China's Regulatory State

China's Regulatory State: A New Strategy for Globalization

Roselyn Hsueh
Copyright Date: 2011
Edition: 1
Published by: Cornell University Press
Pages: 320
https://www.jstor.org/stable/10.7591/j.ctt7z6z0
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  • Book Info
    China's Regulatory State
    Book Description:

    Today's China is governed by a new economic model that marks a radical break from the Mao and Deng eras; it departs fundamentally from both the East Asian developmental state and its own Communist past. It has not, however, adopted a liberal economic model. China has retained elements of statist control even though it has liberalized foreign direct investment more than any other developing country in recent years. This mode of global economic integration reveals much about China's state capacity and development strategy, which is based on retaining government control over critical sectors while meeting commitments made to the World Trade Organization.

    In China's Regulatory State, Roselyn Hsueh demonstrates that China only appears to be a more liberal state; even as it introduces competition and devolves economic decisionmaking, the state has selectively imposed new regulations at the sectoral level, asserting and even tightening control over industry and market development, to achieve state goals. By investigating in depth how China implemented its economic policies between 1978 and 2010, Hsueh gives the most complete picture yet of China's regulatory state, particularly as it has shaped the telecommunications and textiles industries.

    Hsueh contends that a logic of strategic value explains how the state, with its different levels of authority and maze of bureaucracies, interacts with new economic stakeholders to enhance its control in certain economic sectors while relinquishing control in others. Sectoral characteristics determine policy specifics although the organization of institutions and boom-bust cycles influence how the state reformulates old rules and creates new ones to maximize benefits and minimize costs after an initial phase of liberalization. This pathbreaking analysis of state goals, government-business relations, and methods of governance across industries in China also considers Japan's, South Korea's, and Taiwan's manifestly different approaches to globalization.

    eISBN: 978-0-8014-6285-6
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Tables and Figures
    (pp. ix-x)
  4. ACKNOWLEDGMENTS
    (pp. xi-xiv)
  5. List of Abbreviations
    (pp. xv-xvi)
  6. INTRODUCTION: China’s Liberalization Two-Step
    (pp. 1-6)

    When I first arrived in the People’s Republic of China (PRC) in the summer of 2002, shortly after the country’s accession to the World Trade Organization (WTO), I immediately confronted a paradox: the omnipresence of the state in economic activities along with genuinely capitalist practices and values. Foreign influence screamed everywhere, from neon displays of ING and Nestlé on skyscrapers lining the Bund in Shanghai, to billboards selling Motorola and LG handsets along boulevards of provincial Shandong, to foreign brands worn by China’s nouveau riche in the western interior. Yet visits to town and village enterprises (TVEs), and other quasi-state–...

  7. PART I. THE POLITICS OF MARKET REREGULATION

    • 1 LIBERALIZATION TWO-STEP: Understanding State Control of the Economy
      (pp. 9-24)

      The Open Door Policy in 1978 unleashed economic reforms and the liberalization of foreign direct investment in China after nearly two decades of internal economic and political upheaval and international isolation. This book investigates how China’s economic statecraft has been transformed in the ensuing period as China became integrated into the international economy.¹ Because economic liberalization is not a uniform process, this book examines the different dimensions of liberalization—including regulatory challenges, the domestic business class, foreign direct investment, and intranational industrial policy—to explain the rise of China’s regulatory state. By doing so, I will illuminate the relationship between...

    • 2 CHINA’S STRATEGY FOR INTERNATIONAL INTEGRATION: The Logic of Reregulation
      (pp. 25-44)

      Scholars of the political economy of development have sought to explain what motivates governments to pursue particular economic policies in the face of globalization. Some look to domestic politics and institutions, others identify the role played by tradition and prevailing ideology, and still others look to exogenous factors in shaping the state’s pursuit of particular policies and strategies. In three decades of reform, industrial sectors across the Chinese economy have experienced several common liberalizing forces. Although these common forces may explain macroliberalization, they only partially explain why and how reregulation, which inevitably follows, varies across industrial sectors. For example, common...

    • 3 TELECOMMUNICATIONS AND TEXTILES: Two Patterns of State Control
      (pp. 45-58)

      The Third Plenum of the Fourteenth Congress of the Chinese Communist Party set the stage for macroliberalization when it adopted the Decision on Issues Concerning the Establishment of a Socialist Market Economic Structure in 1993. It officially eliminated the planning system and aimed to establish a modern market system and incorporate international institutions.¹ That year, the Chinese government abolished the Ministry of Textile Industry and formally decentralized economic decision making in subsectors of textiles to the local levels. The central government also introduced competition in telecommunications by licensing China Unicom and value-added service providers; in the ensuing decade, FDI surged...

