While Chapter 4 outlines the national pattern of visibility projects and the forced exit of private firms from the urban bus sector, this chapter uses comparative case studies, in-depth interviews, and process tracing to explore the causal mechanism linking visibility projects to deprivatization. Guangzhou and Nanning, two capital cities in neighboring provinces in southern China, are selected for a most-similar case comparison. Guangzhou deprivatized its bus sector in 2007, whereas Nanning continues to have a privately controlled bus sector.

Guangzhou initiated multiple visibility projects in its urban bus sector, driven by ambitious city leaders seeking attention from the Party-state. In contrast, Nanning launched only a few projects, as its city leaders sought to avoid attention following recent political turmoil. By contrasting these two cases and demonstrating why deprivatization occurred in Guangzhou but not in Nanning, this chapter illustrates how visibility projects led to the end of marketization in China’s urban bus sector.

The second political service provided by firms is to supplement the state’s societal control efforts. When public grievances arise over a project, infrastructure, or plant, the state may politicize the associated firms by demanding their assistance in managing social unrest. Firms play two distinct roles in societal control: serving as allies when the state employs suppression strategies against protesters or acting as scapegoats when the state opts for appeasement strategies.

Private firms are more suited to serve as scapegoats, while SOEs, particularly large and powerful ones, are stronger allies. This distinction arises from differences based on ownership and extent of political capital available to firms. Private firms typically have narrower and more limited sources of political capital than SOEs. In sectors where protests become increasingly frequent and intense, suppression strategies often replace appeasement, leading to a decline in the standing of private firms as large SOEs gain dominance.

The Chinese government and its officials often demand political services from companies in China. Chapter 1 examines the phenomenon of politicizing business, its institutional origins, and its consequences. It introduces two political services that have largely gone unnoticed: political contributions to visibility projects and supplements to the authoritarian state for the purposes of societal control. The former advances the careers of authoritarian officials, while the latter helps the state maintain social stability. Some of these political services resemble bribes; others resemble regulations.

The chapter then traces the institutional origins of business politicization to the authoritarian mechanisms used to control both government officials and the general public. To maintain these mechanisms, the Chinese state has preserved its authority to politicize business and has never granted full autonomy to companies during China’s economic reforms. The outcome is the retreat of the market. Political services demanded by the state often place private firms at a disadvantage compared with state-owned enterprises (SOEs), altering the competitive landscape of entire sectors. Ultimately, the politicization of business is a key factor behind the inconsistency between China’s nominally promarket policies and its frequent, seemingly arbitrary, antimarket actions.

Using comparative case studies, process tracing, and in-depth interviews, this chapter builds on Chapter 6 to examine the mechanisms connecting protests, societal control strategies, and outcomes for firms in the solid waste treatment sector. Process tracing is first applied to Wuxi, a city with multiple incineration plants, to illustrate how escalating protests gradually shifted the city government’s strategy from appeasement to suppression. This shift in strategy made private firms less effective in providing societal control services, leading to the transfer of the city’s incineration plants into the hands of SOEs.

Next, a most-similar case study compares an incineration plant in Wuxi with another in Qinhuangdao, highlighting how differences in political capital, linked to firm ownership, influence the outcomes of societal control efforts. The weaker political capital of private firms means they are less equipped to assist local governments during protests, making them less favorable. This comparison sheds light on how Chinese local governments perceive protests and firms, explaining why SOEs increasingly dominate a sector as protests within it become more frequent and intense.

This chapter begins the empirical examination of the second political service provided by firms: societal control. I situate this political service within China’s solid waste treatment sector, where the development of waste incineration plants has consistently faced public opposition and protests. Drawing on original data from all 351 incineration plants built or under construction in Chinese cities between 1999 and 2016, as well as records of protests against these plants, I demonstrate a strong relationship between protests and firm ownership in this sector. During the bidding stage for waste treatment contracts, local governments factor in societal control when selecting firms to build and operate these plants. If local governments anticipate employing appeasement strategies toward protesters, private firms are more likely to thrive in a city. Conversely, if governments expect to rely on suppression strategies, state-owned enterprises tend to dominate.