Between Market Economy and State Capitalism: China's State-Owned Enterprises and the World Trading System

"This book is very much in two parts. In the first part of the book, Professors Gao and Zhou give the most accessible and thorough account of the history of the Chinese regime’s economic and trade policy, their approach to investment, their approach to exporting, how their thinking has evolved. For a lot of us in the West, this is a complete black box. We can tell you what the state of polling is in a swing district in Ohio, but most people couldn’t name two members of President Xi’s inner circle. And so it is fascinating to read. So much of the future is going to be shaped by the US and China. We have a million pages of ink written by Americans about America and by others about America, whereas genuinely insightful writing about the Chinese Communist Party, how it made decisions historically, how it created what’s called the economic miracle, is in short supply. This is really valuable, so that you at least have some insight into how they got to where they are, as a kind of complement to Doug’s book. The second half of the book is more of a trade law section, which talks about the extent to which the Chinese government uses what’s called “state capitalism”; the way that it uses a blend of private and public industry. It looks at the extent to which the rules of international trade, the World Trade Organization and other treaties are equipped to deal with that and where and when it begins to harm other nations. You’ll find that fascinating if you’re from a law background or interested in law, but for me, what stood out and what I thought made this book really valuable to have on this list was this sort of insight into China, Chinese economic history and Chinese trade history. It does a good job of unpacking the critiques of a specific part of the Chinese model, which is the state-owned enterprises and state champions model. Capitalist theory says that it’s a really bad idea to have the government picking corporate winners and losers, that in the long run, that kind of thing creates the wrong incentives. It doesn’t reward the right kind of innovation, and so on. If you spin history out for 5,000 years, eventually a system based on state patronage and bureaucratically selected winners is going to lose out to a more competitive market where the government doesn’t play that role. But, given that China is operating at such scale, there is a sense that even if you accept that argument without reservation, other governments can’t wait that long if a flood of Chinese government patronage is helping China monopolise a market entirely in a way that is crushing competition abroad. Governments have to deal with that in the here and now, and they have to make really hard choices effectively between the interests of consumers and perhaps some long-term considerations about their dependency on Chinese supply chains, the importance of having certain forms of domestic industry and so on. This is really, really complicated. And one of the reasons I think it’s important to understand the history is to understand just how complicated this stuff is."