Structural Power, Hegemony, and State Capitalism: Limits to China’s Global Economic Power

• DOI: 10.1177/0032329220950234
• Published date: 01 June 2021
• Date: 01 June 2021
• Subject Matter: Articles

https://doi.org/10.1177/0032329220950234

Politics & Society

2021, Vol. 49(2) 235 –267

© The Author(s) 2020

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DOI: 10.1177/0032329220950234

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Article

Structural Power, Hegemony,

and State Capitalism: Limits

to China’s Global Economic

Power

Mingtang Liu

Johns Hopkins University

Kellee S. Tsai

Hong Kong University of Science and Technology

Abstract

A comparative historical perspective shows how globalization and the specificities

of China’s rapid growth era limit its hegemonic potential in the twenty-first century

global economy. Although state capitalism and openness to foreign capital facilitated

China’s economic transformation, interactions among three forms of capital—state,

private, and foreign—have produced developmental dynamics that constrain China’s

capacity to assume the position of the world’s economic hegemon. These include

(1) the compromised competitiveness of China’s corporate sector due to the

domination of state-owned enterprises, (2) limits on the ability of Chinese firms to

develop leading transnational corporations, and (3) early openness to and continued

dependence on foreign capital. Moreover, the party-state’s efforts to ameliorate these

constraints arouse external suspicion rather than support a Chinese-led hegemonic

order based on consent and shared interests. These historically conditioned realities

should temper expectations that China is converging teleologically toward a familiar

hegemonic role in the international economy.

Keywords

China, hegemony, globalization, state capitalism, structural power

Corresponding Author:

Kellee S. Tsai, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong

SAR.

Email: ktsai@ust.hk

950234PASXXX10.1177/0032329220950234Politics & SocietyLiu and Tsai

research-article2020

236 Politics & Society 49(2)

I believe the twenty-first century will belong to China because most centuries have

belonged to China.

Niall Ferguson (2011)

It will be impossible for China to be a strong country without an innovation-driven

economy. If we do not follow the innovation-driven path, then we will only be big, but by

no means strong.

Xi Jinping (2018)

Huawei is an instrument of the Chinese government.

Mike Pompeo (2019)

Images of China’s skyscraper-studded megacities, sleek high-speed trains, robot-oper-

ated assembly lines, cashless consumerism, and the ubiquity of AI-assisted surveil-

lance are awe-inspiring, if not unnerving to international observers. Coupled with

news headlines about China producing more than 200 unicorns (start-ups valued at

over $1 billion), such images give the sense that China’s economic and technological

ascendance is bound to continue, albeit at a more modest pace than in the previous four

decades. Traditional metrics of national wealth would suggest that China is well on its

way to becoming an economic superpower. Its establishment of the Asian Infrastructure

Investment Bank and rollout of the Belt and Road Initiative have further fueled specu-

lation about the imminence of China’s accession to a hegemonic position in the global

economy. However, regardless of Beijing’s intentions, our analysis of China’s political

economy from a comparative historical perspective reveals structural constraints on

such expectations. Globalization and the historical specificities of China’s rapid

growth era have adversely affected key indicators of its relative economic power and

undercut its potential to build a new hegemonic order in the twenty-first century. By

comparing the configuration of social forces embedded in China’s development model

with those of earlier rising powers, we argue that although state capitalism and open-

ness to foreign capital facilitated its remarkable economic transformation since the late

1970s, the dynamics of the growth process itself and the changing nature of the global

economy have generated structural constraints on China’s capacity to develop strong

transnational corporations. Combined with Western backlash to China’s rise, that

weakness poses limits on its economic influence in an age in which such corporations

play a dominant role in the global economy.

To anchor this argument analytically, we adopt Robert Cox’s broader conception of

hegemony as encompassing strong structural power, as well as the ability to generate

consent and exercise leadership in the world political economy.1 To understand the

mechanisms underlying these twin components of global hegemony, we contend that

it is necessary to examine China’s domestic political economy and the configuration

of social forces underpinning it. We start by establishing that the political economy of

China’s reform-era development is historically unprecedented. Aggregate prosperity

Liu and Tsai 237

in the world’s most populous country has been led by a strong Leninist party-state with

state-owned enterprises controlling the commanding heights of the national economy,

the relative neglect and fragmentation of domestic private capital, and a significant

presence of foreign capital following liberalizing reforms. We further observe that by

the 2000s, interactions among these three forms of capital—state, private, and for-

eign—generated three dynamics that constrain China’s relative economic power: (1)

compromised competitiveness of China’s corporate sector due to the domination of

state-owned enterprises, (2) limits on the ability of Chinese firms to develop leading

transnational corporations, and (3) early openness to and continued dependence on

foreign capital.

As the Chinese government attempted to address these structural constraints during

the 2000s, it met countervailing responses from abroad that undermine its potential for

establishing an alternative hegemonic order. First, entrenched business interests and

foreign governments sought to preserve the status quo. Second, China’s statist eco-

nomic model raised concerns about national security and elicited critiques of protec-

tionism by other major economic powers. Those dual pressures subsequently triggered

vigorous countermeasures from the West. Recognition of these historically condi-

tioned realities, taken together, should temper expectations that China is converging

teleologically toward a familiar hegemonic role in the global economy. Rather than

unipolar economic dominance by China, the contemporary world order shows signs of

multipolarity with a flattening of postwar American dominance.2

In making these claims, this article does not discount the Chinese economy’s pre-

existing performance, portend national decline, dismiss political concerns raised by

China’s external investments, or speculate about its leadership’s intentions. Instead,

we focus on elucidating the developmental paradoxes generated by China’s state-led

socialist transition and industrialization within the global economic context of the late

twentieth and early twenty-first centuries. Doing so demonstrates the analytic value of

historicizing national economic power rather than reflexively equating it with tradi-

tional metrics such as industrial output or GDP. Our focus on structural power in

global production intends not to downplay the roles of global finance and military

capabilities but to interrogate common assumptions regarding China’s economic

power and potential for global leadership. The empirical findings revealed in the pro-

cess have implications for how we situate the case of China in the study of interna-

tional relations and international political economy.

The article proceeds as follows. After noting dominant perspectives on the mea-

surement of national economic power, the first section critiques studies that engage in

ahistorical consideration of China’s rise and overlook distinguishing features of its

domestic political economy. To address those shortcomings, we propose that China’s

relative economic position and hegemonic potential should be investigated through a

thicker notion of hegemony that includes capacity to generate consent. Adopting a

comparative historical lens, the second section points out the changing indicators of

economic power over time and compares China’s developmental model and interna-

tional context with those of dominant Western powers in the preceding centuries. The

third section elaborates the structural constraints generated by China’s developmental