Coordinating China's Economic Growth Strategy via Its Government-Controlled Association for Private Firms

47 Pages Posted: 5 Feb 2018 Last revised: 9 Mar 2019

See all articles by Zhenhuan Lei

Zhenhuan Lei

New York University (NYU) - Department of Politics, Students

Jeffrey B. Nugent

University of Southern California - Department of Economics

Date Written: May 6, 2018

Abstract

Scholars in economics and political science argue that one major function of government is to overcome coordination failure in economic development, especially during times of rapid environmental changes. But, how and through what means does the state coordinate firms to follow the changing directions of its economic objectives? This paper focuses on the case of a government-controlled business association, namely the All-China Federation of Industry and Commerce (ACFIC), and shows that the ACFIC may be serving, at least partially, as a means of avoiding the kind of coordination failures that are often associated with policy reform programs in authoritarian regimes like China when the government deems it necessary to radically and suddenly change its policy objectives. It does so by comparing the activities of firms that are members of ACFIC with non-members before and after the world financial crisis of 2008-9 which induced a significant change in government objectives. Before that crisis when priority in government objectives was “outward” (to stave off balance of payments crises that had befallen many other developing countries), ACFIC member firms were able to engage in exports and foreign investment to a greater extent than non-member firms, and even than those whose owners are members of the Congresses or Chinese Communist Party. After viewing the crises in international markets, and government objectives had turned more “inward”, ACFIC members were more likely to focus on domestic sales and investments.

Keywords: China, business association, political connection, private firms, export, foreign investment

JEL Classification: D23, L22, O53

Suggested Citation

Lei, Zhenhuan and Nugent, Jeffrey B., Coordinating China's Economic Growth Strategy via Its Government-Controlled Association for Private Firms (May 6, 2018). Zhenhuan Lei and Jeffrey B. Nugent. 2018. “Coordinating China’s Economic Growth Strategy via Its Government-Controlled Association for Private Firms.” Journal of Comparative Economics, 46: 1273-1293.. Available at SSRN: https://ssrn.com/abstract=3111182 or http://dx.doi.org/10.2139/ssrn.3111182

Zhenhuan Lei (Contact Author)

New York University (NYU) - Department of Politics, Students ( email )

Jeffrey B. Nugent

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
510-740-2107 (Phone)
510-740-8543 (Fax)

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