Governance

FSI's research on the origins, character and consequences of government institutions spans continents and academic disciplines. The institute’s senior fellows and their colleagues across Stanford examine the principles of public administration and implementation. Their work focuses on how maternal health care is delivered in rural China, how public action can create wealth and eliminate poverty, and why U.S. immigration reform keeps stalling. 

FSI’s work includes comparative studies of how institutions help resolve policy and societal issues. Scholars aim to clearly define and make sense of the rule of law, examining how it is invoked and applied around the world. 

FSI researchers also investigate government services – trying to understand and measure how they work, whom they serve and how good they are. They assess energy services aimed at helping the poorest people around the world and explore public opinion on torture policies. The Children in Crisis project addresses how child health interventions interact with political reform. Specific research on governance, organizations and security capitalizes on FSI's longstanding interests and looks at how governance and organizational issues affect a nation’s ability to address security and international cooperation.

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2022 Sam Dr. Sam-Chung Hsieh Memorial Lecture
Date & Time: Wednesday, September 28, 2022     |    4:30 - 6:00 PM PT 
Location: Green Library, Bing Wing, 5th floor, Bender Room


Overreach and Overreaction: The Downward Spiral in the U.S.-China Relations 

Stanford Libraries and the Stanford Center on China’s Economy and Institutions are pleased to present the 2022 Dr. Sam-Chung Hsieh Memorial Lecture featuring Professor Susan Shirk who will be speaking on Overreach and Overreaction: The Downward Spiral in the U.S.-China Relations.  This is an in-person event.

Why did China abandon its successful foreign policy of restraint and shift toward confrontation and unchecked control over its own society? Surprisingly the shift began under Hu Jintao’s collective leadership (2002-12). Under the personalistic leadership of Xi Jinping the trend has intensified. Those who implement Xi's directives compete to outdo one another, provoking an even greater global backlash. To counter China’s overreach, the worst mistake the rest of the world, and the United States in particular, can make is to overreact. Understanding the domestic political drivers of foreign policy in both countries can help us stem the downward spiral in relations.


About the Speaker

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Susan Shirk

Susan Shirk is Chair of the 21st Century China Center and research professor at the UC San Diego School of Global Policy and Strategy. Shirk’s book, China:  Fragile Superpower helped frame the policy debate on China in the U.S. and other countries. Her articles have appeared in leading academic publications in political science, international relations, and China studies. She previously served as deputy assistant secretary of state (1997-2000) responsible for U.S. policy toward China, Taiwan, Hong Kong and Mongolia. She is director emeritus of the UC Institute on Global Conflict and Cooperation and founded the Northeast Asia Cooperation Dialogue, an unofficial forum for discussion of security issues. Shirk is a graduate of Mt. Holyoke College and received her PhD from M.I.T.


The family of Dr. Sam-Chung Hsieh donated his personal archive to the Stanford Libraries' Special Collections and endowed the Dr. Sam-Chung Hsieh Memorial Lecture series to honor his legacy and to inspire future generations. Dr. Sam-Chung Hsieh (1919-2004) was former Governor of the Central Bank in Taiwan. During his tenure, he was responsible for the world's largest foreign exchange reserves, and was widely recognized for achieving stability and economic growth. In his long and distinguished career as economist and development specialist, he held key positions in multilateral institutions including the Asian Development Bank, where as founding Director, he was instrumental in advancing the green revolution and in the transformation of rural Asia. Read more about Dr. Hsieh.


Questions? Contact Sonia Lee from Stanford Libraries 

Green Library, Bing Wing, 5th floor, Bender Room

Susan Shirk University of California San Diego
Lectures
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Earlier this year the Stanford Center on China's Economy and Institutions (SCCEI) joined the Center for Strategic and International Studies (CSIS) to launch Big Data China, a new project aimed at bridging the gap between cutting-edge academic research on China and the Washington policy community. Since the launch of the collaboration, SCCEI and CSIS have hosted a number of featured events, organized briefing sessions for academics to speak directly with policy makers,  launched a new project website, and much more.

