Inside and outside: The modernized hierarchy that runs China

•Describes China's restructured and strengthened bureaucracy.•Contrasts strengthened bureaucracy with absence of rule of law.•New bureaucratic system is more rule-governed, and includes procedures rules for promotion, credentialing, and leadership turnover, including term limits.•System is stable and appears to be incentive compatible.•External accountability is absent. The huge difference between “inside” and “outside” may be a unique feature of the Chinese system.•Labor relations described as a process of discarding law-driven dispute settlement and moving towards an internalized mediation process.

Describes the process through which China has rebuilt and strengthened its bureaucracy since 1978 without moving toward rule of law. Internally, the bureaucracy has become more rule-governed, and new procedures have been introduced, including regular rules for promotion, credentialing, and turnover, including term limits. However, external accountability is absent. The huge difference between “inside” and “outside” may be a unique feature of the Chinese system.