STRONG STATE AND COMPLIANT BUSINESSES: HOW CHINA LIBERALIZES ITS FINANCIAL MARKET AND DISTRIBUTES SUBSIDIES

Abstract

Why do some domestic firms get more state resources compared to others? I argue that firms use a) political connections and b) strategic behavior to get more subsidies and foreign capital. Data from firms listed in China’s Shenzhen and Shanghai (2008–22) support the argument. In three ways, this dissertation enhances our understanding of China’s political economy. First, it suggests that marketization in China has not led to its assimilation to global neoliberalism. I show that firms who need foreign capital–those without connections and subsidies–receive less foreign capital. Second, I suggest that when the private-state boundary is blurred, party-state capitalism better explains China’s political economy than state-capitalism. I use new measures of connections: firms’ Party committees and amended charters. Third, I show that when connected firms work more in the citizen interest, the state grants them more resources. Scholars have associated political connections with cronyism at the expense of citizens’ interest.