We just don’t understand China — if we understood China better, we could make better policy decisions.
Scott Rozelle

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Big Data China logo
The Big Data China website features regular multimedia analysis with high-quality data that explores important trends in China’s economy and society. In the newest video release, Scott Rozelle, SCCEI Co-Director, and Scott Kennedy, CSIS Trustee Chair in Chinese Business and Economics, sit down to discuss why the Big Data China collaboration is needed now, more than ever. As Scott Rozelle puts it, "we just don’t understand China — if we understood China better, we could make better policy decisions." This collaboration aims to reduce the current gap between academia and Washington by identifying and highlighting the policy implications of cutting-edge scholarly work on China and presenting it directly to the policy community. 


Watch the video and visit the website for more from Big Data China!

Read More

Data graph lines over cityscape in China.
News

SCCEI Launches New Impact Initiative with the China Briefs

The SCCEI China Briefs are short features that translate top-quality academic research into evidence-based insights for those interested in China and U.S.-China relations. Released twice a month, the briefs will cover timely issues that inform policy and advance the public understanding of China and its role on the global stage.
SCCEI Launches New Impact Initiative with the China Briefs
Big Data China logo in front of Shanghai cityscape
News

SCCEI Launches "Big Data China" in Collaboration with the Center for Strategic and International Studies (CSIS)

"Big Data China" aims to bridge the gap between cutting-edge quantitative academic research and the Washington policy community. On February 11, 2022, SCCEI and CSIS hosted their first Big Data China event, "A Liberal Silent Majority in China?" Curated highlights from the first feature of the collaboration are included below.
SCCEI Launches "Big Data China" in Collaboration with the Center for Strategic and International Studies (CSIS)
American and Chinese flags
News

Politico: Biden Bets Big on Asia

Jude Blanchette from CSIS recommends Scott Rozelle's new book "Invisible China" saying, "If you’re thinking seriously about China’s future trajectory, it’s imperative you read this book to understand the possible impacts of China’s chronic underinvestment in education.”
Politico: Biden Bets Big on Asia
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In this video short, Scott Rozelle, SCCEI Co-Director sits down with Scott Kennedy, CSIS Trustee Chair in Chinese Business, to discuss Big Data China, a new project aimed at bridging the gap between cutting-edge academic research on China and the Washington policy community.

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Big Data China logo

The event will be webcast live from this page.

The Stanford Center on China’s Economy and Institutions (SCCEI) and the CSIS Trustee Chair in Chinese Business and Economics launch the third feature of the new collaboration, Big Data China, on July 27 at 9 a.m. PDT / 12 p.m. EDT.  The feature, “The AI-Surveillance Symbiosis in China,” highlights the work of professors Noam Yuchtman (London School of Economics) and David Yang (Harvard University) and their colleagues. The feature shows how China‘s large-scale investments in surveillance technology is both enhancing the state‘s capacity to repress dissent and providing commercial advantage to Chinese AI companies operating in the facial recognition and surveillance space.


The event will feature a presentation of the key findings of the analysis and its implications for the Washington policy community by Noam Yuchtman of London School of Economics, David Yang of Harvard University, and Trustee Chair Fellow Ilaria Mazzocco. Trustee Chair Director Scott Kennedy will moderate a panel discussion which will include questions from the public and questions from the audience. The distinguished panelists for the event are: Emily Weinstein of CSET, Paul Mozur of the New York Times, and Trustee Chair non-resident senior associate Paul Triolo


