Beyond Ownership: State Capitalism and the Chinese Firm

58 Pages Posted: 23 Mar 2014 Last revised: 2 Sep 2015

See all articles by Curtis J. Milhaupt

Curtis J. Milhaupt

Stanford Law School; European Corporate Governance Institute

Wentong Zheng

University of Florida Levin College of Law

Date Written: March 22, 2014


Chinese state capitalism has been treated as essentially synonymous with state-owned enterprises (“SOEs”). But drawing a stark distinction between SOEs and privately owned enterprises (“POEs”) misperceives the reality of China’s institutional environment and its impact on the formation and operation of large enterprises of all types. We challenge the “ownership bias” of prevailing analyses of Chinese firms by exploring the blurred boundary between SOEs and POEs in China. We argue that the Chinese state has less control over SOEs, and more control over POEs, than its ownership interest in the firms suggests. Our analysis indicates that Chinese state capitalism can be better explained by capture of the state than by ownership of enterprise. We explain the mechanisms of capture in China and argue that due to China’s institutional environment, large, successful firms — regardless of ownership — exhibit substantial similarities in areas commonly thought to distinguish SOEs from POEs: market dominance, receipt of state subsidies, proximity to state power, and execution of the state’s policy objectives. We explore the significant implications of this argument for theory, policy, and law.

Keywords: State Capitalism, China, Corporate Governance, State-Owned Enterprises, Privately Owned Enterprises, Ownership, Control, Capture

JEL Classification: D72, D73, D78, G18, G38, K21, K23, K33, L32, L33, L44, L53, P26, P31, P33

Suggested Citation

Milhaupt, Curtis J. and Zheng, Wentong, Beyond Ownership: State Capitalism and the Chinese Firm (March 22, 2014). 103 Georgetown Law Journal 665 (2015), European Corporate Governance Institute (ECGI) - Law Working Paper No. 251/2014, Columbia Public Law Research Paper No. 14-391, University of Florida Levin College of Law Research Paper No. 15-8, Available at SSRN:

Curtis J. Milhaupt

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Wentong Zheng (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States
352-273-0936 (Phone)

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