Capitalists Inside a Communist State: On Two Books and the Puzzle of Chinese Billionaires

Carey Mott reviews two books about the blurred lines between communism and capitalism in China: Christopher Marquis and Kunyuan Qiao’s “Mao and Markets: The Communist Roots of Chinese Enterprise” and Scott Moore’s “China’s Next Act: How Sustainability and Technology Are Reshaping China’s Rise and the World’s Future.”

Capitalists Inside a Communist State: On Two Books and the Puzzle of Chinese  Billionaires

China’s Next Act: How Sustainability and Technology Are Reshaping China’s Rise and the World’s Future by Scott Moore. Oxford University Press. 320 pages.Mao and Markets: The Communist Roots of Chinese Enterprise by Christopher Marquis and Kunyuan Qiao. Yale University Press. 384 pages.

LONG BEFORE he commanded 200,000 employees as the CEO of Huawei, Ren Zhengfei dreamed only of eating a steamed bun. But as one of seven siblings raised during the Great Famine (1959–61) in Guizhou—among China’s poorest provinces—Ren stuck to his food ration. His schoolteacher mother made an exception, though, slipping him a scallion pancake every morning to help him study for the Gaokao, China’s standardized college entrance exam.

Just three years after Ren commenced his studies at the Chongqing Institute of Architectural Engineering in 1963, Mao launched the chaotic Cultural Revolution. Amid the tumult, Ren joined the engineering corps in the People’s Liberation Army in 1968, which is where he began studying the Quotations from Chairman Mao. The “little red book” extolled the virtues of Mao’s ideas like class struggle, selfless devotion to the collective, social revolution, and obedience to Mao as the leader of the Chinese Communist Party. The book assured Ren that he was serving the masses, and that he was expected to do the same when he left the army. He was told his frugal upbringing, sans steamed buns, was respectable in the eyes of Mao, who anticipated that socialism would inevitably prevail over capitalism.

Yet Ren found himself adrift after the army. Following a struggle for power after Mao died in 1976, Deng Xiaoping became China’s paramount leader and began spoon-feeding capitalism to the country through free-market laboratories called “special economic zones”—mostly located in coastal regions. Ren floated to the largest of these, in Shenzhen. This bustling city and its hints of Western-style capitalism unnerved the young comrade. His time in the army was filled with Maoist rhetoric about serving the masses. So why, in Shenzhen, he wondered, “should a product bought at 10 yuan be sold at 12 yuan?” Despite these hesitations, Ren stumbled into business, expecting commerce to function with the same mutual trust and selflessness he experienced in the army.

Ren’s business naivete soon led to some unscrupulous dealings that cost his first employer, a state-owned oil company, half a million dollars. When the company sued him, Ren determined to read all the legal texts he could find and represent himself in court. It was in these pages that the engineer came upon what he claimed were the basic mechanics of a market economy: goods and customers, united by a transaction.

Ren lost the case and, fatefully, was ordered to repay his debts. With little to his name, he started a small electronics resale company whose full Chinese name (“Zhōnghuá yǒuwéi”) roughly translated to China will prosper. He shortened it to “Huawei.”


How, in the 50 years since Mao, did a nominally socialist country produce more billionaires than many of the capitals of capitalism? Can a true market economy operate inside a socialist government? Which wields more influence? As the state props up yet another privately owned property developer whose potential collapse would reverberate through the global economy, these questions remain unanswered—and often dismissed altogether. “A little more plan or a little more market is not the difference between socialism and capitalism,” said Deng in 1992, a reformer who opted for a little more market. But a market economy within, and therefore subordinate to, the Chinese socialist system leaves the impression of matryoshka dolls that don’t quite fit. For every 10 firms in China, nine are private. Yet state-owned firms dominate many sectors deemed “strategic”; considered together, these would be the world’s fourth-largest economy.

The state’s influence over the market inverts capitalism’s most basic tenet: Homo economicus serves himself, not the state. Left to its own devices, this self-interest is supposed to yield efficiency, meritocracy, and other small miracles—but this is only possible if government cedes some of its power to private enterprise. Over the last two decades, the Chinese state, loath to relinquish power, has begun operating more like a multinational corporation itself—and a decidedly self-interested one at that—as it loans, gifts, and invests abroad.

