In 1984, when China was in its early embrace of capitalism, 29-year-old He Lifeng was near the center of the action. A Communist Party member with two degrees in government finance, he got a municipal job in Xiamen, a coastal city that had just been freed by Deng Xiaoping from central planning dictates to test free markets.

Over the next two decades in Xiamen and nearby cities, Mr. He rose to become a senior party official and top local leader. And Xiamen became a bastion of small and medium-size businesses, with few state-owned enterprises. It was a model in a national experiment that helped light up years of rapid growth for China.