State Strategies Under Global Rules: Chinese Industrial Policy in the WTO Era

Abstract

This dissertation examines the strategies that various actors within the Chinese state adopted in response to World Trade Organization (WTO) rules demanding far-reaching modifications to China's domestic policies and institutions. While several scholars have noted the unevenness of reforms resulting from WTO entry, I ask: why did more liberalizing reforms take place in some parts of the state and not others. I provide a framework explaining why policy responses to the WTO were neither top-down nor monolithic, despite single-party rule. To understand this divergence, I identify three competing philosophies of economic governance from which such responses are drawn: market-replacing (directive strategies), market-shaping (developmental strategies) and market-enhancing (regulatory strategies). I demonstrate that policy divergence originates from a combination of international and domestic forces, which emphasize the likelihood of sanction for deviating from WTO norms and the prospects for bureaucratic advancement for diverse actors within the Chinese state. Across administrative levels, I show that while WTO rules provoked a regulatory response from the central state, the same rules inspired economic strategies based on directive and developmental measures at the subnational level. I further show that within the central state, WTO rules altered the balance of power between different economic agencies, increasing the leverage of agencies advocating regulatory strategies while provoking quite a different response from developmental agencies. The ability of these agencies to advance their preferred policies is further mediated by the ability of the party leadership to punish the central bureaucracy. Finally, I address how WTO entry has intensified the conflict between central and subnational states over the governance of key industries. While WTO entry has heightened the central state's determination to build globally-competitive national champions, paradoxically, it has also enhanced the ability of subnational states bypass the center, by increasing their direct access to global markets and foreign capital. In sum, this study offers a new explanation for why WTO rules, usually thought to constrain member states or credibly commit them to international norms, in fact provoked divergent responses within the state, in ways neither expected nor desired by the architects of those rules.