Rank-and-file party members serve not only to implement distinctively Chinese policies, such as the one-child policy. They are also involved in fulfilling universal state-building tasks, such as tax collection. To maintain the material base of their polity, state-builders everywhere need to find ways to raise fiscal resources. In transition economies like China, tax extraction runs into problems of asymmetric information coupled with administrative transaction costs that are high compared to the tax potential: In the rural economy, small sums are extracted from numerous individuals engaging in increasingly diverse economic activities. In the urban economy a large part of the economic activity occurs in the informal sector, where small and medium-sized companies come and go. The argument of this chapter applies to both sectors: Party networks help the state to extract resources, either by convincing and coercing citizens to contribute to common projects, or more generally by solving severe asymmetric information problems between the lowest level of the state hierarchy and grassroots society, at low cost. As a result, the state is better at extracting fiscal resources in places with dense party member networks, both in rural and in urban areas. In short, local party organizations help to maintain the material foundation of the People's Republic.

This chapter contrasts with – but by no means contradicts – conventional views of authoritarian regime parties as networks for patronage distribution. One exemplary model, which incorporates leading research on the functions of parties in authoritarian polities, analyzes the dictator's commitment problem vis-a-vis his followers and describes regime parties as tools serving to effectively share the benefits of power. In a nutshell, the patronage approach to regime parties holds that party members are politically loyal in exchange for material benefits. This approach implies that in time of crisis, when the state has fewer benefits to distribute, the loyalty base of the party quickly dissipates, so that parties would be of limited use to authoritarian regimes. Based on this observation, researchers have questioned whether the patronage approach can fully explain the usefulness of parties for authoritarian regimes, pointing to the importance of understanding the nonmaterial sources, such as legitimacy based on historical achievements and the way in which regimes mobilize the resources on which they rely in the first place.