Institutions and Class Inequality in China’s Party-State System

China’s economic reform, initiated in the late 1970s, has transformed the country’s highly centralized planned economy into a market-oriented economy while retaining the one-party ruling system. This chapter employs a class-based approach to understand how social inequality has evolved from an antagonistic to a non-antagonistic class relationship in contemporary China. Under state socialism, China’s class inequality existed as a political order, characterized by caste-like classes, the hukou system, party membership privilege and organizational hierarchy. These hierarchical arrangements corresponded to people’s political status in relation to Communist Party rule. The mechanism of reward distribution has changed since the introduction of market forces, defining China’s class structure similar to that of most industrialized countries, mainly including the elite class, the middle class and the subordinate class. Meanwhile, some state-socialist legacies closely associated with redistributive systems, such as the hukou and danwei systems, remain relevant in informing class structure in the reforming era. By reviewing the relevant literature, this chapter also demonstrates that the rising class inequality does not lead Chinese people to doubt economic liberalization and the positive results it has generated. Instead, what they find unacceptable in a market-oriented economy is instances of institutional betrayal and discrimination.