
Notes to Pages 170–173 323
43. “ ‘Exit of Private Economy’: Increasing State Advances and the Private Sec-
tor Retreats and Panic Spread among Chinese Private Enterprises,” https://www.bbc
.com/zhongwen/simp/chinese-news-45522113 [retrieved on July 5, 2021].
44. Ghosh, Shona, “An Arrest, a Debutante Ball, and 2 Marriages: Inside the
Lives of the Superrich Huawei Dynasty,” https://www.businessinsider.com/insane
-life-huawei-founder-ren-zhengfei-ultra-wealthy-family-2018-12 [retrieved on
July 5, 2021]. Ren Meng Wanzhou a dopted her surname from her m other, Ren’s
ex-wife.
45. “Tang Wanxin: Last Dream of the Delong Empire,” http://news.sina.com.cn
/c/2005-01-12/15065519168.shtml [retrieved on July 5, 2021].
46. “Ten Years of the Cultural Revolution,” http://www.gov.cn/test/2005-06/24
/content_9300.htm [retrieved on July 5, 2021].
47. “Xi Jinping’s Anti-corruption Defeated 1.73 Million Party Members and
Cadres Last Year,” https://www.rfi.fr/cn/%E4%B8%AD%E5%9B%BD/20190109
-%E4%B9%A0%E8%BF%91%E5%B9%B3%E5%8F%8D%E8%85%90%E5
%8E%BB%E5%B9%B4%E6%89%93%E5%80%92173%E4%B8%87%E4%
BA%BA%E6%AC%A1%E5%85%9A%E5%91%98%E5%B9%B2%E9%8
3%A8-%E8%85%90%E5%8A%BF%E4%BB%8D%E5%A6%82%E9%87%8
E%E7%81%AB [retrieved on July 5, 2021].
48. “Zhu Yuanzhang’s Anti-corruption Campaign Killed 150,000 P eople. Why
Did Corrupt Officials Continue to Emerge in the Ming Dynasty? Only Because of
the Defect,” https://k.sina.cn/article_7277845125_1b1cb1a8500101jjlh.html?from
=history [retrieved on July 5, 2021].
49. “Comment on China: Xi Jinping, Mao Zedong in Version 2.0?,” https://www
.b bc.c om/z hongwen/s imp/f ocus_o n_c hina/2 013/1 0/1 31007_c r_x ijinping
_maozedong [retrieved on July 5, 2021].
50. For example, “Xi Jinping Unifies the Arena, Komsomol Faction and Shanghai
Faction Have Become the Past?,” https://www.dw.com/zh/%E4%B8%80%E7%B
B%9F%E6%B1%9F%E6%B9%96%E4%B9%A0%E8%BF%91%E5%B9%B3
-%E5%9B%A2%E6%B4%BE%E6%B5%B7%E6%B4%BE%E6%88%90%E8
%BF%87%E5%BE%80/a-41131029 [retrieved on July 5, 2021]; and “The Gangs
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27. Some scholars have discussed why China escaped shock therapy—for exam-
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330 Notes to Pages 200–203
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37. We used ordinary least squares regression to see the difference between party
secretaries who joined the CCP before 1978 and those after regarding their prac-
tices related to number of new firms, foreign investments, and venture capital and
private equity investments. The regression results show that party secretaries who
joined the CCP before 1978 are more antagonistic toward entrepreneurship
( β = −6.440, p = .000; −10.36 percent = 55.73 / 62.17), foreign investment ( β = −7.530,
p = .000; −12.17 percent = 54.35 / 61.88), and venture capital and private equity in-
vestments ( β = −2.386, p = .000; −4.18 percent = 54.74 / 57.13). The overall index of
entrepreneurship and innovation is also smaller ( β = −6.197, p = .000; −10.15
percent = 54.86 / 61.06) for party secretaries who joined the CCP before 1978.
We then analyzed the mayors of these Chinese cities regarding their practices re-
lated to number of new firms, foreign investments, and venture capital and private
equity investments. The regression results show that mayors who joined the CCP
before 1978 are more antagonistic toward entrepreneurship ( β = −8.360, p = .000;
−12.99 percent = 56.00 / 64.36), foreign investment ( β = −9.764, p = .000;
−15.15 percent = 54.67 / 64.43), and venture capital and private equity investments
( β = −5.026, p = .000; −8.46 percent = 54.38 / 59.41). The overall index of entrepre-
neurship and innovation is also smaller ( β = −8.752, p = .000; −13.74 percent = 54.95
/ 64.30) for party secretaries who joined the CCP before 1978.
38. “Funing Sanzao Town Tax-Free Zone (Industrial Park) Has Become the New
Engine of the Town’s Economic Development,” https://jsnews.jschina.com.cn/yc/a
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39. Lu, Yi, Jin Wang, and Lianming Zhu, “Place-Based Policies, Creation, and
Agglomeration Economies: Evidence from China’s Economic Zone Program,”
American Economic Journal: Economic Policy 11, no. 3 (2019): 325–60.
40. We use a probit model to investigate the relationship between joining the
CCP before 1978 and the likelihood of establishing a special economic zone. The
results provide further evidence that party secretaries ( β = −0.704, p = .000) and may-
Notes to Page 204 331
ors ( β = −0.681, p = .000) who joined the CCP in the Maoist period are more an-
tagonistic toward business.
41. Wang, Du, and Marquis, “Defending Mao’s Dream”; Zhang, Jianjun, Chris-
topher Marquis, and Kunyuan Qiao, “Do Political Connections Buffer Firms from
or Bind Firms to the Government? A Study of Corporate Charitable Donations of
Chinese Firms,” Organization Science 27, no. 5 (2016): 1307–24.
42. “Kunshan Bombing Case Exposes Investment Insider,” http://www.c hina.org
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43. We first coded CEOs’ membership in e ither of the two political councils—
the National People’s Congress or the Chinese P eople’s Political Consultative
Conference—based on their CVs. Then, based on the location of these publicly
traded firms, we computed the aggregate number at the city level. After that, we
use a negative binomial model to estimate the number of such business-government
ties based on whether the focal politician joined the CCP before 1978. The results
are consistent with our illustration in fig. 10.6—party secretaries ( β = −0.659,
p = .000) and mayors ( β = −0.402, p = .000) who joined the CCP in the Maoist pe-
riod appoint fewer businesspeople to political councils. We understand that it may
also be possible that the higher-level CCP-government selects people for certain ar-
eas, such that more liberal officials are appointed to economically liberal regions
where the number of business-government ties is higher and entrepreneurship and
foreign investments are more common. We consider these issues in our supplemen-
tary statistical tests.
