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The application of the developmental state concept outside its birthplace in East Asia is generally unsuccessful. The culprit is the ‘laundry list’ method commonly seen in the literature. In this paper a ‘strategic capacity’ conceptualisation is used instead, with emphasis on its diverse institutional underpinnings. The paper demonstrates that the Chinese state's approach to industrial relations is integrated with its national development strategy and that crafting institutions of labour management is part of the state's effort at building up its strategic capacity for political, social and economic management. The study delineates the factors shaping labour management institutions, paying special attention to the communist heritage that sets China apart from other developmental states. As such, the concept of developmental state has much wider application. [ABSTRACT FROM PUBLISHER]