Governance in today's China: China's political regime and economic system

Doug Guthrie, Dashiell Chien, Chris Gao and Diane Long

Chapter 2 in Research Handbook on Corporate Governance in China, 2025, pp 18-43 from Edward Elgar Publishing

Abstract: Corporate governance holds an important place in any advanced market economy. In the case of China, we have watched the country's dramatic rise from the ‘economic opening’ in 1979 under Deng Xiaoping to its current position as the world's second-largest economy. The gradual building of new institutions and new ways of governing economic activity in the market has been a crucial part of China's successful transition. Over the last four decades of reform and transformation, the institutional environment shaping corporate governance has evolved into a robust system governing corporate actors in China today. While the 1980s and 1990s could be characterized as periods of close administrative governance and control by the state, these periods were also the era in which China was setting in place systems of governance that would allow corporations to be governed by a system of laws and rules, the ‘modern enterprise system’ [xiandai qiye zhidu]. These periods saw new laws and regulations such as the Labor Law, the Company Law, and the Joint Venture Law—laws and regulations that governed the ways in which corporations operate in the rapidly growing economy. In the 2000s, under the leadership of Hu Jintao and Wen Jiabao, it looked like the government was stepping back from direct administrative fiat, allowing this rule of law system to govern the economy. However, in the decade since President Xi's inauguration in 2013, we have seen a dramatic reversal of these trends, what might be called a rule-by-law system, where the government relies on new aggressive regulations that make it increasingly difficult to operate in China. In this new legal regime, local governments demand economic partnerships in building strong local economies in exchange for positive rulings on corporate compliance with the new legal regimes. Through an analysis of the cases of Apple, Foxconn, and Alibaba, we show the ways in which corporate governance in China today depends, once again, on close relations with local governments.

Keywords: Economic development; Corporate governance; Rule by law; Apple; Zhengzhou; China (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035312603
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