For all t hese analyses, we consider potential problems of endogeneity. First, CCP-
government leaders might not be randomly assigned to different cities. For exam-
ple, leaders who are more open to business-related ideas and activities might be sent
to cities with more vibrant private economies, and thus it is not the politicians’ back-
ground that affects these business-related actions but rather assignment by the
higher level. We utilize the anti-corruption movement in China and keep political
leaders whose predecessors are removed from offices suddenly to deal with the en-
dogeneity issue. In this way, their assignment might not be driven by a high-level
CCP committee’s consideration of matching leaders with cities. Using this sample,
we still find that political leaders—both party secretaries and mayors—who joined
the CCP before 1978 are more antagonistic toward entrepreneurship, innovation,
and foreign investment.
Second, politicians’ ages might be a concern and introduce an omitted variable
bias. Therefore, we include their ages, and the results are consistent with our main
analyses. Furthermore, our results are consistent with studies that use more robust
methods and are published in leading academic journals, such as Hu, Helen Wei,
and Dean Xu, “Manager or Politician? Effects of CEO Pay on the Performance of
State-Controlled Chinese Listed Firms,” Journal of Management, online ahead of
print (2021), https://doi.org/10.1177/01492063211015301 [retrieved on April 12,
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Strategic Management 28, no. 4, online ahead of print (2021), https://doi.o rg/10
.1108/CCSM-09-2020-0182 [retrieved on April 12, 2022]; Liang, Wang, and Zhu,
“Growing Up under Mao”; and Wang, Du, and Marquis, “Defending Mao’s Dream.”
332 Notes to Pages 204–209
44. Inoue, Carlos F. K. V., Sergio G. Lazzarini, and Aldo Musacchio, “Leviathan
as a Minority Shareholder: Firm-Level Implications of State Equity Purchases,”
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45. Hayek, Friedrich August, “The Use of Knowledge in Society,” American Eco-
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48. “Jack Ma’s Latest Voice: The Pawnshop Ideology of China’s Banking Indus-
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49. Dickson, Bruce J., Red Capit alists in China: The Party, Private Entrepreneurs,
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/initial-us-china-trade-deal-has-major-hole-beijings-massive-business-subsidies
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26. Du, Jun, Xiaoxuan Liu, and Ying Zhou, “State Advances and Private Re-
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28. “General Secretary Xi Jinping: Constantly Open Up a New Realm of Con
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31. “ ‘Exit of Private Economy’: Increasing State Advances and the Private Sec-
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32. Around 294,000 p eople were documented to have suffered from this in some
way, including 6 babies who died from kidney stones and 54,000 babies who were
hospitalized. The scandal hampered the growth of the dairy industry and many
manufacturers, including Mengniu. See Branigan, Tania, “Chinese Figures Show
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34. “The ‘State Advances and Private Sector Retreats’ That Underlies China Oil and
Foodstuffs Corporation’s Investment in Mengniu,” http://news.ifeng.com/opinion
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stuffs Corporation More,” https://business.sohu.com/20090921/n266871745.s html
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35. Data are from “321 A-Share Listed Companies ‘Change Ownership’ in
2020,” https://www.jwview.com/jingwei/html/m/02-01/378688.shtml [retrieved on
August 7, 2021]; “Securities Daily: State-Owned Listed Companies Participated in
655 A-Share Mergers and Acquisitions during the Year,” http://www.sasac.gov.cn
/n2588025/n2588139/c16181884/content.html [retrieved on August 7, 2021]; “41
Private Enterprises Were Nationalized, How Did Those Bosses Eliminate Listed
Companies?,” https://www.sohu.com/a/363609918_534161 [retrieved on August 7,
336 Notes to Pages 218–220
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on August 7, 2021]; and “Local State-Owned Assets Take the Initiative to Help
Private Enterprises: 29 Firms Have Been Invested This Year, Non-uniform Deploy-
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36. “Return to the Public-Private Partnership in the 1950s? The Governments of
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340 Notes to Pages 230–235
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methodological appendix
1. “Regional Distribution of Best Private Enterprises in China: Jiangsu and Zheji-
ang Took the Lead and Chongqing Surpassed Tianjin,” https://finance.sina.com.cn
/china/2019-08-29/doc-iicezueu2028692.shtml [retrieved on July 1, 2021].
2. The survey continued after 2012, but there were further restrictions on use of
the data, so we did not subscribe to later waves of it.
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Vern L. Glaser, Milo Shaoqing Wang, Sarah Kaplan, and P. Devereaux Jennings,
348 Notes to Page 272
This book is built on decades of research and life in China, and it reflects
the deep influence of many on our individual and collective thought. Both
of us have published intensively on business and entrepreneurship in China,
including numerous academic articles in leading management, sociology,
and economics journals, as well as Harvard Business School case studies.
These writings cover a broad range of topics, such as business-government
relations, corporate governance, corporate social responsibility, finance,
human resource management, innovation, internationalization, and sustain-
ability of many types of Chinese enterprises—state-owned firms, privately
owned firms, publicly traded firms, and entrepreneurial start-ups. We owe
a debt of gratitude to all of the p
eople who collaborated on, edited, and
reviewed this work who have shaped our thinking.
Chris has long been interested in East Asian culture. In high school he
did an independent research project on the role of Confucianism in con
temporary China. He is grateful to his early teachers such as Dr. Diana
Wood, who spurred his initial interest in China. He traveled to the region
for the first time in 1996, when he was fortunate to have had an opportu-
nity to live and work in Taiwan for a short period and take a six-week back-
packing trip around mainland China. At the time, bikes and small cars
were the common means of transportation. Chris still remembers standing
on the Bund, the Shanghai waterfront, and talking to someone who told
him that the poor region across the Huangpu River now known as Pudong
would become the financial capital of China. He thought this person was
349
350 Acknowledgments
crazy. Even Shanghai natives followed the dictum, “I would rather have a
bed in Puxi [on the west bank of the Huangpu River] than a room in Pudong
[on the east bank].” Today, three of the tallest buildings in the world are on
that relatively undeveloped spot Chris viewed in 1996. In fact, one may
drive more than twenty miles into Pudong while only seeing high-rises.