WATCH THE RECORDING

FEATURING

Noam Yuchtman 
Professor of Managerial Economics and Strategy, London School of Economics and Political Science
David Yang 
Assistant Professor of Economics, Harvard University
Emily Weinstein  
Research Fellow, Center for Security and Emerging Technology (CSET), Georgetown University
Paul Mozur 
Correspondent, New York Times
Scott Kennedy 
Senior Adviser and Trustee Chair in Chinese Business and Economics
Ilaria Mazzocco 
Fellow, Trustee Chair in Chinese Business and Economics
Paul Triolo 
Senior Associate (Non-resident), Trustee Chair in Chinese Business and Economics
 

EVENT PARTNERS
 

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SCCEI and CSIS logos

Virtual Livestream 

Scott Kennedy
Ilaria Mazzocco
Paul Mozur
Paul Triolo
Emily Weinstein
David Yang
Noam Yuchtman
Panel Discussions
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Big Data China logo
Join the CSIS Trustee Chair in Chinese Business and Economics and the Stanford Center on China’s Economy and Institutions (SCCEI) for the launch of the second feature of their collaboration, Big Data China, on May 27, 12:00-1:15 pm ET. Our latest digital report, “How Inequality Is Undermining China’s Prosperity,” written by CSIS Fellow Ilaria Mazzocco, highlights the path-breaking work of Stanford scholars Scott Rozelle, Hongbin Li, and their colleagues. By analyzing data on inequality and its sources, the feature shows how trends in China’s labor market, educational attainment, automation, and rural employment are conspiring to harden inequality, which could hurt prospects for growth and undermine political stability. These developments will complicate how the United States should address the China challenge in the years ahead.

Following a presentation by Scott Rozelle of Stanford University on the key findings of the analysis and its implications for the Washington policy community, Trustee Chair Fellow Ilaria Mazzocco will moderate the panel discussion and questions from the audience. The distinguished panelists for the event include Mary Gallagher of the University of Michigan, Mary E. Lovely of the Peterson Institute and Syracuse University, and Martin K. Whyte of Harvard University.


Watch the Recording:

FEATURING

Scott Rozelle 
Helen F. Farnsworth Senior Fellow, FSI and SIEPR, 
& Co-director, SCCEI,  
Stanford University
Mary Gallagher 
Professor, Democracy, Democratization, and Human Rights, University of Michigan
Mary E. Lovely 
Senior Fellow, Peterson Institute 
for International Economics; 
Professor Emeritus, Department 
of Economics, Syracuse University
Martin K. Whyte 
Professor Emeritus, International Studies and Sociology, Harvard University
Ilaria Mazzocco 
Fellow, Trustee Chair in Chinese Business and Economics
 

 

EVENT PARTNERS
 

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SCCEI and CSIS logos

Virtual Livestream 

Mary Gallagher
Mary Lovely
Ilaria Mazzocco
Scott Rozelle
Martin Whyte
Panel Discussions
Date Label
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A SCCEI Spotlight Speaker Event


Friday, April 22, 2022          6 - 7 PM Pacific Time 
Saturday, April 23, 2022    9 - 10 AM Beijing Time


U.S.-China Relations in the Age of Uncertainty

The US-China relations are entering into an uncertain era. More than any other bilateral relations in the world, the US-China relations are characterized by complexities. The two countries compete in multiple arenas, but the competition takes place in a broad context of mutual dependency and collaborations. The Russian invasion of Ukraine may further unravel US-China relations. This talk will discuss and examine these issues.

This event features Yasheng Huang, Professor of Global Economics and Management at the MIT Sloan School of Management. He is joined by Scott Rozelle, co-director of Stanford Center on China's Economy and Institutions, and Helen F. Farnsworth Senior Fellow at the Freeman Spogli Institute for International Studies (FSI) and the Stanford Institute for Economic Policy Research (SIEPR), who will moderate a discussion about the major themes of the research. A question and answer session with the audience follows the discussion.


