The Rise of the Investor State: State Capital in the Chinese Economy
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The Rise of the Investor State: State Capital in the Chinese Economy Hao Chen 1 & Meg Rithmire 2 # Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract The nature and extent of the role of the Chinese state in the economy is fundamental to many empirical and theoretical debates about that country’s political economy. We document and explain the rise of a novel form of intervention on the part of the Chinese state: the expansion of state capital beyond ownership of state firms. We argue that state investment as a mode of state intervention in the economy is conceptually distinct from both “state capitalism” and the “developmental state” in its introduction of new agents to distribute state capital to firms and new mechanisms through which states, especially authoritarian ones, monitor and influence business actors. We document the growth of the investor state in several ways. Case studies of three high-profile shareholding firms in China demonstrate that state capital can be deployed strategically, for example, to respond to financial crisis or facilitate industrial upgrading, but also generates moral hazard, resulting in corruption and resource misallocation, and international alarm about the intentions of Chinese firms. We further compare the rise of state shareholding firms in China to similar phenomena in Brazil and Malaysia, concluding that the practice has both economic and political logics. Keywords China’s political economy . State shareholding . State-business relations . State
capitalism . China’s financial system
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s12116-02009308-3) contains supplementary material, which is available to authorized users.
* Meg Rithmire [email protected] Hao Chen [email protected]
1
Department of Political Science and International Relations, University of Southern California, 3518 Trousdale Pkwy, VKC233B, Los Angeles, CA 90089, USA
2
Business, Government, and International Economy, Harvard Business School, 267 Morgan Hall, Soldiers Field Road, Boston, MA 02163, USA
Studies in Comparative International Development
Comparative political economy is premised on the idea that a range of important phenomena, from growth and competitiveness to political stability and inclusion, are related to the institutions that structure firm preferences and the role of the state in the economy. For the past two decades at least, scholars of the political economy of development have recognized a range of productive roles for the state in guiding economic development (e.g., Evans 1995; Haggard 2018), with some even heralding the arrival of “state capitalism” as a sometimes viable alternative to market-led development (Musacchio et al. 2014). These debates about the impact of state intervention in the economy turn on the precise mechanisms of intervention and the incentives they create, requiring scholars to “get the facts right” (Huang 2008, xvii) about both the state’s role and the firms with which the state interfaces
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