After joining Harvard Business School as a professor in 2005, Chris be-
gan to study business in China more formally, working with a large and
diverse group of colleagues and students. During his frequent visits to China
and times living in Beijing and Shanghai in 2011, 2012, and 2014–2015,
he was continually amazed by the pace and intensity of the entrepreneurship
and rapid development in China and, at the same time, by the persistence of
Maoism. He is grateful to the business schools of Peking University, Fudan
University, and Shanghai Jiaotong University for hosting those visits, with a
special thanks to Dean Yuan Li, Runtian Jing, and Zucheng Zhou for their
close partnership.
One memorable event was when he took a research trip to Changsha in
Hunan Province in 2011. For five days he stayed in the corporate dormi-
tory of Broad Air, a leading environmentally focused company with an im-
pressive corporate campus where employees lived, ate, and worked u nder
the guidance of founding chairman Zhang Yue. One day he visited the
nearby town of Shaoshan, birthplace of Mao Zedong. The town was flooded
with visitors, mostly rural Chinese who came to honor and even worship
the chairman. Chris was the only Westerner in sight.
He is grateful for opportunities to visit with and study the leadership of
many private Chinese companies in depth, such as Broad Air, Tsing Capital,
SMIC, and Continental Hope Group, and state-owned enterprises such as
State Grid, COSCO, Jiangsu Broadcasting, and Shenhua Energy. This access
to executives, staff, and corporate facilities at many Chinese companies
for over a decade has s haped his understanding of business and politics in
China. To cite one example of how these many experiences challenged his
Western biases, when he entered the office of COSCO shipping CEO Wei
Jiafu in 2012, he was shocked to find a life-size statue of Mao next to the
flag of the CCP. But over time, he came to a better understanding of how
Mao imbues all aspects of life in China.
While the US media tend to discuss China as a communist country, fo-
cusing on the downside of the regime, when Chris led groups of Harvard
and Cornell students to China to study, those who had never been were
consistently shocked by the economic vibrancy they saw. He learned a lot
by seeing China through t hese “newcomers’ ” eyes. E very year, one or more
of them would take him aside and exclaim, “China is not really a commu-
nist country!” He encountered the same surprise and confusion when he
talked to practitioners who were new to China. At the same time, while
Acknowledgments 351
them, as well as many others, including Zhi Huang, Susan Jackson, Yuan
Li, Xiaowei Rose Luo, Cuili Qian, Dongning Yang, Zoe Yang, Juelin Yin,
Hongyu Zhang, Jianjun Zhang, and Yanhua (Zhou) Bird. Peng Lu from the
Chinese Academy of Social Sciences also provided valuable access to and
assistance with the Chinese Private Enterprise Survey data. Furthermore,
we also appreciate guidance from Meg Rithmire and Tony Saich on some
important resources for our book.
Faculty and students at both Cornell and the University of Electronic Sci-
ence and Technology of China have provided enormous help in collecting
data and conducting interviews of entrepreneurs. Chris in particular is
grateful for the support of UESTC and, since 2019, for being able to closely
connect to the business sector in Chengdu, China. We especially would like
to thank Dean Yongkai Ma for his support and friendship, Henry Gui for
his leadership, Ying Wang for her administrative help, and Xueyun Luo,
Qian Wang, Yichen Wang, Sai Xu, and Kai Xie for their research help. We
are also indebted to the entrepreneurs we interviewed; their insights were
invaluable contributions to our book.
We would also like to thank Jim Levine and his literary agency for their
support and guidance, as well as the editorial team at Yale University Press,
led by Seth Ditchik, for making this book a reality. In addition, we greatly
appreciate Arthur Goldwag’s insightful commentary and editorial guidance
on an early draft of the book.
Last but not the least, we are grateful for financial support from Cor-
nell’s Innovation, Entrepreneurship, and Technology Theme and Center for
Social Sciences Research. Conferences at the Academy of Management;
seminars held at Harvard University, the University of Cambridge, London
Business School, and the University of Texas at Dallas; and events held at
China EconTalk and SupChina provided us with opportunities to take feed-
back from both researchers and general audience members and improve
the work.
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349-99188_Rothfels_ch01_3P.indd 6
Index
355
356 Index
54–55, 86, 88, 228; SOE representation campaigns); military in (see military); myths
by, 15, 211; terminology for, 280n56; Third about, 21–26; nationalism in (see nation-
Front Construction under (see Third Front alism); social contributions in (see social
Construction); Three Represents Theory, contributions); socialist institutions in
13–14, 50, 55; United Front Department, (see socialist institutions)
239; US vilification and misunderstanding China Everbright Group, 49
of, 4, 234–237; Xi’s commitment to, 2–3, China Investment Corporation, 219
3f, 5, 25, 33, 37, 174, 234, 245, 249 Chinalco, 200
Central Advisory Commission, 172 China National Offshore Oil Corporation,
Central Cultural Revolution Group, 160, 172 10
Central Military Commission, 36–37, 159, China National Radio, 140
164 China Oil and Foodstuffs Corporation, 218
Chan, Jackie, 58 China’s New Red Guards (Blanchette), 235
