China's Disruptors

Tse, a consultant who ran Booz and Company's China business before founding his own advisory firm, wrote about the private Chinese entrepreneurs who built large companies outside the state sector.

His argument is that the standard Western account of China's economy, focused on state-owned enterprises and state direction, misses where the growth and the innovation actually came from. He documents the private sector's share of output, employment and export growth, and profiles the founders: Jack Ma at Alibaba, Pony Ma at Tencent, Robin Li at Baidu, Wang Chuanfu at BYD, Liu Chuanzhi at Lenovo, Zhang Ruimin at Haier, and Wang Jianlin at Wanda.

The common characteristics he identifies include starting with almost no capital and no institutional support, operating in an environment where formal contracts and property rights were unreliable, moving fast and adapting to policy changes, and building business models that fitted Chinese conditions rather than importing foreign ones. He argues that the constraint of operating without reliable institutions produced companies that are unusually adaptive.

He also examines the relationship with the state, arguing that these entrepreneurs succeeded by operating in spaces the state had not yet defined, and that the government's tolerance of this was deliberate, since the private sector delivered growth and employment that the state sector did not.

The book was published in 2015 and is optimistic about the trajectory. The regulatory intervention beginning in late 2020, which halted the Ant Group listing and imposed restrictions across platform companies, education and gaming, changed the relationship between these firms and the state substantially. Tse's argument that the state tolerated private enterprise because it delivered growth remains valid; the assumption that this tolerance would continue has been tested.