Explaining the Rise of State Capitalism

Abstract

This chapter looks within the powerful central government to explain a shift in central policy trajectories over time, from one of market-enhancing liberalization to one of market-shaping developmentalism. It reveals that the central government's regulatory response to World Trade Organization (WTO) entry did not last. Instead, a shift toward developmentalism in the form of strengthened industrial policies emerged in the latter half of the 2000s. The chapter explains that these shifting policy trajectories were driven by different sets of agencies within China's powerful central bureaucracy. Focusing on the reversal in policy trajectory, the chapter investigates why did the rise of regulatory institutions in response to WTO entry not constrain the belated strengthening of developmental policies. It details the timing of this policy change, then addresses deficiencies in the dominant explanations that have been put forth for the emergence of Chinese state capitalism in the latter half of the 2000s. Ultimately, the chapter provides evidence for an explanation of the pattern and timing of this policy reversal, focusing on changes in the ability of the party to discipline the central state and how WTO rules altered the prospects for political advancement of different central agencies.