Chang, Gordon, 21, 235 China Vanke, 142
Changhong Group, 180 Chinese Academy of Social Sciences, 230,
charitable donations. See social 270
contributions Chinese Civil War (1945–1949), 129
Chen Dongsheng, 214t Chinese Communist Party. See CCP
Chen Duxiu, 35, 80 Chinese Dream, 91, 249, 260
Chengdu Tianxing Instrument and Meter, Chinese Dream Red-Theme Museum, 174
181 Chinese Economy, 272
Chen Geng, 309n7 Chinese governance model. See principles of
Chengzhu Lou, 224 governance
Chen Jiageng, 93 Chinese management model. See principles
Chen Jinyi, 170t of business
Chen Kaixuan, 103, 154 Chinese National Day Parade, 138f
Chen Min’er, 346n82 Chinese P eople’s Political Consultative Con-
Chen Pixian, 160 ference (CPPCC), 15–16, 89, 172, 204,
Chen Ruifeng, 150 331n43
Chen Shaoyu (later Wang Ming), 35–36 Chinese Private Enterprise Survey, 27, 86,
Chen Tianyong, 157 105, 118, 119, 220–221, 270–271,
Chen Yonggui, 160, 206 311n31, 337n44
Chernenko, Konstantin, 172 Chinese rust b elt, 177, 180, 184–186
Chiang Kai-shek, 40–41, 43, 78, 100, 246, Chinese Stock Market and Accounting
309n7 Research Database, 27, 272, 311n31
children and youth: Cultural Revolution Chinese Writers Association, 174
effects on, 156–157, 162, 165 (see also Chint Group, 300n38
Cultural Revolution); Eastern vs. Western Chongqing Junfeng Property L imited
parenting of, 18–19; education of (see Company, 192
educational system); imprinting on, Chongqing University, 9
51–52 (see also imprinting theory); inter- Churchill, Winston, 233
generational transmission to (see inter- class. See social structure
generational transmission); send-down Clausewitz, Carl von, 124
movement for, 45, 75, 159, 162–163, Clinton, Bill and administration, 1, 6
175, 253, 288n41, 346n77 Coca-Cola, 122, 124
China: communism in (see CCP; Maoism); Cold War, 234–235, 236
devotion in (see devotion); foreign relations Collected Works on Military by Mao Zedong
with (see specific countries); frugality in (Mao Zedong), 43, 125, 253
(see frugality); Mao’s influence on (see collective-owned enterprises (COEs), 68,
Mao’s lasting influence on China; Mao 213–214, 214t, 215
Zedong); mass campaigns in (see mass collectivism, 57, 113, 117
358 Index
collectivization, 44, 81, 84, 113–114, 143–144, Company (military unit), 125, 189, 209, 226
148–149, 209, 211, 213 Confucianism: country-over-capital principle
Coming Collapse of China, The (Chang), consistent with, 238; Cultural Revolution
21, 235 targeting, 321n15; devotion and social
common prosperity policy, 3, 71, 111, contribution in, 113, 116; Doctrine of the
119–120, 225, 238 Mean, 250, 344n63; frugality in, 50, 99;
communism: capitalism and, 5, 7, 9–21, 213, lasting influence in China, 8; Maoism
233; capitalism compared, 41–42, 42t, principles tied to, 38–39, 43, 50, 61, 69;
286–287n28; historical path to, 23, 282n82; political system and, 193; statism and, 57
Maoist principles of (see Maoism); politi conglomerates, 7
cal system of (see CCP; political system); consumer nationalism, 93
Soviet (see Soviet Union); terminology, consumer orientation, 133–134
280–281n58; US fear and misunderstand- context-consciousness principle, 240–241
ing of, 4, 6, 33, 234–235 contradictions: CCP governance and, 18–21,
communist entrepreneurs: CCP commit- 33–34; defined, 33–34; economic, 102,
ment, 9, 11, 12–21, 13f, 51, 55–57, 117, 210; Maoism on, 19, 38–39
256–257, 279n45; contradictions for, Cook, Tim, 154
18–21; Cultural Revolution effects on, corporate social responsibility. See devotion;
156, 157, 163, 164–175, 166f, 201, 242; social contributions
devotion and social contributions by, corruption: Cultural Revolution and, 157,
110–113, 115–122, 118f–119f, 238, 164–170, 166f, 167t–168t, 170t, 206;
311n31; frugality of, 97–98, 103–109, KMT, 40, 100; political system and, 205;
104f–107f, 142, 149–151, 239–240, of richest people, 165–170, 167t–168t,
307n30; Great Leap Forward lessons 170t, 309n49, 322n30; Xi’s campaign
applied by, 139–142, 149–155; Mao’s against, 171–172, 206, 255–256
lasting influence on, 17, 52–53, 69–70; Cotton, Tom, 4, 212
Military Thought application by, 11, 12, country-over-capital principle, 237–239
123–135, 240–241, 243, 279n41; nation- COVID-19 pandemic: Chinese vilification for,
alism of, 75–78, 85–90, 87f–88f, 92–96, 4; economic effects of, 1, 22, 26, 94; fru-
237–238, 301n41; overview of, 15–18; gality during, 100–101; long-term impli-
political system and, 15–16, 191–194, cations of, 154–155; Military Thought on,
200–208, 202f–205f, 330n37, 330–331n40, 125; political system and, 195, 244–245;
331n43; principles of business for, 237–244; social contributions during, 116, 257;
resource use by, 139–142, 151–155, technology use during lock-downs, 6
239–240; socialist economy and, 209–231, CPPCC (Chinese People’s Political Consul-
333n13, 337n44, 337n48, 339–340n81, tative Conference), 15–16, 89, 172, 204,
340n83 (see also socialist economy); 331n43
sources of, 213–215, 214t; Third Front Cui Genliang: CCP commitment, 14, 16,
Construction and, 176–177, 180–187, 55–56, 62; devotion and social contribu-
183f, 242. See also private enterprises tions of, 112, 117; internationalization
Communist International, 35, 37, 100 efforts, 89; Military Thought application
Communist Manifesto (Marx and Engels), by, 133; as private entrepreneur, 214t
8, 15, 253 Cultural Revolution, 156–175; conceptual
Communist Youth League, 60 foundation for, 158–159; counterrevolu-
Community of Common Destiny, 129 tionsists in, 53–54, 156, 162; effects of, 25,
Company (business firm), 2, 7, 9, 11, 16, 53, 26, 45, 156–157, 159–175, 201, 206, 242;