  8. PART II. STATE CONTROL OF TELECOMMUNICATIONS

    • 4 CONSOLIDATING CENTRAL CONTROL OF TELECOMMUNICATIONS IN THE PRE-WTO ERA
      (pp. 61-87)

      China in the 1990s was a playground for foreign companies interested in tapping into the potential of reaching 1.2 billion customers through telecommunications. Technological advances—more efficient use of the spectrum available for wireless communication and fiber-optic technology, which dramatically increased the capacity for data transmission—also propelled FDI inflows. Foreign institutional investors and private entrepreneurs alike, hoping to maximize first-mover advantage, teamed with local governments and provincial branches of Chinese carriers to build second-generation telecommunications networks. The issuance of an operating license to China United Telecommunications Corporation (China Unicom) in 1994 created history. The subsequent breakup of the telecommunications...

    • 5 STATE-OWNED CARRIERS AND CENTRALLY LED REREGULATION OF TELECOMMUNICATIONS IN THE WTO ERA
      (pp. 88-126)

      China became the 143rd member of the World Trade Organization on December 11, 2001. The global telecommunications industry expected China, a signatory of the WTO Basic Telecommunications Agreement, to open its markets and erect liberal regulatory institutions. The Chinese government had other goals in mind, and the regulatory regime set up immediately prior to WTO accession laid the institutional foundations for government-business relations in the post-WTO period. Prior to WTO accession, the government’s deliberate utilization of foreign direct investment after the initial introduction of competition and consolidation of regulatory control helped modernize telecommunications infrastructure and corporatize and restructure state-owned carriers...

  9. PART III: STATE CONTROL OF TEXTILES

    • 6 DISMANTLING CENTRAL CONTROL OF TEXTILES IN THE PRE-WTO ERA
      (pp. 129-155)

      “The numerous central incentives are policies of the past. Government support to encourage MNCs to source and procure in China has all but stopped. Any encouragement of manufacturing, which are dominated by private Chinese firms, are done on the local level,” explained a former China general manager for Liz Claiborne, an American apparel brand marketer.¹ The dismantling of the Ministry of Textile Industry in 1993, forty-four years after its creation, represented a milestone in post-Mao market liberalization and foreshadowed the relinquishing of state control in textiles, a nonstrategic industry. The elimination of the textile ministry followed fifteen years of market...

    • 7 SECTOR ASSOCIATIONS AND LOCALLY LED REREGULATION OF TEXTILES IN THE WTO ERA
      (pp. 156-190)

      To join the World Trade Organization, China committed to extending bilaterally negotiated export restraints in textiles in exchange for a lower ceiling on foreign direct investment in telecommunications. This trade-off revealed the low strategic value of textile manufacturing and the Chinese government’s purposive orientation toward market reform to achieve paramount goals of national security and technological advancement. According to an official at the National Development and Reform Commission, “China has a tendency to represent ‘national’ interests over industry interests; basically, the interests of the textile industry have not been on the top of the state’s agenda.”¹

      In 2001, immediately before...

  10. PART IV: THE EMERGENCE OF CHINA’S REGULATORY STATE

    • 8 DELIBERATE REINFORCEMENT IN STRATEGIC INDUSTRIES
      (pp. 193-226)

      In the preceding chapters, I systematically mapped sectoral and cross-time variation in how the Chinese government reregulated after economy-wide liberalization. In the next two chapters, I will survey other industries to test, extend, and refine the broader applicability of the strategic value framework developed in earlier chapters. The following mini case studies contribute methodologically (more cases) and empirically (broadening the scope) to the story told in this book: the transformation of Chinese statecraft toward the economy, more broadly, and the differentiated relationship between government and business across strategic and nonstrategic industries in the post-Deng era, more specifically. The cross-sector survey...

    • 9 DECENTRALIZED ENGAGEMENT IN NONSTRATEGIC INDUSTRIES
      (pp. 227-252)

      This chapter applies the strategic value framework to mini case studies of nonstrategic industries (consumer electronics, foodstuffs, and paper) to show that decentralized engagement is the dominant regulatory pattern in low-tech, labor-intensive industries.

      These industries score low in their contribution to the national technology base and their importance to national security, and consist of relatively competitive local companies (see figure 2.4). Manufacturing involves linear technology, connects to buyer-driven global commodity chains, and requires low capital but high labor inputs; moreover, quasi-state–quasi-private companies dominate markets. Thus, according to the strategic value logic, the state takes an incidental orientation toward market...

    • 10 CHINA’S DEVELOPMENT MODEL: A New Strategy for Globalization
      (pp. 253-270)

      A front-page editorial in the People’s Daily on January 5, 2010, read, “When the financial crisis forced the neoliberal economic system into a dead end, the shortcomings of the capitalist system were exposed for all to see. . . . But a China that was pushed to a crossroads proved its ‘national capabilities’ in taking on a crisis by answering with the advantage of the socialist system with Chinese characteristics.” Notwithstanding the Chinese leadership’s desire to characterize the Chinese development model as a “socialist system with Chinese characteristics,” China today is not a socialist system.¹ In the transformation of state-society...

  11. REFERENCES
    (pp. 271-290)
  12. INDEX
    (pp. 291-304)