Far from resolving these essential contradictions in China’s economy, President Xi Jinping has introduced more of his own. He dreams of a global economy where all roads lead to China. For that, he needs to meet the world’s demand for innovative technology, but his regulation is stifling it. He needs foreign buyers too, but his mercantilism and influence over corporate governance has cooled reception abroad. He has encouraged the decisiveness of markets while simultaneously keeping inefficient state-owned firms afloat. And all this as he transitions the economy from manufacturing cheap goods to high-value services.

It is a transition challenged by financial instability at home and tension on the international stage. The apparently binary outcome—success or failure—strikes many as a terrifying palindrome, spelling doom either way. A slower China will drag on the global economy, while a thriving China will exercise more leverage in global affairs. Both outcomes ultimately depend on whether Xi sources his much-needed growth from the state or the market—and how he distinguishes the two. Some recent books examine a private sector still struggling to navigate this mixed economy; the influence Xi hopes to wield over private companies; and how, at a time of contested values, the pursuit of profit may be the only one we still share.


In last fall’s Mao and Markets: The Communist Roots of Chinese Enterprise, the idea of the straitjacketed tycoon, yearning for capitalism in communist China, is dismissed as a fantasy of a Western imagination—the same one that has predicted for decades that something or someone will soon liberalize China’s markets. For the book’s authors, Christopher Marquis and Kunyuan Qiao, Huawei’s founder typifies a different ideal: the “communist entrepreneur.”

A disciple of Mao, Ren—whose own version of his life story and vision of its meaning are spelled out in a company compilation, In His Own Words: Dialogues with Ren, available on the Huawei website—was skeptical of capitalism but embraced just enough of it to create a thriving company that pleased communist leaders. Like many successful Chinese businessmen, he lived Mao’s virtues of frugality, self-reliance, and independence. Huawei reduced China’s dependence on overseas technology, making it a world leader in 5G. In return, the state offered loans, subsidies, and protected markets, and Ren enjoyed access to the highest-ranking politicians in China.

This narrative of the mixed economy—mutual dependence leading to shared success—reaffirms a convenient and motivating illusion among China’s business class. Only foreigners are capitalists; communist entrepreneurs are socially responsible servants. Though Huawei is partly beholden to global markets, Ren caters to China’s masses and advances the country’s goals. Xi, therefore, is happy to suppress competition between private and state-owned companies so that all of China’s firms can better compete with profit-maximizing foreign firms.

Marquis and Qiao do not doubt that these communist entrepreneurs feign loyalty to ingratiate themselves to Party elites. It seems odd, then, when they support their argument with the public statements of businessmen who serve the two masters of profit and Party. Ren, no longer the callow comrade in Shenzhen, may thump the little red book in China, but with Western interviewers he variously credits his corporate strategy to American politics, military, and business (Huawei had to “learn from the best”). And although the authors sprinkle their book with choice anecdotes from Ren and other Chinese billionaires, their survey-based data draws from 32 mostly smaller entrepreneurs, whose relationship to the state certainly differs from that of the industry titans.

As a result, their argument—that Maoism is endemic and integral to China’s economic success—relies on connections between Mao and the market that seem stretched and tenuous. No one doubts Ren’s communist bona fides, but is Huawei’s mundane decision to funnel resources to its high-growth divisions really comparable to Mao’s battlefield strategy against the Kuomintang in 1946? When entrepreneurs sling their product to underserved markets, how often are they thinking of Mao’s forces “surrounding the city from the countryside”? To the extent that they are, is this anything more than a turn of phrase? Can we distinguish Party allegiance from business as usual?

It has never been so hard to divine what role Chinese entrepreneurs perform for the state versus what they pursue out of their own self-interest. The authors acknowledge that the state meddles in private companies through Party cells and golden shares, and that Xi has softly shaped the national interest with historical revisionism and frequent exhortations to ancient glory. But Marquis and Qiao study communists who joined the Party before they became entrepreneurs. They argue that focusing on the state’s explicit influence misses the fact that these are zealous businessmen who have willingly aligned their corporate strategy to the state’s goals. Regrettably, their book, which was published in 2022, relies on qualitative data that ends in 2020, before Xi’s regulatory crackdown, and therefore misses a more essential reason for this alignment.

For Adam Smith, the moral philosopher who established economics and defined capitalism as we know it, “self-interest” wasn’t purely about maximizing personal gain, but something akin to self-preservation. In 2019, Marquis and Qiao interviewed entrepreneurs so worried about the “exit of the private economy” that they contemplated surrendering their companies rather than letting the state seize them. By excommunicating entrepreneurs, stripping public listings from foreign exchanges, and nationalizing private education, Xi has sent a clear message that self-preservation requires aligning one’s interests, commercial and personal, to the state.

