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Private Benefits as Public Signals: Wealth into Politics and State-business Exchanges in Contemporary China


Modern autocrats depend on at least some support and cooperation from the business sector to sustain their rule. To efficiently mobilize business support, they are incentivized to (1) build a reputation of rewarding loyal supporters, and (2) create a minimum check so that they will not renege on their promises when business elites spend costly effort in supporting the regime. I argue that autocrats may achieve the two goals by incorporating loyal business elites into existing formal institutions and visibly channeling economic privileges to them. As these politically incorporated business elites are in the spotlight, the private benefits that they gain from holding political office become public signals to other business elites. The visibility then enables the state to showcase that it rewards loyal supporters and to mitigate the usual commitment problem underlying bilateral business-state interactions, both of which enhance state-business exchanges.

Drawing on a range of data, this dissertation provides evidence that the Chinese ruling party incorporates private entrepreneurs into high-level political institutions, such as the National People’s Congress (NPC), to take advantage of the visible nature of these institutions. Specifically, the ruling party selects loyal business supporters to the formal institutions while also channeling substantial economic privileges to the incorporated entrepreneurs. These private benefits, when becoming public signals, help the party build a reputation of credibly rewarding supporters. The reputation then mobilizes private entrepreneurs to support the regime in exchange for a profitable seat in formal institutions in the future. The enhanced regime support from the business sector may explain why the party made the noticeable switch from rewarding business supporters through informal (and often “invisible”) interactions to formally incorporating them into political institutions in the early 2000s.

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