Economy China After and Before Crisis
We are the (National) Champions: Understanding the Mechanisms of State Capitalism in China Li-Wen Lin Curtis J. Milhaupt*
Introduction China’s emergence as a global economic power poses enormous explanatory challenges for scholars of comparative corporate governance. While China appears to present a new variety of capitalism, frequently labeled “state capitalism,” the features and implications of this system are still poorly understood.1 Particularly since China’s economic system may be in its early stages of development, understanding the mechanisms by which state capitalism currently operates and how they may change as Chinese enterprises globalize is a pressing task for researchers. One highly distinctive characteristic of state capitalism in China is the central role of about 100 large, state-owned enterprises (SOEs) controlled by organs of the national government in critical industries such as steel, telecom, and transportation. Although few of these firms are household names in the West, they dominate major industries in China and are increasingly active in global markets. As The Economist recently noted, “as the economy grows at doubledigit rates year after year, vast state-owned enterprises are climbing the world’s league tables in
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Lin is a PhD Candidate in the Sociology Department of Columbia University. JSD, University of Illinois. Milhaupt is the Parker Professor of Comparative Corporate Law, and Fuyo Professor of Japanese Law, Columbia Law School. Helpful comments on an earlier draft were received from Yuen Ang, Donald Clarke, Robert Ferguson, Ronald Gilson, Jeffrey Gordon, Benjamin Liebman, Nicholas Howson, Mariana Pargendler, Hugh Patrick, Randall Peerenboom, Frank Upham, and participants at workshops in Beijing, and at Columbia, Cornell, Fordham, NYU and Vanderbilt Law Schools. We also thank interviewees in Beijing from business, government, and academia who generously shared their knowledge and insights with us. Interviews were conducted
Introduction China’s emergence as a global economic power poses enormous explanatory challenges for scholars of comparative corporate governance. While China appears to present a new variety of capitalism, frequently labeled “state capitalism,” the features and implications of this system are still poorly understood.1 Particularly since China’s economic system may be in its early stages of development, understanding the mechanisms by which state capitalism currently operates and how they may change as Chinese enterprises globalize is a pressing task for researchers. One highly distinctive characteristic of state capitalism in China is the central role of about 100 large, state-owned enterprises (SOEs) controlled by organs of the national government in critical industries such as steel, telecom, and transportation. Although few of these firms are household names in the West, they dominate major industries in China and are increasingly active in global markets. As The Economist recently noted, “as the economy grows at doubledigit rates year after year, vast state-owned enterprises are climbing the world’s league tables in
*
Lin is a PhD Candidate in the Sociology Department of Columbia University. JSD, University of Illinois. Milhaupt is the Parker Professor of Comparative Corporate Law, and Fuyo Professor of Japanese Law, Columbia Law School. Helpful comments on an earlier draft were received from Yuen Ang, Donald Clarke, Robert Ferguson, Ronald Gilson, Jeffrey Gordon, Benjamin Liebman, Nicholas Howson, Mariana Pargendler, Hugh Patrick, Randall Peerenboom, Frank Upham, and participants at workshops in Beijing, and at Columbia, Cornell, Fordham, NYU and Vanderbilt Law Schools. We also thank interviewees in Beijing from business, government, and academia who generously shared their knowledge and insights with us. Interviews were conducted