Global markets balked at this message, shedding two trillion dollars in response, leading one to wonder: how important is business to Xi’s Party? That the targeted companies were mostly internet and media behemoths, each led by a communist entrepreneur who claimed as much as 30 percent of their workforce as Party members, proves that Xi is skeptical of the cheaper forms of loyalty, and is selecting for a certain type of company. Upon assuming the role of Party General Secretary in 2012, Xi visited Shenzhen and lamented China’s sorry state of innovation. He seemed poised to fire up the private sector to continue China’s growth.

But much of this growth was destabilizing, both financially—the country’s debt load swelled from 100 percent of GDP in the 1990s to nearly 300 percent today—and ideologically. To many, Party membership meant nothing more than career advancement and easy loans, and clunky state-owned firms binged on this cheap credit. Meanwhile, large tech and media companies such as Alibaba, Weibo, and ByteDance were importing Western ideology, making the Party’s problems worse. Xi needed their lean, high growth but, more than his predecessors, he desired controlled growth. In a series of speeches on science and technology, Xi made clear that all innovation must advance the state’s goals.

Having strayed from the socialist course, China’s economy was to be steered back into the state’s safe harbor. In hindsight, alighting in Shenzhen was not a symbol of Xi’s commitment to innovation and private enterprise, as so many hoped, but rather his awareness that the ascendant technology and media firms rooted there could either endanger the state or, with a bit of influence, empower it. But what form will this influence take?


Scott Moore’s latest book, China’s Next Act: How Sustainability and Technology Are Reshaping China’s Rise and the World’s Future (2022), helps us understand what Xi might have seen during Shenzhen’s boom times, and what China’s leader may be envisioning for the future. Crucially, Xi is not limited to the economic building blocks of capital, goods, and labor like his predecessors. In a 2020 state circular, China recognized another factor of production: data.

Of the $238.00 it cost Apple to produce an iPhone in 2016, Chinese firms captured only $9.00. This old growth model, predicated on cheap manufacturing and large trade surpluses, has maxed out. In response, Xi is designing a lean growth model to reduce debt and dependence on foreigners while making the world more dependent on China’s technology—and the insurgent tech firms that produce, consume, transmit, store, and manipulate data are the most promising input to this new economic engine.

In a field of hyperbolic futurists and scaremongering hawks, Moore, a former US State Department official, deserves credit for his sober analysis—which makes it all the more concerning when he lays out China’s techno-authoritarian playbook.

Huawei’s 5G technology is 100 times faster than 4G. Consumers enjoy improved streaming, more connected devices, and reliable navigation. As adoption increases, whoever controls the speedy network can theoretically harvest data on cultural preferences and surveil devices and their whereabouts. Harmless on its own, this data collectively feeds ever more reliable and robust artificial intelligence. With a greater volume and variety of increasingly sensitive data—irises, faces, fingerprints, and heartbeats—artificial intelligence can fast-track developments in genetic engineering, biotechnology, and autonomous systems.

The state has already feasted on China’s 800 million netizens; it’s practically salivating over the rest of the world’s data—and it stands to get some of it. In 2018, the International Telecommunication Union (ITU), which influences the technologies that are adopted worldwide, selected 5G standards that benefited Huawei’s patents. This had been the plan for years: closed out of the West’s 3G development, China collected patents and lobbied standards for 4G, then plowed into 5G.

By controlling networks like Huawei’s, the Chinese Party-state can protect itself from foreign influence and exert influence abroad. In this way, data permeates China’s digital borders in one direction only: foreign data in, but no Chinese data out. Xi, meanwhile, champions a “cyber sovereignty” that considers network barriers as sacred as national borders—a characteristic double standard.

Part of this is legitimate defense: China, long home to pirated software, is more vulnerable than most to cyberattacks. The country has also imported so many foreign parts and incompatible technology that one standardized, domestic system would be more convenient. All the better when the world is forced to adopt this standard too. After all, some firms make products; other firms create technology. But the best firms, Xi likes to say, are like Huawei: they set the standards for the rest.

Moore worries that this self-interested policy makes collaboration on technology that should transcend borders—say, engineering the human genome—improbable, either because China has forbidden access to its data or because it has created headaches with incompatible sharing protocols. Ditching collaboration in favor of competition may be part of Xi’s plan to dominate a tech-centric future—but should states operate with the same self-interest expected in commerce?