58, 76, 77, 85, 86, 93, 94, 97, 98, 103–105, end of, 163–164; goals of, 137, 159; insti-
112, 116, 120, 121, 124, 127, 128, 130, tutional effects of, 45, 157, 159–163, 242;
132, 134, 140, 150, 152, 154, 164, 168, leaving China following, 157, 169–170,
169, 180, 192, 211, 228–230, 241, 279n41, 170t; Maoism in, 34, 255; media on,
281n61, 300n38, 304n79, 313n87 160–161, 163–164, 248; nationalism
Index 359
during, 84–85; Old Ideas destruction in, Diligent Work-Frugal Study Movement, 35,
62, 321n15; overview of, 44, 45, 158–164, 37, 252
175; persecution and violence in, 156, 159, Dilmurat, Dilraba, 238
160–163, 164–165; private enterprise ef- Disabled Persons’ Federation, 172
fects of, 156, 157, 163, 164–175, 166f, Doctrine of the Mean, 250, 344n63
201, 242; recurrence of, 157, 171–175, Do-Fluoride Chemicals, 133
247; religious destruction in, 62; unfold- Dolce & Gabbana, 93, 237, 238
ing of, 159–163 Donahoe, John, 96
Cuomo, Andrew, 194 Dongfeng Motor Corporation, 183
Dongguan Zelong Cable, 228
Daimler, 97, 218 Douban, 72
Dalio, Ray, 21 Duan, Whitney, 24
Danone, 76–77
Darwin, Charles, 34 East Hope Group, 200
“Decision of the Central Committee of the economic system: capitalist vs. communist,
Chinese Communist Party on the Great 41–42, 42t; Chinese (see socialist economy)
Proletarian Cultural Revolution, The,” 159 educational system: business studies in, 135,
deforestation, 155 239; college attendance option, 288n41,
Delong Group, 164–165, 170 294n40; Cultural Revolution effects on,
Deng Pufang, 172 45, 157, 159, 162; frugality emphasis in,
Deng Xiaoping: CCP leadership, 36–37, 55, 107, 239; inspectors of, 61; Maoism rein-
164, 249; common prosperity policy of, forcement in, 50, 59–61, 60f, 243; na-
120; Cultural Revolution end by, 164; tionalist backlash in, 91; political loyalty
Cultural Revolution to counter power of, and, 294n40; social contributions to, 110,
158–160, 163; Deng Xiaoping Theory, 18, 111; Xi’s changes to, 256
50, 55; devotion stance of, 115; economic Embracing Globalization but D on’t Forget
reforms, 8, 10, 16, 47, 49, 64, 65–66, 67, Our Nation (Yin Mingshan), 77
69, 91, 115, 134, 193, 199–200, 211, 213, employment: Cultural Revolution effects
247; education system under, 294n40; on, 45, 162; employee insurance, and
frugality stance of, 102–103; life history CCP branches, 229, 229f, 339–340n81;
of, 252, 254; Lu and, 140; Mao chal- permanent, 172; by private enterprises, 7,
lenged by, 45, 84, 158; Maoist founda- 132–133; by SOEs, 219; Third Front
tions of theories, 25, 67; moderatism Construction end effects on, 180
of, 250–251; permanent employment End of History and the Last Man, The
changes by, 172; on practice for testing (Fukuyama), 21, 235
truth, 38, 164, 247; as revisionist, 84; on Engels, Friedrich, 8, 15, 19, 23, 282n82
socialism and capitalism, 19; successor to, Entrepreneurs’ Corruption Crimes Annual
173 Report, 157
devotion, 110–122; CCP stance on, 31, 43, environmental issues: G reat Leap Forward
110–122, 119f, 228, 311n31; consumer impacts on, 155; increased environmental
orientation and, 133–134; country-over- degradation, 50; social contributions to
capital principle consistent with, 238; address, 116
mass line ideological principle and, 43, exaptation, 141, 151–152
112–113; media rhetoric on, 113–115, “Exit the Private Economy” proposal, 2,
114f; overview of, 120–122; by private 169–170, 217, 225
enterprises, 110–113, 115–122, 118f–119f,
238, 311n31; social contributions devel- famine. See Great Famine
oped from, 115–120 (see also social Fang Xiaojian, 170t
contributions) farmers: devotion and social contributions
Diaoyu Islands, 93 of, 113–114; frugality of, 100; Hukou
DiDi, 2, 48, 94, 174, 218, 256 household registration system for, 124;
360 Index
Secret Speech of, 68, 81, 249, 252; Stalin ittle Swan, 127
L
criticism by, 24, 68, 81, 249 Liu Chuanzhi, 116, 169, 215
Kingsoft, 124 Liu Genshan, 167t
Korean War, 6, 39, 46, 143, 158, 248 Liu Han, 167t
Kristoff, Nicholas, 259–260 Liu He, 94, 172
Kuomintang (KMT): CCP negotiations with, Liu Jun, 167t
40–41; as CCP rival, 10, 35–36, 37, 39–41, Liu Qiangdong, 241
70, 134, 179; extravagance vs. frugality Liu Shaoqi: Cultural Revolution to counter
of, 100; indoctrination affected by ties to, power of, 158–160, 163; death of, 160;
53–54; Mandate of Heaven for, 39–40; Great Leap Forward stance of, 143, 144,
military strength, 112, 309n7; national- 146, 148; leadership position of, 158,
ism under, 78; political system under, 193 320n11; Mao challenged by, 45, 146;
Maoism advocacy by, 38
La Jeunesse (New Youth), 80 Liu Xiaobo, 260
Lan Shili, 167t, 308n49 Liu Yingxia, 170t
Lao Tzu, 257 Liu Yonghao, 98, 103, 154, 240
Lei Jun, 116, 124, 130 Liu Zhidan, 38
Lenin, Vladimir: communism under, 23–24, Li Wenliang, 245
38, 64, 222; economic system under, 222, Li Xiulin, 103–104
252; Great Leap Forward influenced by, Li Yan, 170t
142; political system under, 197–198, 245 localization strategy, 96
Lenovo, 116, 169, 215 Locke, John, 57
Leshi Internet Information & Technology, 169 Long March, 36, 37, 46
Le Songsheng, 211 Long March (television show), 63
Lewis, William Arthur, 107 Lorenz, Konrad, 51
LG, 127 Louis XIV, 17, 64
Li, Eric (Li Shimo), 230 Lucent, 12. See also Alcatel-Lucent
Li, Robin (Li Yanhong), 215–216, 214t Lu Guanqiu, 98, 139–141, 151, 152, 214,
Liang Yaohui, 167t 214t, 240
Liaoning Daily, 115 Luo Bangpeng, 214t, 215
Liberation Daily, 82–83, 84, 101, 114–115, Luo Changping, 248
164 Luo Zhongfu, 167t
Liby, 103, 154 Lu Zuofu, 93
Li Dakai, 180, 181
Li Dazhao, 34–35 Ma, Jack (Ma Yun): CCP commitment, 12,