About the Speakers
 

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Yasheng Huang headshot.
Yasheng Huang is Epoch Foundation Professor of International Management, Professor of Global Economics and Management, and Faculty Director of Action Learning at Sloan School of Management, Massachusetts Institute of Technology. He is currently involved in research projects in three broad areas: 1) political economy of contemporary China, 2) historical technological and political developments in China, and 3) as a co-PI in “Food Safety in China: A Systematic Risk Management Approach” (supported by Walmart Foundation, 2016-). He has published numerous articles in academic journals and in media and 11 books in English and Chinese. His book, The Rise and the Fall of the EAST: Examination, Autocracy, Stability, and Technology in Chinese History and Today, will be published by Yale University Press in 2023.
 

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Headshot of Dr. Scott Rozelle
Scott Rozelle is the Helen F. Farnsworth Senior Fellow and the co-director of Stanford Center on China's Economy and Institutions in the Freeman Spogli Institute for International Studies and Stanford Institute for Economic Policy Research at Stanford University.  For the past 30 years, he has worked on the economics of poverty reduction. Currently, his work on poverty has its full focus on human capital, including issues of rural health, nutrition and education. For the past 20 year, Rozelle has been the chair of the International Advisory Board of the Center for Chinese Agricultural Policy, Chinese Academy of Sciences (CAS). Most recently, Rozelle's research focuses on the economics of poverty and inequality, with an emphasis on rural education, health and nutrition in China. In recognition of this work, Dr. Rozelle has received numerous honors and awards. Among them, he became a Yangtse Scholar (Changjiang Xuezhe) in Renmin University of China in 2008. In 2008 he also was awarded the Friendship Award by Premiere Wen Jiabao, the highest honor that can be bestowed on a foreigner.


Questions? Contact Debbie Aube at debbie.aube@stanford.edu


Watch the recording:

Scott Rozelle

Zoom Webinar

Yasheng Huang
Lectures
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In the ever-growing gulf between the U.S. and Chinese governments, what can often be lost are the citizens of the two superpowers. More difficult to sum up in a news article than the platform of a politician, public opinion is a nevertheless immensely important barometer of the U.S.-China relationship.

From an American perspective, gaining an understanding of what people in China really think can be a difficult task; with a completely different system of governance, a complex ideological history, and a social media and information ecosystem largely separate from that of the U.S., public opinion in China cannot necessarily be grafted neatly onto American perceptions of right and left.

Join the Stanford Center on China's Economy and Institutions (SCCEI) for a conversation on understanding the Chinese ideological spectrum with leading scholars in the field of contemporary Chinese politics and political communication, the first in a series of collaborations with Asia Society Southern California.

Joining us for the first feature, “Charting the Ideological Spectrum and Public Opinion in China,” is Jennifer Pan, Assistant Professor of Communication and, by courtesy, of Political Science and of Sociology, at Stanford University, and Rory Truex, Assistant Professor of Politics and International Affairs at Princeton University. Senior Adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies Scott Kennedy will moderate.

 

WATCH THE RECORDING


SPEAKERS

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Headshot of Dr. Jennifer Pan

Jennifer Pan is an Associate Professor of Communication at Stanford University. Her research focuses on political communication and authoritarian politics. Pan uses experimental and computational methods with large-scale datasets on political activity in China and other authoritarian regimes to answer questions about how autocrats perpetuate their rule; how political censorship, propaganda, and information manipulation work in the digital age; and how preferences and behaviors are shaped as a result.

Her book, Welfare for Autocrats: How Social Assistance in China Cares for its Rulers (Oxford, 2020) shows how China's pursuit of political order transformed the country’s main social assistance program, Dibao, for repressive purposes. Her work has appeared in peer reviewed publications such as the American Political Science Review, American Journal of Political Science, Comparative Political Studies, Journal of Politics, and Science.

She graduated from Princeton University, summa cum laude, and received her Ph.D. from Harvard University’s Department of Government.

