A Historical Perspective on China's Grand Bureaucratic System: The Initial Institutional Logic of State-Owned Enterprises

The grand bureaucratic system organizationally characterized China's state-owned economy, with SOEs serving as organic branches of the state. Industrialization goals and constraints required authoritative bureaucratic control to replace spontaneous market transactions, enabling socialist accumulation. Contradictions in material interests among the state, production units, and individuals were resolved by centralizing enterprise surplus rights and organizing labor through enterprises within the macro planned and micro work unit systems. Confronting weak incentives from information blockages, the system decentralized surplus rights through structural vertical-horizontal (tiao-kuai) adjustments. Bureaucratic ailments further necessitated governance structures that aligned interests between managers and workers. These intermediary adjustments-in state-enterprise and enterprise-labor relations-continuously reproduced SOEs as connectors linking central-local authorities and state-society. After introducing market mechanisms, this manifested as moderated centralization with bidirectional central-local cooperation and the integration of Party leadership into corporate governance.