Li Desheng, 285n10 16, 226, 227; devotion and social contri-
Li Dongsheng, 116, 130 butions of, 111, 116, 242; international
Lifan Group, 77 collaborations, 78, 89; Mao’s lasting in-
Lifan Industrial Corporation, 108 fluence on, 52–53; Military Thought ap-
Lifan Motors, 181 plication by, 132; on political system and
Li Guangman, 174 regulation, 206; as private entrepreneur,
Li Hejun, 109 7, 214t, 215
Li Jun, 192 Ma, Pony (Ma Huateng), 7, 116, 214t, 215,
Li Keqiang, 54, 172, 259, 263 242
Lin Biao, 127, 159, 160, 163, 309n7, 321n17 Macao, 79
Li-Ning, 92, 237 Made in China 2025 Initiative, 91, 224,
LinkedIn, 207 244, 255
Li Shijiang, 133 Madison, James, 57
Li Shufu, 97 Ma Huateng. See Ma, Pony
Li Songjian, 167t management model. See principles of
Li Suwen, 160 business
364 Index
Mandate of Heaven, 39–40, 57, 293n30 alism under (see nationalism); social con-
Maoism, 33–48; biblical status of, 34, 49, tributions u nder (see social contributions);
62; contradiction in, 19, 38–39; develop- socialist institutions under (see socialist
ment of unique principles of, 38–41; en- institutions); successor to, 159, 160,
durance of, 70–72, 243–244, 258–260; 163–164, 321n17; tenure of, 2, 49, 71;
ideological principles of, 42–44, 78–81, wife of, 158, 160, 320n13
98–103, 112–113, 257, 287n29 (see also Mao Zedong (movie), 63
devotion; frugality; nationalism; social Mao Zedong’s Military Thought (Mao Ze-
contributions); lasting influence of (see dong), 124. See also Military Thought
Mao’s lasting influence on China); Mao’s Mao Zedong Thought, 39, 50, 158. See also
background and rise underlying, 34–38; Maoism
mass campaigns supporting, 44–46 (see Mao Zedong Thoughts (Mao Zedong), 39
also Cultural Revolution; Great Leap market economy, 69, 213, 247
Forward; Third Front Construction); market nationalism, 93
overview of, 41–48; political system and, Marx, Karl: on class struggle, 19, 65–66;
191–192, 201–208, 202f–203f; private Communist Manifesto, 8, 15, 253; on en-
enterprise application of, 11–12, 17; trepreneurs, 15; on historical path to
socialist institutions reflecting, 46–48, communism, 23, 282n82; industrial set-
243–244 (see also political system; social- ting for theory of, 36; on religion, 62;
ist economy); Soviet comparison to, 23–24, study of, 60, 254
34, 35–36, 46–47, 240 mass campaigns, 44–46. See also Cultural
Mao’s lasting influence on China, 49–72; Revolution; Great Leap Forward; Third
communist entrepreneurs reflecting, 17, Front Construction
52–53, 69–70; educational system rein- mass line: consumer orientation and,
forcing, 50, 59–61, 60f, 243; endurance 133–134; country-over-capital principle
of Maoism, 70–72, 243–244, 258–260; consistent with, 238; as Maoist ideologi-
imprinting ideology and, 51–70, 234; in- cal principle, 43, 112–113, 257; media
doctrination process and, 53–55; inter- rhetoric on, 113–115. See also devotion;
generational transmission of, 58–59, 243; social contributions
media use for, 58, 63–64, 72; myths about Ma Yun. See Ma, Jack
China clarified by understanding, 21–26; McConnel, James, 107
overview of, 49–51, 233–234; pervasive- McConnel and Kennedy, 107
ness of Mao’s teachings and, 57–64, 59f, McDonald’s, 241
234; priority of CCP’s call and, 55–57; media: anti-capitalist and anti-Western rhe
research on (see research); socialist insti- toric of, 25; business leaders featured in,
tutions and, 64–70, 233–234, 243–244; 140; capit alist vs. communist, 41, 42t;
Xi’s policies reflecting, 2–3, 5, 18, 25, CCP control of, 27, 28, 63; Cultural Rev-
28–29, 33–34, 50, 55, 70–71, 91, 171–175, olution reports in, 160–161, 163–164, 248;
237, 254–258, 284n99 database of, 273; devotion and social
Mao Zedong: aliases of, 285n10; background contribution rhetoric in, 113–115, 114f;
and road to power for, 34–38; CCP lead- economic reform coverage in, 192; frugal-
ership, 35–41, 158; characterization of, 29, ity propaganda in, 101–102, 101f; gov-
31, 32f, 33–34, 55, 58; communism under ernmental communication in lieu of, 17;
(see Maoism); cult of personality, 29, 159; Great Leap Forward in, 143, 144–146,
death of, 163; devotion under (see devo- 145f; Mao’s lasting influence via, 58, 63–64,
tion); dress style of, 70, 71f, 297n82; fru- 72; nationalist discourse in, 78, 80, 82–85,
gality under (see frugality); lasting influence 83f, 91–92, 95, 247–248; private enterprise
on China (see Mao’s lasting influence on analysis of, 127; Xi’s honorifics in, 171
China); legacy of, 8, 33; mass campaigns Megvii, 93
under (see mass campaigns); Military Mencius, 43, 257
Thought of (see Military Thought); nation- Mencius, 38
Index 365
On Practice (Mao Zedong), 38, 247 245–246; nationalism shaped by, 79–80;
“On the Protracted War” (Mao Zedong), 130 permanent employment in, 172; politics-
“On Ten Major Relationships” (Mao at-the-center principle, 244–246; private
Zedong), 47 enterprises and, 15–16, 191–194, 200–208,
Opium Wars, 77, 79, 236, 249 202f–205f, 330n37, 330–331n40, 331n43
Orthodox Histories, The (a.k.a. Twenty-Four (see also under CCP); socialist economy
Histories, The), 248 and, 6, 21–23, 65–66, 191–193, 195–196,
Ostrovsky, Nikolai, 75 198–200, 207, 235, 246, 296n71, 296n72;
socialist system post-1949, 194–200;
Panzhihua Steel Base, 180 Soviet-Chinese comparison of, 193–194,
paper tigers, 81, 82, 83, 84, 94–95 196–200, 196f; term limits in, 2, 49, 71,
Paradise International Foundation, 116 172–173, 253, 254, 255. See also CCP
“Patio Spring Snow” (Mao Zedong), 40–41, poverty: frugality necessitated by, 43, 99,
61, 305n8 100, 102, 103, 150; send-down move-
