103 Geo. L.J. 665 (2014-2015)
Beyond Ownership: State Capitalism and the Chinese Firm

handle is hein.journals/glj103 and id is 682 raw text is: 




Beyond Ownership: State Capitalism and the

Chinese Firm


CURTIS  J. MILHAUPT*   &  WENTONG ZHENG**


         Chinese state capitalism has been treated as essentially synonymous with state-
      owned  enterprises (SOEs). But drawing a stark distinction between SOEs and
      privately owned enterprises (POEs) misperceives the reality of China s institutional
      environment and its impact on the formation and operation of large enterprises of
      all types. We challenge the ownership bias of prevailing analyses of Chinese firms
      by exploring the blurred boundary between SOEs and POEs in China. We argue that
      the Chinese state has less control over SOEs and more control over POEs than its
      ownership interest in the firms suggests. Our analysis indicates that Chinese state
      capitalism can be better explained by capture of the state than by ownership of
      enterprise. We explain the mechanisms of capture in China and argue that due to
      China's institutional environment, large, successful firms-regardless of ownership-
      exhibit substantial similarities in areas commonly thought to distinguish SOEs from
      POEs:  market dominance, receipt of state subsidies, proximity to state power and
      execution of the state's policy objectives. We explore the significant implications of
      this argument for theory, policy, and law.

                                 TABLE  OF CONTENTS

INTRODUCTION.................................                     . . . . . . . ..667


  1.  THE  OWNERSHIP BIAS.      ..........................           . . . . . ..670

       A.  BLURRED   BOUNDARY BETWEEN SOES AND POES....            . . . . . . ..671

       B.  STATE  OWNERSHIP                  .................................    676

            1.  The  State Collects Little or No Dividends from SOEs .....         678

            2.  Executive   Compensation Practices at SOEs Suggest
                Limited  State Control  over  Managers ..............              680

           3.   The  State Often  Fails to Implement   Major  Operational
                and  Policy Decisions   at SOEs  ....................              681




  * Parker Professor of Comparative Corporate Law and Fuyo Professor of Japanese Law, Columbia
Law School; Research Fellow, European Corporate Governance Institute. D 2015, Curtis J. Milhaupt.
  ** Associate Professor of Law, University of Florida Levin College of Law. D 2015, Wentong
Zheng. The authors thank Donald Clarke, Ronald Gilson, Zohar Goshen, Li-Wen Lin, Tom Merrill, Ed
Morrison, Mariana Pargendler, Mario Shapiro, Daniel Sokol, and Angela Zhang for helpful comments,
and workshop participants at the Office of the United States Trade Representative, Tsinghua University
School of Law, the Center for Chinese Legal Studies at Columbia Law School, FGV Law School, Sao
Paulo, the Foreign and Comparative Law Committee of the New York City Bar Association, the
University of Florida Competition Policy Workshop, the Columbia Law Faculty Workshop, and the
Columbia Workshop on Chinese State Capitalism for stimulating discussions on prior drafts and early
presentations of this paper. The authors also thank University of Florida Levin College of Law student
Xin Yang for excellent research assistance.


665

What Is HeinOnline?

HeinOnline is a subscription-based resource containing nearly 2,700 academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline with pricing starting as low as $29.95

Access to this content requires a subscription. Please visit the following page to request a quote or trial:

Already a HeinOnline Subscriber?