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Rory Truex headshot

Rory Truex is Assistant Professor of Politics and International Affairs at Princeton University. His research focuses on Chinese politics and authoritarian systems. His work has been published in the American Political Science Review, British Journal of Political Science, Journal of Politics, Comparative Political Studies, Perspectives on Politics, and The China Quarterly, and featured in the Wall Street Journal and The New York Times. In 2021 he received the President’s Award for Distinguished Teaching, the highest teaching honor at Princeton. He currently resides in Philadelphia.

 

MODERATOR

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Scott Kennedy headshot

Scott Kennedy is senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies (CSIS). A leading authority on Chinese economic policy, Kennedy has been traveling to China for over 30 years. His specific areas of expertise include industrial policy, technology innovation, business lobbying, U.S.-China commercial relations, and global governance. He is the editor of China’s Uneven High-Tech Drive: Implications for the United States (CSIS, February 2020) and the author of The State and the State of the Art on Philanthropy in China (Voluntas, August 2019), China’s Risky Drive into New-Energy Vehicles (CSIS, November 2018), The Fat Tech Dragon: Benchmarking China’s Innovation Drive (CSIS, August 2017), and The Business of Lobbying in China (Harvard University Press, 2005). He has edited three books, including Global Governance and China: The Dragon’s Learning Curve (Routledge, 2018). His articles have appeared in a wide array of policy, popular, and academic venues, including The New York Times, Wall Street Journal, Foreign Affairs, Foreign Policy, and China Quarterly. He is currently writing a report tentatively titled, Beyond Decoupling: Winning the Hi-Tech Competition Against China.

From 2000 to 2014, Kennedy was a professor at Indiana University (IU), where he established the Research Center for Chinese Politics & Business and was the founding academic director of IU’s China Office. Kennedy received his Ph.D. in political science from George Washington University, his M.A. in China Studies from the Johns Hopkins School of Advanced International Studies, and his B.A. from the University of Virginia.

IN PARTNERNSHIP WITH:

Asia Society Southern California

Scott Kennedy

Zoom Webinar

Jennifer Pan
Rory Truex
Panel Discussions
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Big Data China logo
The CSIS Trustee Chair in Chinese Business and Economics and the Stanford Center on China’s Economy and Institutions (SCCEI) launch a new collaboration, Big Data China, to bridge the gap between cutting-edge quantitative academic research and the Washington policy community. Through regular multimedia features, written analysis, and public events, Big Data China identifies, analyzes, and introduces top academic research on China and then teases out the most relevant findings for today’s policy issues.


Please join the CSIS Trustee Chair in Chinese Business and Economics for the launch of the inaugural feature, “Public Opinion in China: A Liberal Silent Majority?” which highlights the work of Stanford professors Jennifer Pan and Yiqing Xu on recent trends in Chinese public opinion. CSIS Trustee Chair Scott Kennedy and SCCEI co-director Scott Rozelle will offer opening remarks and moderate the panel discussion. Jennifer Pan and Yiqing Xu will present the main findings of their research. Panelists include Carla Freeman of the U.S. Institute of Peace, Suisheng Zhao of University of Denver, Bruce Dickson of George Washington University, and Jessica Chen Weiss of Cornell University and the U.S. Department of State.

Watch the recorded event:

FEATURING

Jennifer Pan
Associate Professor of
Communication, Stanford
University
Yiqing Xu
Assistant Professor of Political Science, Stanford University
Carla Freeman
Senior Expert for China, United
States Institute of Peace & Senior
Fellow, SAIS Foreign Policy Institute
Suisheng Zhao
Professor & Director, Center for China-U.S. Cooperation, University of Denver
Bruce Dickson
Professor of Political Science and International Affairs, George Washington University
Jessica Chen Weiss
Professor of Government, Cornell University; Senior Advisor, Secretary's Policy Planning Staff, U.S. Department of State
Scott Rozelle
Helen F. Farnsworth Senior Fellow,
FSI and SIEPR, & Co-director, SCCEI, Stanford University
Scott Kennedy
Senior Adviser and Trustee Chair in Chinese Business and Economics, CSIS

