...(Prof Ang's) insight is that the central government in China had to balance between control that was “too loose” and control that was “too tight.” She shows that the central government issued directives of three types.
One clearly prohibited local governments from doing some things. It was no question of “anything goes.” Another type of directive clearly mandated that all local governments had to do certain things. But the third type specified objectives but was deliberately vague about how to accomplish the objective and made it clear innovation was allowed but did not specify exactly what was allowed.
This created a space in which local governments could create their own innovations and attempts that the central government might have never thought of, while at the same time, allowing the central government the space to claw back if things were headed in bad directions.
This, she argues was central to China’s ability to (in our words) “crawl the design space” incrementally towards a market system. The organizational and institutional forms created on the path—like Township and Village Enterprises—were, as to be expected, unique hybrid forms. These allowed much of the functionality and dynamism of a market economy even before there were private firms and clear delineation of property rights.
I hope to read this book soon. I will post a detailed review/critique then.