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Design and Practice of China’s Regulatory Regime
Organizer: Doris Fischer, University of Duisburg-Essen, Germany
Chair and Discussant: Joern-Carsten Gottwald, University of Trier, Germany
The panel introduces recent theoretical innovations concerning the issues of ‘governance’ and the ‘rise of the regulatory state’ into empirical research on institutional change in the People’s Republic of China in a co-ordinated and encompassing effort. One fundamental task of research in the area of social sciences is the re-definition of the relationship between the state, society and the economy in the age of globalization. While some authors have argued that globalization leads to a diminished role for state intervention in economic and social affairs, a convincing set of new theoretical and empirical work has stressed the role of new norms, mechanisms, and arrangements in organizing political and economic activity. Softer modes of governance have often replaced the traditional form of government. The rise of so-called regulatory states where national governments transfer considerable competences in policy-making, policy-implementation and policy-revision to specialized independent agencies lies at the core of a new theoretical thinking on the modern state.
While most of the research on the rise of the regulatory state so far has concentrated on well established democratic market economies, the papers presented at the panel will apply these concepts to China, focusing on the evolving regimes in such different realms as the regulation of financial markets, the fight against money-laundering, the cotton sector and the media. All papers will be circulated among the panel participants before the conference. The presentations will be limited to 10 minutes, thus allowing for an in-depth comment by the chair as well as for a public discussion on patterns, pitfalls and perspectives of regulation in China.
Regulating China’s Media
Doris Fischer, University Duisburg-Essen, Germany
Regulation of media in modern market and information societies most often pertains to the control of market power in media markets, ethical standards for content, and the provision and protection of a public broadcasting system. Such regulation aims at securing certain quality standards, the protection of minority opinions as well as independence of information from either political intervention or economic power. Media in the P.R. China are state-owned and for a long time were merely expected to be propaganda instruments for the Party and government. Media were not seen as a business or economic branch. But, since the late nineties, development plans formulated by the Chinese government for the media are highly ambitious. As a result, Chinese media have experienced tremendous change in terms of organisation, business model and financial resources. At the same time the state is trying to uphold government control over media content. The paper analyses perceivable changes in government policies concerning the regulation of media business and media content by focusing on the role of the main regulatory institutions and actors (Central Propaganda Department, GAPP, SARFT, MII, SAIC etc.), on policies for market and ownership structures and the discourse about media content quality and independence. The paper ends with a discussion concerning future perspectives of media regulation in China.
Local States and the Building of a Regulatory State: Implementing Reforms in China's Cotton Sector
Bjoern Alpermann, University of Cologne, Germany
Recent reforms in the Chinese cotton sector aimed at a transition from planned to market economy structures and amounted to a redefinition of the state’s role in this industry. Instead of acting as a monopsonist through its network of supply and marketing cooperatives the state now intended to perform the role of a regulator. However, to achieve this redefinition the central state not only had to push through systemic transformation (from plan to market) but also to face the more complicated task of steering institutional change in the industry. In particular, the state needed to build the institutional capacity to monitor market access and product quality.
The paper analyzes the factors accounting for success or failure in building a regulatory state in this particular industry. It will be argued that in order to understand the challenges in constructing regulatory regimes in China’s economy we need to properly take into account regional and local state actors. When regional and local actors come into play they will bend or dilute central state initiatives giving rise to localized versions of regulation. This is exemplified using a comparative case-study approach to analyze two county-level units in two different provinces (Shandong and Hubei). Analysis is based on extensive fieldwork conducted by the author in 2002 and 2004 for his Ph.D. thesis Economic Transformation and State Capacity: The Case of the Chinese Cotton Sector (University of Cologne, 2006).
Anti-money Laundering Regulation in the People’s Republic of China – National and International Influences on the Establishment of a Legal and Institutional Anti-money Laundering Framework
Nicole Schulte-Kulkmann, University of Trier, Germany
Since the inauguration of the Financial Action Task Force on Money Laundering (FATF) in 1989, the crime of money laundering has attracted more and more attention, nationally as well as internationally. Moreover, the terrorist attacks of 11 September, 2001 brought to the fore the close connection between money laundering and the financing of terrorist activities. Since then, more and more nations have joined the anti-money laundering efforts of the international community and established the requisite legal and institutional provisions at the national level. The People’s Republic of China (PRC), which to date still has to be considered a ‘magnet’ for money laundering activities, has recently also become more and more aware of this problem and accordingly has enacted several legal norms and established some specific institutions in order to carry out effective anti-money laundering activities. It is the aim of this contribution to analyse in more detail the peculiarities of the Chinese anti-money laundering regime and to offer a hypothesis as to the explanation of the regime’s specific design.
Anti-money laundering regulation in the PRC in essence follows a ‘command and control’ model by imposing legal standards on certain – financial and non-financial – institutions vulnerable to money laundering activities and by designing governmental institutions responsible for the implementation of these standards as well as for the imposition of sanctions in case of violations of standards. However, the specific legal and institutional design of anti-money laundering regulation in the PRC is to date in flux and subject to different, and sometimes conflicting, influences and interests. Therefore, the paper deals with two major issues: ‘who commands’ – i.e. which governmental agency or agencies will authoritatively regulate anti-money laundering in the future –, and what will the ‘commands’ target in particular – i.e. the regulatory contents of anti-money laundering legal rules. Thereby, the paper provides an account of the different governmental agencies involved in anti-money laundering regulation and their specific interests as well as their organizational capacity to further these interests, but also includes an international perspective linking Chinese efforts to various international norms and standards.
Creating a regulatory state within Leninist authoritarianism: financial market reforms in the PR China
Svenja Schlichting, University of Trier, Germany
Recent reforms in the domestic financial markets have drawn new attention to the change of economic governance and political control over the economy in China. This paper discusses whether financial market restructuring, reform and new modes of regulation provide sufficient evidence to claim the rise of a regulatory state in China. Or whether there is in fact – based on the specific characteristics of China’s post-Leninist political system – a ‘regulatory autocracy’ emerging.
Financial market reform in China has included the establishment of market-oriented regulatory institutions that – on first sight – seem to herald the emergence of a classical regulatory state. These institutions embody most clearly the change economic reforms have initiated with regards to state structures and institutions. The Chinese government has implemented these institutional changes along the lines of the Western regulatory model since the administration of Zhu Rongji (1998-2003) with remarkable speed. Three formally independent regulatory bodies for the financial markets have been cut out of the Chinese central bank, the People’s Bank of China. These are the China Securities Regulatory Commission, the China Banking Regulatory Commission and the China Insurance Regulatory Commission, in name and design similar to their US-American models. However, the three Chinese regulatory institutions remain clearly subordinated to the policies and aims of the Chinese leadership and have little institutional independence. It is predominantly this lack of independence – most obvious in financing and personnel decisions – that highlights their ambivalent nature.
In this light, the introduction of globally accepted regulatory standards such as the Basel Accord on Capital Adequacy and the principles of the International Organisation of Securities Regulators (IOSCO) in China should not be overrated as a clear commitment to implement market-oriented standards in China comprehensively. Moreover, the adaptation of modern tools of regulation in the Chinese context might lead to a new type of ‘regulatory autocracy’ in which all regulatory and market players remain subordinated to the rule of the Chinese Communist Party.