While China continues to develop capitalistic capacities, the party-state has increasingly tightened control of the economy and synchronized political and economic stratification – a tendency towards a centrally managed capitalism. Under centrally managed capitalism, the party-state commands the economy by controlling personnel, organizations, and capital in both political and economic arenas. At the same time, it delegates fiscal and administrative authorities to multiple and diversely formed corporations to compete in the marketplace. I further speculate on future ideological alternatives: a western-style democracy, a mature-stage socialism, or an enlightened authoritarianism – Xiaokang (小康 moderate prosperity or well-off society). After eliminating or casting doubt on the former two, I argue that a two-step transformation towards Xiaokang is under way. In the first step, the party-state leadership gradually decouples its position from Marxist ideology of communism and socialism, and moves towards the maintenance of economic growth and social order. The second step then allows the legitimacy of party rule to be based on indigenous Confucian ideology that emphasizes enlightened leaders, moral institutions, and social relations (i.e., Xiaokang). Finally, I explore the feasibility and paths towards an indigenous ideology of democracy (Datong: 大同 – universal harmony).