 

EVENT PARTNERS
 

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SCCEI and CSIS logos

Scott Kennedy
Scott Rozelle

Virtual Livestream 

Bruce Dickson
Carla Freeman
Jennifer Pan
Jessica Chen Weiss
Yiqing Xu
Suisheng Zhao
Panel Discussions
Date Label
Authors
Claire Cousineau
Heather Rahimi
News Type
News
Date
Paragraphs

On November 15, 2021, the Stanford Center on China’s Economy and Institutions (SCCEI) launched its new impact initiative:  the SCCEI China Briefs.  The briefs translate data-driven social science research into accessible insights for those interested in China and U.S.-China relations.  Released twice a month, the briefs cover timely issues that inform policy and advance public understanding of China and its role on the global stage.

This initiative targets one of SCCEI’s primary objectives: to inform public debates on U.S.-China relations with empirically-driven social science research.

This initiative targets one of SCCEI’s primary objectives: to inform public debates on U.S.-China relations with empirically-driven social science research.

On Monday, SCCEI released its first three China Briefs spotlighting findings central to China’s economy, U.S.-China trade competition, and their implications for U.S.-China relations:   

In “Did ‘China Shock’ Cause Widespread Job Losses in the U.S.?” Stanford's own Nicholas Bloom and his co-authors find compelling evidence that import competition from China did not, in fact, cause aggregate employment loss in the U.S. – a finding that contradicts prevailing views. Read our brief for a fuller picture of how “China shock” impacted U.S. employment dynamics and how this might impact regional inequality and political polarization in the U.S.

Only a handful of countries have escaped the middle-income trap since 1960. In “Invisible China: Hundreds of Millions of Rural Unemployed May Slow China’s Growth,” SCCEI’s co-director Scott Rozelle finds that approximately 70% of China’s labor force – 500 million people – concentrated in rural areas do not have a high school education. Our SCCEI China Brief sheds light on why these statistics matter – not only for China, but for the rest of the world.

In “Rise of Robots in China,” SCCEI’s co-director Hongbin Li presents strong data revealing China’s global leadership in the use of industrial robots. What is driving this relentless growth of automation in China? What future trends and implications can we glean from China’s use and production of robots? Read our SCCEI China Brief to find out more.

Read the Briefs


 

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Shipping container ship docked.

 

 

 

Did "China Shock" Cause Widespread Job Losses in the U.S.?
Findings in this brief challenge prevailing views regarding net jobs lost in the U.S.
 


 

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Invisible China feature image

 

 

 

Invisible China: Hundreds of Millions of Rural Underemployed May Slow China's Growth
Education is the key for China to realize its goal of moving from a middle-income to high-income economy


 

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Robotic arm in a factory

 

 

 

Rise of the Robots in China
Data representative of China’s manufacturing sector reveals China’s global leadership in the use of industrial robots

 


Join our mailing list to receive SCCEI China Brief email announcements. The briefs are also posted on our SCCEI China Briefs homepage every other week. 

Read the Briefs


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Findings in this brief challenge prevailing views regarding net jobs lost in the U.S.
 


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Education is the key for China to realize its goal of moving from a middle-income to high-income economy


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Data representative of China’s manufacturing sector reveals China’s global leadership in the use of industrial robots

 


Join our mailing list to receive SCCEI China Brief email announcements. The briefs are also posted on our SCCEI China Briefs homepage every other week. 

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The SCCEI China Briefs are short features that translate top-quality academic research into evidence-based insights for those interested in China and U.S.-China relations. Released twice a month, the briefs will cover timely issues that inform policy and advance the public understanding of China and its role on the global stage.

