State Strategies in the WTO Era: Explaining the Rise of Chinese State Capitalism

• In Event: China in the Global Economy: Authoritarian Politics and Economic Liberalization

Abstract

When China joined the WTO in 2001, conventional wisdom held that global trade rules would act as a credible commitment to domestic reform and restrain Chinese industrial policymaking. While significant reforms did take place in the early 2000s, scholars soon pointed to the growing assertiveness of a Chinese “state capitalism”. This paper addresses two questions: First, why did the expansion of market-oriented institutions in response to WTO entry not constrain the subsequent activism of more interventionist developmental agencies? Second, what explains the timing of these non-linear policy trajectories? By applying automated text analysis to an original dataset of over 40,000 Chinese industrial policies, this paper disaggregates the Chinese central state into its major agencies and unpacks the divergent policy strategies adopted by competing agencies in response to WTO entry. I show that the timing and trajectories of this divergence turns on the durability of global trade commitments and the political relationship between China’s party and its state. Therefore rather than a uniform convergence to liberalization, WTO rules have intensified the competition within the central state over the direction of economic policy. The result is an enhanced dualism in the governance of the Chinese economy, with intensified market competition promoted by one set of central economic agencies, yet a more consolidated industrial policy promoted by rival agencies.

Author

• Yeling Tan, University of Oregon