Impeding Authoritarian Transparency: How China’s Industrial Giants Hold Back Institutional Reform

Abstract

Recent transparency reforms in China are intended in part to help activists, journalists, and others to limit the ability of the local party-state to engage in practices that not only harm ordinary Chinese but also go against central government interests. However, implementing these reforms requires cooperation from the very actors who may be weakened by them. We show that even controlling for pollution, development, and industrialization, Chinese cities dominated by large industrial firms are less transparent than those with a less-concentrated industrial base. This effect is stronger when the city’s largest firm is in a highly polluting industry. We control for pollution using satellite-generated data in order to avoid relying on questionable official data that may be manipulated by local governments. While the negative economic consequences of the dominance of large state-connected firms have been widely discussed, our study shows that this growth strategy has important and deleterious political effects as well.