China’s state monopolies cast a big shadow over private enterprise, but will antitrust law and vows of reform help?

Restructuring monopolies enjoyed by China’s state enterprises has been a contentious topic, but doing so could contradict top-level calls to make them stronger

Chinese antitrust regulators may be pressured to turn a blind eye to well-connected SOEs, so as not to contradict national economic policy, analysts say

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The need to restructure the monopolies enjoyed by state enterprises in certain sectors has been a subject of the ongoing debate on China’s transition toward a more market-oriented economy. Illustration: Sierra Chiao

Published: 11:00pm, 5 Jan 2021Updated: 12:46pm, 6 Jan 2021

Beijing’s latest measures to redistribute state capital in key sectors while enhancing the influence of state-owned enterprises (SOEs) are arousing concern in China’s private sector while also fuelling foreign suspicion about the return of state capitalism.

Chinese officials, namely President Xi Jinping, have commented on the need to build bigger, better and stronger state firms.

But some analysts say that may run counter to pledges of market-oriented reform in the state sector. In particular, there are questions about whether the nation’s antitrust law will be applied to China’s many state-owned firms as it is now being applied to private-sector technology companies.

Enhancing the influence of state-owned firms fits well with Beijing’s new economic strategy emphasising self-reliance to offset external uncertainties, including decoupling attempts by the United States and its allies.

Reforms since the mid-1990s did not shrink the state sector, but solidified SOEs’ role as agents of state capitalism

Andrew Batson

But many analysts say the way those SOEs are treated is key to judging Beijing’s pledges to combat monopolistic activities and to promote competition neutrality for state, private and foreign investors.

The power of state-owned enterprises came into the spotlight during negotiations of the just-signed China-European Union investment deal, with the EU demanding that Beijing rein in the behaviour of SOEs as part of the agreement.

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