Two combinations of four characters have much to reveal about change in the Chinese economy. In 2004, Hong Kong economist Larry Lang raised the alarm about corrupt management buyouts (MBOs) of state-owned enterprises (SOEs) and applied the phrase ‘retreat of the state, advance of the private sector’ (guotui minjin 国退民进) to the ills of SOE privatization. Lang's public skewering of refrigerator tycoon Gu Chujun for acquiring state assets at below market value stirred controversy on the mainland, leading ultimately to Gu's arrest and an end to officially sanctioned MBOs. A few years later, the same characters arranged in slightly different order described a very different trend. In the wake of the 2008 Global Financial Crisis, a series of high-profile takeovers of private enterprises by China's central-level SOEs gave rise to a new, and quickly ubiquitous, phrase: ‘advance of the state, retreat of the private sector’ (guojin mintui 国进民退). In the span of less than a decade, in other words, hand-wringing about the Chinese economy has come full circle. Whereas concern once focused on curtailing private entrepreneurs' predations in the weakened state sector, policy debate now centres on how to shield private enterprises from the unwanted advances of massive and centrally backed SOEs (yangqi 央企). What has happened?

The analysis offered here finds that the advance of the state in China is a longer-term and slower process than the above vignette would suggest. Commentators have sometimes characterized central SOE assertiveness since 2008 as marking a turning point in Chinese economic development – as a decision for state capitalism and against slow but steady marketization (e.g. Wines 2010). A closer look at the evidence shows that the state's advance reaches much farther back in time. To be sure, the Chinese government's US $586 billion post-crisis fiscal stimulus plan, which heavily favoured the state sector, did play to the advantage of large SOEs and hastened the ‘retreat’ of private enterprises from several industries including steel, real estate and airlines. But this was a moment of culmination more than inception. Today's muscular yangqi are, in some measure, the product of twenty years of sustained effort to mould state-owned national champions in key industries.