Peking University: Mao at, 34–35; National ment and, 45, 75, 159, 162–163, 175,
School of Development, 27, 182, 202, 273; 253, 346n77; social contributions to
post-Cultural Revolution attendance, combat, 111, 117, 120
157; Third Front Construction of branch principles of business, 237–244; context
of, 179 consciousness as, 240–241; country over
Peng Dehuai, 158, 160 capital as, 237–239; norms over rules as,
people’s communes, 143–144, 145f, 148–149, 241–243; persistence as, 243–244; re-
158 source consciousness as, 239–240
People’s Daily: Cultural Revolution reports principles of governance, 244–251; eco-
in, 159, 164; frugality propaganda in, 102; nomic decentralization as, 246–247;
Great Leap Forward coverage in, 143, 144, historical existentialism as, 248–250;
146; Lu profiled in, 140; nationalist dis- ideological pragmatism as, 247–248;
course in, 78, 84; research using, 27, 273 moderatism as, 250–251, 344n63; poli-
Pepsi, 124 tics at the center as, 244–246
perestroika, 66 private enterprises: background on Chinese,
Perry, Elizabeth, 235 212–216; CCP commitment by, 9, 11,
persistence principle, 243–244 12–21, 13f, 51, 55–57, 117, 256–257,
pervasiveness of Mao’s teachings, 57–64, 59f, 279n45; CCP representatives/branches in,
234. See also Mao’s lasting influence on 2, 14–15, 47–48, 125, 189, 209, 211–212,
China 224, 225–231, 239, 259, 340n81, 340n83;
Peter the Great, 198 communist-capitalist hybrid for, 7–8,
philanthropy. See social contributions 16–17, 47–48, 213; consumer orientation
Pinduoduo, 124, 135, 240–241, 279n41 in, 133–134; contradictions for, 18–21;
political system, 191–208; authoritarian, Cultural Revolution effects on, 156, 157,
251–258; capitalist vs. communist, 41, 42t; 163, 164–175, 166f, 201, 242; devotion
centralization or top-down control of, and social contributions by, 110–113,
46–47, 191, 192–193, 194–195, 195f, 115–122, 118f–119f, 238, 311n31;
244–246; Cultural Revolution effects on, employee insurance in, 229, 229f,
160; decentralization of, 189, 193, 197–198, 339–340n81; financing of, 220–222,
246; democratization of, 6, 21–23, 193, 221f–222f, 337n44; firm performance,
260; ethnic groups and, 198; leadership 106–108, 107f, 230, 307n30; frugality
roles in, 320n11; local politics and mar- in, 97–98, 103–109, 104f–107f, 142,
ket development, 191–194, 198, 200–208, 149–151, 239–240, 307n30; gray econ-
202f–205f, 246, 330n37, 330–331n40, omy for, 333n13; Great Leap Forward
331n43; Maoist adherence and, 191–192, lessons applied by, 139–142, 149–155;
201–208, 202f–203f; Mao’s lasting influ- localization strategy of, 96; Maoism ap-
ence in, 64–70, 234; military and, 197, plication in, 11–12, 17; Mao’s lasting
Index 367
influence on, 17, 49–51, 55–70; Military Red Roulette (Shum), 24, 248
Thought application in, 11, 12, 123–135, red tourism, 58, 64, 174, 243
240–241, 243, 279n41; motivation of Regional Comprehensive Economic Partner-
employees by example in, 133; national- ship, 95, 258
ism and, 75–78, 85–90, 87f–88f, 92–96, religion: anti-communism and, 235; biblical
237–238, 301n41; political system and, status of Maoism, 34, 49, 62; Cultural
15–16, 191–194, 200–208, 202f–205f, Revolution destruction of, 62; frugality
330n37, 330–331n40, 331n43 (see also principles and, 107
under CCP); principles of business for, Renmin Net, 272
237–244; profits appropriated from, Ren Moxun, 9–10, 54
221–222, 223f, 337n48; resource use by, Ren Zhengfei: CCP commitment, 9–12, 16;
139–142, 151–155, 239–240; size of, 7; daughter as US citizen, 170; devotion and
socialist economy and, 7, 209–231, social contributions of, 111, 117; frugality
333n13, 337n44, 337n48, 339–340n81, of, 98, 103, 106, 240; Mao’s lasting influ-
340n83 (see also socialist economy); ence on, 49, 52, 54; Military Thought
sources of, 213–215, 214t; state-owned application by, 123, 133; nationalism
enterprises and, 2, 213–214, 214t, 215, stance, 85; as private entrepreneur, 214t
216–225, 239, 337n44, 337n48; on stock Republic of China Military Academy, 309n7
market (see stock market); team-building research: benefits and contributions of, 5–6,
in, 132; Third Front Construction and, 7–8, 17–18; case studies for, 262–263,
176–177, 180–187, 183f, 242; Xi’s policy 264; data and evidence, 26–27, 264–273;
toward, 2, 206, 216, 222–223, 233, 256. interview recruitment letter for, 265–266;
See also specific firms interviews for, 266–270, 267t–268t; meth-
Protestant Ethic and the Spirit of Capital- odology, 261–273; overview of, 26; peer-
ism, The (Weber), 107 reviewed studies for, 261–262; presentation
protracted war doctrine, 129–131, 243 of, 263–264; private enterprises conduct-
public opinion, CCP response to, 247 ing, 126–127; qualitative data, 26–27,
Putian Fuxin Mopei Computer Numerical 264–270; quantitative data, 27, 270–273;
Control Company, 150 questionnaire for interviews for, 268–270
Pye, Lucian, 131, 243 resiliency, 109
resource use: exaptation and, 141, 151–152;
Qian Xuesen (Hsue-Shen Tsien), 146, Great Leap Forward influencing, 139–142,
317n20 151–155, 240; implications of, 153–155;
Qin Bangxian (later Bo Gu), 35, 36 repurposing resources, 140–142, 151–153,
Qin dynasty, 19, 39, 99, 286n19 240; resource consciousness principle,
Qing dynasty, 20, 79–80, 112–113 239–240
Qinghai Daily, 114–115 revisionism: Cultural Revolution to counter,
Qin Shi Huang, 40, 99, 192 158; nationalist denigration of, 83, 84–85;
Qiushi, 120, 230 Soviet, 84, 213, 249
Qiu Zimin, 92 Rong Yiren, 93, 210, 210f
Qualcomm, 10 Roosevelt, Eleanor, 100
quick-win theory, 129–130 Roosevelt, Franklin Delano, 64, 287n28
Quotations of Chairman Mao Zedong Rousseau, Jean-Jacques, 34
