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Competition Policy and State-Owned Enterprises in China

  • WILLIAM E. KOVACIC (a1)
Abstract

The Anti-Monopoly Law (AML) of China came into effect in August 2008. In less than a decade, China has made remarkable strides to enforce this law; no other jurisdiction with a competition law system – over 130 to date – comes close to matching China's accomplishments in the first decade of its competition regime. However, China's progress in implementing competition policy remains uncertain.

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Corresponding author
*Email: wkovacic@law.gwu.edu
Footnotes
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The author thanks Merritt Janow, Petros Mavroidis, and Mark Wu for many useful comments. The views expressed here are the author's alone.

Footnotes
References
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1 Anti-Monopoly Law of the People's Republic of China (2007), Presidential Order No. 68, 30 August 2007.

2 On the development of China's modern competition law system, see Emch A. and Stallibrass S. (eds.), The Chinese Anti-Monopoly Law: The First Five Years, Kluwer, 2013 ; Journal of Antitrust Enforcement: Special Supplement – Chinese Competition Law, 15 November (2015); Svetiev Y. and Wang L., ‘Competition Law Enforcement in China: Between Technocracy and Industrial Policy’, 79 Journal of Law and Contemporary Problems (2016) 187 .

3 See Kovacic W. and Lopez-Galdos M., ‘Lifecycles of Competition Systems: Explaining Variation in the Implementation of New Systems’, 79 Journal of Law and Contemporary Problems (2016) 85, 8788 (discussing development of new competition systems since late 1980s); Svetiev and Wang, ‘Competition Law Enforcement in China’, supra note 1, at 188–90 (describing early development of China's antitrust enforcement program).

4 On possible improvements, see Kovacic W., ‘China's Competition Law Experience in Context’, Journal of Antitrust Enforcement 12 (Supplement 2015).

5 See Kovacic W. and Hyman D., ‘Institutional Design, Agency Life Cycle, and the Goals of Antitrust Law’, 81 Fordham Law Review (2013) 2163 , 2169–71 (describing how competition agencies reconcile the multiple goals assigned to them by legislators).

6 See Kovacic W., ‘The Institutions of Antitrust Law: How Structure Shapes Substance’, 110 Michigan Law Review (2012) 1019 , 1043 (discussing restructuring of competition systems in Brazil, France, Portugal, Spain, and the United Kingdom).

7 NDRC's AML unit also enforces China's price law. There have been NDRC investigations where the foundations – price law or the AML – have not been clearly specified. The SAIC's AML unit also enforces China's unfair competition law, but application can clash with the AML's mandate.

8 See Kovacic W. and Winerman M., ‘The Federal Trade Commission as an Independent Agency: Autonomy, Legitimacy, and Effectiveness’, 100 Iowa Law Review (2015) 2085 , 2087 (recounting the often-expressed view that competition agencies should be independent).

9 See Xu S., Competition Law and Competition Policy – China's Perspective (SinoMedia Holdings Ltd. 2010) 244 (calling administrative monopoly ‘one of the largest obstacles to the development of China's market economy).

10 Wu C. and Liu Z., ‘A Tiger without teeth? Regulation of administrative monopoly under China's Anti-Monopoly Law’, Review of Industrial Organization (March 2012).

11 One case concerns NDRC's action (in September 2014) in Hubei province where only locally registered passenger transport companies are given a 50% discount on road toll charges while companies not locally registered receive no discounts. Another case is action taken by SAIC's Guangdong provincial branch against the Heyuan municipal government for giving one local company, the New Space-Time Navigation Technology Company (NSTNT), a monopoly in the municipality's GPS tracking and monitoring platform, forcing other GPS operators to upload their data on to the NSTNT platform at a fee.

12 AML Chapter V, Article 6, on the ‘Provisions for Administrative Authorities for Industry and Commerce to Prevent Abuses of Administrative Powers to Exclude or Restrain Competition’.

13 On the development of the FRCM mechanism, see D. Dong and Y. Meng, ‘Overview of Competition Policy’, in Y. Meng and H. Lee (eds.), China–Korea IP & Competition Law Annual Report 2015, at 35–37.

14 SOEs in China adversely affect resource allocation and competition in a number of ways. The AML allows them to operate as monopolies in a wide range of regulated industries regarded as strategic and which account for a significant share of manufacturing output and GDP. Consequently, competitive forces are absent in large parts of the economy.There are considerable difficulties in measuring accurately the share of the state sector in China's GDP because of various methodological issues in defining the exact scope of state ownership or control.

15 SOEs are defined as those with 100% or majority state shareholding and exclude enterprises with minority but sometimes sizeable, and even controlling, state shareholding. The total amount of state assets would therefore be greater if state shares in the mixed ownership enterprises were to be included.

16 Leutert W., ‘Challenges ahead in China's reform of state-owned enterprises’, 21 Asia Policy 8399 (January 2016) (National Bureau of Asian Research).

17 Z. Zhang, ‘The role of state-owned enterprises in economic development: Practice in China’ (2014) Unpublished presentation to the OECD Workshop on State-Owned Enterprises in the Development Process, Paris. Five industries (electric power, iron and steel, transportation equipment, coal mining and oil exploration) of these 10 industries alone accounted for 64% of total state industrial assets and 63% of total state industrial output.

The author thanks Merritt Janow, Petros Mavroidis, and Mark Wu for many useful comments. The views expressed here are the author's alone.

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World Trade Review
  • ISSN: 1474-7456
  • EISSN: 1475-3138
  • URL: /core/journals/world-trade-review
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