When Marquis, a professor at Cambridge’s Judge Business School, approached the communist CEO of a major Chinese shipping conglomerate to interview him for Mao and Markets, he was greeted in the company offices by a life-size statue of Mao. For decades after the chairman’s death, his specter has haunted the office walls and desktops of China’s business elite, but who is Mao in a world of Xi? Marquis and Qiao suggest these are emblems of personal admiration, but it’s hard not to see them as amulets against the state’s power.

The private economy’s wariness around the state imperils the innovation Xi hopes to nurture. Since the Enlightenment, innovation has been understood as an exercise of curiosity and objectivity repeated through trial and error—all of which is less acceptable under Xi. At a quarter of the world’s total, China’s research and development expenditure exceeds the EU average, but it is mostly preferential state investment doled out by risk-averse state-owned banks, rather than successful firms reinvesting earnings to improve their operations. Party leaders love to count the number of Chinese patents, but their overall quality remains low.

Mao’s virtues of frugality, self-reliance, and independence may be valuable principles for a prudent business, but they are at odds with the role expected of a rising global power, and sound to the global community a lot like free-riding. And while many would prefer that China not involve itself in global affairs, its unwillingness to collaborate on pandemic preparedness, environmental regulation, and financial stability presents its own risks.

In 2017, Joseph Nye warned that such obstinance could lead to an episode of global instability not seen since the interwar years, when the US failed to assume the stabilizing role of Britain as that descending empire gave way to Pax Americana. The result was a Great Depression, the rise of populism, and a world war.

Should China’s rise rhyme with history, it’s too bad that the analytical sobriety that lends authority to Moore’s account also gelds his recommendations—as if he knows they are the fanciful wish list of a seasoned technocrat. He casts China’s dominance in 5G as a failure of Western industrial policy, and thus proposes a jointly capitalized, public-private international alternative to Huawei’s network. Even if such an undertaking were possible, it is exactly this sort of uncooperative workaround that risks fracturing global telecommunications into illiberal networks (Huawei) and liberal networks (Finland’s Nokia, Sweden’s Ericsson). Soon it is two internets, two conceptions of the world, two worlds altogether.

That these reasonable proposals seem unrealistic underscores the challenge of Moore’s otherwise sound thesis: from pandemics and environmental disasters to advances in bioengineering and artificial intelligence, the demand for collaborative solutions to global challenges reveals differences in our values, prompting the United States and China to compete where cooperation is optimal.

Moore is clear that not all competition is bad. Private firms competing globally to create the cheapest, most efficient clean energy technology would be very good indeed. But industry could also collaborate on carbon capture and storage technology—for example, by combining China’s manufacturing prowess with Western IP. The problem with this is obvious; Moore himself takes the temperature on US-China relations and does not anticipate a thaw anytime soon.

For this reason, the former diplomat writes to businesses, who can grease the wheels of stalled diplomacy, he believes. Not only is private enterprise crucial to China’s new growth model, he reasons, but competition and cooperation will also inevitably play out subnationally—between local governments and universities, state-owned firms and private ones. Marquis and Qiao’s text, then, is the perfect complement—part sociological analysis, part handbook for the Western businessman in China.

From Armand Hammer’s dalliance with Lenin to the KFC right off Tiananmen Square, international engagement has long depended on private enterprise—especially between the world’s largest economies. Commercial promise was the reason the United States reached out to the Qing dynasty in 1783, and the reason Xi’s pivot away from the market is so challenging today.

As an army engineer, Ren was once tasked with installing French machinery in a fiber factory. The factory conditions were harsh, but he said that he and his young comrades were content. After all, their perspective was limited: “[W]e didn’t know that French bread was delicious.”

That the starving boy who dreamed of nothing more than a steamed bun has, by now, certainly tasted a baguette; that he rose to the top of China’s hybrid economy while remaining loyal to the Party; that he today provides affordable, essential technology to developing nations while maneuvering (or being maneuvered) as something more than a pawn in Xi’s geopolitical chess—that is the promise, the peril, and the unsolved puzzle of China’s private economy.

LARB Contributor

Carey K. Mott, a researcher at the Yale Program on Financial Stability, studies business and finance at Columbia University. Previously, he worked at the Federal Reserve Banks of New York and Boston. He has contributed to Foreign PolicyThe National Interest, and other publications.


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