(Mao Zedong), 9, 39, 49, 81, 131 Rubio, Marco, 4
“Rumor Refutation Platform,” 92, 235–236
red book. See Quotations of Chairman Mao Russia: communism collapse in, 22; extrem-
Zedong ism in, 250; German relations with, 6;
Red Cross Society of China, 121 political system in, 198; territory ceded
Red Guards, 156, 159, 160–162, 161f, 165, to, 79–80; Ukrainian invasion, 6. See also
169 Soviet Union
Red Pioneers, 60 rust belt, 177, 180, 184–186
368 Index
social structure: capitalist vs. communist, interdependence with, 189, 211; socialist
41, 42t; class struggle, 19, 33, 50, 65, economy and, 209–231 (see also socialist
156, 160, 162, 164, 173, 210; flag repre- economy); socialist transformation to,
senting, 213; norms-over-rules principle 209–211, 213, 218–219, 224; stimulus
and, 241–243; social contributions and, plans for, 216, 224; subsidies to, 212,
116; socialist institutions and, 65–66 216, 255
SOEs. See state-owned enterprises steel production: B elt and Road Initiative
Song Binbin (later Song Yaowu), 161 for, 95; devotion and social contributions
Song Ping, 179 to, 110; frugality in, 102; G
reat Leap For-
Song Ruhua, 170t ward for, 44–45, 143, 146–148, 147f,
Song Yaowu (formerly Song Binbin), 155, 205; Third Front Construction for,
161 179–180, 184
Song Yongyi, 169 stimulus plans, 216, 224
Soong Mei-ling, 40, 100 stock market: Beijing Stock Exchange,
South Korea: political system in, 41, 191. 277n14; Chinese private enterprise listing
See also Korean War on US, 2; entrepreneur-controlled, pub-
Soviet Union: CCP sponsorship by, 35, 37, licly traded firms on, 271–272; IPOs on,
209–211; China understood through ex- 2, 76, 77, 173–174, 206
perience with, 23–24, 194, 236; Cold War Strong, Anna Louise, 82
with, 234–235, 236; communism change subjugation theory, 129–130
and collapse in, 4, 6, 21, 23, 66–68, 77, subsidies to SOEs, 212, 216, 255
199, 235, 236, 252, 296n71; economic Sullivan, Jake, 23
system in, 66–68, 196, 198–200, 213, 222; Sung, Thomas, 242
industrialization in, 44, 100, 142–143, Sun Huifang, 294n40
211; Maoism vs. communism in, 23–24, Suning, 128
34, 35–36, 46–47, 240; Maoist influence Sun Liyong, 170t
in, 39; military in, 197; nationalism and Sun Tzu, 44, 72, 124, 126
relations with, 80–81, 83, 84; October Sun Yat-sen (Sun Zhongshan), 112, 297n82,
Revolution, 24, 36, 44, 143, 288n38; 309n7
permanent employment in, 172; political Su Shaozi, 69
system in, 46–47, 64, 66–68, 173, 189,
193–194, 196–200, 196f, 240, 296n71; Tai, Katherine, 237, 258
revisionism, 84, 213, 249; Sputnik launch Taiping Rebellion, 293n30
by, 146; Third Front Construction due to Taiwan: ceded to Japan, 80; KMT in, 178,
tensions with, 45–46, 176, 177–178 193; Military Thought applied to negoti-
special economic zones, 67–68, 203, 204f, ations on, 131; nationalism and stance
245, 330n40 on, 92; political system in, 41, 193
Sputnik, 146 Taizhou Jiaojiang Second Chemical Factory,
Stalin, Joseph: CCP relations with, 35, 37, 215
143; communism u nder, 23–24, 34, 35, Taizong of Tang, 40
38; criticism of, 24, 68, 81, 158, 249; eco- Taizu of Song, 40
nomic system under, 198; industrialization Tang Shuangning, 49
under, 44, 210–211; nationalism and ten- Tang Wanxin, 164–165, 167t, 170, 308n49
sions with, 80–81; political system under, tax-free zones. See special economic zones
197–198, 240; worship of, 40 tax revenue, 7
state-owned enterprises (SOEs): CCP repre- TCL, 116, 130, 242
sentatives in, 15, 211; country-over-capital team-building, 132
principle support for, 238–239; increase technology: CCP use of, 6, 23, 93; military,
of, 65, 210–211, 216, 217; private enter- 245–246; nuclear, 81; private enterprises
prises and, 2, 213–214, 214t, 215, 216–225, in (see technology enterprises). See also
239, 337n44, 337n48; socialism and CCP internet
370 Index
Xinjiang: nationalism and stance on, 81, 93, 95, Zecheng Net, 272
96, 237–238; social contributions in, 120 Zeller Corporation, 140–141
Xi Zhongxun: demotion and punishment of, Zeng Guofan, 20
34, 38, 158, 253; frugality of, 100; Lu and, Zeng Qinghong, 322n30
140; as Mao supporter, 38; military role Zhang, Charles (Zhang Chaoyang), 214t,
of, 37; on political and economic systems, 215–216
199, 245; Xi Jinping and, 53–54, 172, 253 Zhang Bin, 168t
Xpeng, 208 Zhang Chunqiao, 160
Xu Jiayin, 150, 318n29, 322n30 Zhang Jian, 2, 93–94
Xu Jingxin, 116 Zhang Keqiang, 168t
Xu Ming, 168t Zhang Liangbin, 168t
Xu Shuqing, 168t Zhang Rongkun, 168t
Xu Xiang, 168t Zhang Ruimin, 52
Xu Xiangqian, 309n7 Zhang Side, 54
Xu Zonglin, 170t Zhang Wentian, 36, 37
Zhang Wenzhong, 168t
Yan’an Rectification Movement, 34, 37, 52, Zhang Yiming, 94
132, 197, 255 Zhang Zhelan, 92, 174
Yang Bin, 165, 168t Zhao Mingxing, 174
Yang Changji, 34–35 Zhao Wei, 174
Yang Jiechi, 71–72 Zhao Ziyang, 37, 69, 200, 254
Yang Jisheng, 235–236 Zhejiang Huagang Dyeing and Weaving
Yang Kaihui, 34 Group, 216–217
Yang Shangkun, 37 Zhengtu, 126
Yang Ziren, 285n10 Zhihu, 58
Yan Liyan, 168t Zhong Tianshi, 58, 59f
Yao Anna (Annabel Yao), 170 Zhou Enlai, 37, 100, 143
Yao Wenyuan, 160 Zhou Haijiang, 117, 120, 225, 230
Yavlinsky, Grigory, 199 Zhou Weibin, 168t
Ye Honghan, 76 Zhou Xiaodi, 168t
Ye Huaneng, 214t Zhou Yiming, 168t, 308n49
Ye Zhide, 228 Zhou Yongkang, 171–172, 255
yin and yang, 18 Zhou Zhengyi, 168t
Yinji Media, 169 Zhu De, 100
Yin Mingshan, 77, 108, 181 Zhu Dekun, 127
Yin Shengxi, 127 Zhu Xingliang, 168t
Yin Xidi, 108 Zhu Xinli, 214t
Yitu Technology, 93 Zong Qinghou, 75–77, 85, 97–98, 108,
youth. See children and youth 117, 120, 214t
Yuan Shikai, 112 Zunyi Conference, The, 63
Yu Guoxiang, 168t Zuo Zhuan, 257