Chinese State Capitalism and Western Antitrust Policy

Posted by Social Science Research Network

Chinese State Capitalism and Western Antitrust Policy

Nicolas Petit (University of Liege)

Abstract:      Enthused by China’s conversion to the free market system in 1978 and its adoption of Western-style market institutions, the world has spent the last few decades turning a blind eye to China’s real “governance” problem: that a shadow Party-State system permeates all branches of the economy. Whatever Washington-consensus style institutions are put in place, whatever State Owned Enterprise (“SOE”) reform is introduced, corporate and market governance occur under the rule of the Chinese Communist Party (“CCP”). And the CCP’s guidebook is the Leninist command that the whole of society shall be run as “single country-wide State syndicate”. This paper contends that China’s syndicated economic organization is akin to a “supertrust”, and that this creates conditions that are conducive to antitrust problems to which the Western world must awaken. In this context, this paper advances that the antitrustregulators of North America, Europe and elsewhere should take two simple, pragmatic steps under merger control and antitrust rules. In merger review, antitrust agencies should treat all SOEs and Privately Owned Enterprises (POEs) with a CCP cell as one unitary group and undertake a thorough competitive assessment of transactions on this basis. In addition, antitrustcases involving Chinese firms should be investigated on the default assumption that there is an underlying coordination scheme among them.