State Strategies under Global Rules: Chinese Industrial Policy in the WTO Era Forthcoming in 2021 with Cornell University Press, Studies in Political Economy Series
China’s entry into the World Trade Organization (WTO) in 2001 represented an historic opportunity to peacefully integrate a rising economic power into the international order based on market-liberal rules. To what extent has this liberal internationalist promise of the WTO been fulfilled? To answer this question, this study breaks open the black box of the Chinese state and unpacks the policies that various government actors – central economic agencies as well as subnational authorities – adopted in response to WTO rules demanding far-reaching modifications to China’s domestic institutions. I show that rather than constraining or “disciplining” the state, WTO entry provoked a divergenceof policy responses withinthe state. Moving beyond frameworks that organize responses to globalization in binary terms such as protectionism or liberalization, I show that these responses draw from three competing state strategies, or philosophies of economic governance: market-substituting (directive), market-shaping (developmental) and market-enhancing (regulatory).
In order to capture the shifts in these strategies across industries and government actors over time, I use web-scraping techniques to collect an original dataset of over 43,000 Chinese industry regulations, and then em- ploy machine-learning methods in text analysis to identify policies associated with each strategy. Combining text analysis with industry data, in-depth case studies and field interviews with industry representatives and government officials, I demonstrate that a diversity of actors within the Chinese state each adopted different logics of adjustment in responding to the common “shock” of WTO entry. I show that this 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 of political advancement for diverse actors within the Chinese state. These responses varied systematically not just across administrative levels, but also across central agencies and industries. In sum, this study offers a new explanation for why WTO rules, usually thought to constrain or credibly commit states to international norms, in fact provoked divergent responses within the Chinese state, in ways neither expected nor desired by the architects of those rules.