Rules Governing State-Owned Enterprises: Competition, Coordination, and Control

Consistent with the Developmental State model, China uses State-owned enterprises (hereinafter SOEState-owned enterpriseSOE) as a developmental tool to promote strategic sectorsStrategic sectors essential to national security. Compared to classical Developmental States, however, the Chinese model is more protective and less liberalising for SOEs, because, in China’s socialist market economy, SOEs represent the leading force of China’s national economy. Accordingly, China is reluctant to incorporate SOE provisions in Free Trade Agreements (hereinafter FTAFree Trade AgreementFTA). Instead, Chinese SOEs are governed by domestic competition laws enabling competitivenessCompetitiveness while preventing anticompetitive behaviours and retaining State intervention in the economy. This chapter thus argues that as long as SOE conduct is regulated with thorough enforcement and transparencyTransparency mechanisms, China’s heavy State involvement in the market economy is not necessarily anathema to the liberal regimesLiberalliberal regimes. To elucidate the above arguments, this chapter first critically analyses WTO provisions relevant to Chinese SOEs. An assessment of the liberal model’s SOE rules follows, focusing on recent US and EU FTAs. The chapter culminates in a comparative analysis of the Chinese regime. Based on the socialist market economy model, the Chinese regime’s main priority is to balance market competition and State control. To support this argument, the last section analyses Chinese FTA provisions relevant to SOEs and China’s domestic legislation governing SOE conductState-ownedState-owned enterprisesSOE conduct.