We scrutinise in this paper the systemic consequences of state intervention triggered by external shocks for the dynamics of investment in the transforming Chinese economy. Our analysis focuses on the period before and after the global crisis. We interpret investment dynamics in a comparative party-state model concept framework. We point out that overinvestment is an outcome of the party-state power formed by relations of dependence and interest promotion between party, state and economic decision-makers, and of emerging structural motivations inside of this network. Our findings reveal that these specific features intensify after state intervention, which reacts to the external shock. The level of intensity corresponds inequalities in power distribution within the network and, more specifically, regional and ownership priorities of the network. Structural and motivational specifics that cause overinvestment and thereby economic overheating prevail inside the network even during the transformation of the system. Moreover, they are further enhanced by market actors adapting to priorities in the network. In light of this approach, our analysis will end up in several quantitative conclusions. We will demonstrate that adaptation to an external shock increases the intensity of routine behaviour within the network. We will also prove that due to self-similar structural and operational characteristics of the party-state network overinvestment and, consequently, economic overheating can be detected not only on the national, but on province level as well. Furthermore, we will provide evidence for that overheating concerns especially those regions which are preferred by state intervention. We will underline that temporal swings of overinvestment, that cause economic overheating, and temporarily intensifying activity of the network are interlinked during the transformation of the party-state. Finally, we will reveal that behind swings of investment, including both ups and downs, we may find different forms of behaviour at enterprises with different types of ownership.
China crisis investment overheating party state transformation