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The View | How US-China rivalry shapes the regulatory crackdown in both countries
- While both are driven by different domestic concerns, neither can ignore the geopolitical impact of their regulation of corporate giants
- Such international interactions can drive the rapid evolution and even sudden turns of regulations in the US and China, and investors must remain alert
Reading Time:4 minutes
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While the Biden administration is launching antitrust initiatives to promote competition, China has been reining in corporate giants in some sectors. These checks on corporate dominance on both sides of the Pacific may appear similar on the surface but the underlying drivers are quite different. They reflect fundamentally distinct relationships between the state and the market.
Antitrust regulations in the US, since Woodrow Wilson’s time, have aimed to safeguard the interests of consumers and workers against excessive corporate power. More than regulations, however, globalisation has advanced consumer interests, albeit at the expense of some US workers.
In certain sectors, such as health care, prices in the US can be astoundingly high. Worse than high prices, the landmark US$26 billion opioid settlement with major American pharmaceutical companies has underlined the extent of corporate misconduct. Many of US President Joe Biden’s antitrust initiatives target domestically oriented industries such as agriculture, pharmaceuticals and health care, which are less checked by international competition.
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To protect consumers in China’s highly competitive markets, product safety and fraudulent products are often more pressing concerns. China’s latest clampdown on the tutorial industry, arguably aimed at protecting consumers, has been shaped by deeper motivations.
In areas where monopolistic pricing power is exerted, state-owned enterprises in telecommunications, energy and banking figure highly. In these sectors, the state can engineer social objectives through administrative directives rather than arm’s-length regulations. The state has also been more enthusiastic in regulating private non-bank financial institutions than state-owned banks.
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