China's SOE Reform: Using WTO Rules to Build a Market Economy

Abstract

This paper challenges the widespread view that existing WTO rules are insufficient for dealing with state capitalism in China, which has been further emboldened by the latest rounds of state-owned enterprise (“SOE”) reforms. Through a careful review of WTO agreements and jurisprudence, it is argued that new rules are not necessarily needed because the unique challenges created by China’s state capitalism can be appropriately addressed by the WTO’s existing rules on subsidies coupled with the China-specific obligations. A more realistic approach would be to encourage China to undertake market-oriented reforms through WTO litigation based on existing rules rather than trying to negotiate new rules.