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Corporate governance concerns three sets of issues: property rights, relationships between firms and financial markets, and labor relations. Our literature review shows that the system of corporate governance that emerges within a particular country reflects the outcome of political, social, and economic struggles in that country and that it does not reflect efficiency considerations focused on managing agency relations between owners and managers. Despite these facts, much research has been done in recent years attempting to analyze whether a superior matrix of institutional arrangements or a set of best practices of corporate governance exists to produce greater economic growth. Our review shows that there does not appear to be a single set of best practices, but rather that what is important are stable institutions that are legitimate and prevent extreme rent seeking on the part of governments and capitalists.
Journal Publisher
Annual Review of Law and Social Science
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Authors
Matthew Boswell
Heather Rahimi
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Barry Naughton, Scott Rozelle, and Matt Marostica speak on Zoom during the 2021 Dr. Sam-Chung Hsieh Memorial Lecture.
Barry Naughton, Scott Rozelle, and Matt Marostica speak on Zoom during the 2021 Dr. Sam-Chung Hsieh Memorial Lecture on September 28, 2021.

On September 28 Stanford Libraries and the Stanford Center on China’s Economy and Institutions welcomed Professor Barry Naughton, the So Kwan Lok Chair of Chinese International Affairs at the School of Global Policy and Strategy at UC San Diego to give the 2021 Dr. Sam-Chung Hsieh Memorial Lecture.

Professor Naughton offered his thoughts on how to make sense of what he called China’s “summer blizzard” of regulatory actions and crackdowns that have spanned a dozen industries in recent months, including finance, real estate, energy, education, online consumer platforms, videogaming, and more.

“The summer of 2021 is going to be something that we will be assessing and evaluating for many, many years…I think what we're going to see from these changes is an increasingly aggressive effort on the part of the Chinese Government and the Chinese Communist Party to shape the way the economy is developing, and I argue that it creates substantial medium run costs for the Chinese growth process.”

I think what we're going to see from these changes is an increasingly aggressive effort on the part of the Chinese Government and the Chinese Communist Party to shape the way the economy is developing.
Barry Naughton

Rooted in Industrial Policy
According to Professor Naughton’s analysis, the policies of summer 2021 emerge from a decade-long series of industrial policies that, among other things, aimed to develop technology as a driver of growth.

While interventionist in nature, Naughton points out, “the policies were carried out in ways that, while wasteful, did not impost enormous costs on the economy.” This is because “they used market conforming financial instruments like government guidance funds, government run commercial and investment bank lending, tax and depreciation breaks, low land and utility charges, etc.” If successful, Naughton points out, private firms could become “national champions.”

Beneficiaries such as Alibaba, Huawei, Tencent and Didi were seen as, “members of the national team,” Naughton explained. “China was a ‘venture capital state,’ and the government’s impact was comparable to that of Softbank or a venture capital firm.”

Steering More Industries More Intensively
In contrast, Naughton interprets the events of summer 2021 as a major departure from the past, for two main reasons.

First, with the implementation of many of these policies, Naughton sees an activist “steering” approach appearing in many more sectors and with an intensity unseen in decades, all in order to promote a vaguely defined “common prosperity.”

According to Naughton, one impetus for the changes is China’s looming demographic problem.

“The government now suddenly seems to be displaying something near panic about falling birth rates, and we see a sudden determination to stress the idea that life for families with children, especially urban families with children, should be less stressful,” to promote more childbearing.

Whatever the reason, Naughton notes the assortment of policy objectives aiming to steer the economy has expanded tremendously.

“Instead of pursuing one or two simply defined objectives like new high-tech development as a growth driver,” says Naughton, “China has a portfolio of 10 or more objectives.” These span data security, enhancing control of the financial system, raising the birth rate, building new cities, keeping housing prices low, and reducing carbon emissions, among others.

Instead of pursuing one or two simply defined objectives like new high-tech development as a growth driver, China has a portfolio of 10 or more objectives.”
Barry Naughton

A Changing Toolkit
The second reason these newer plans represent a departure from the past is that as the policy objectives have expanded, the instruments deployed to reach them have lost their “market-conforming” character, Naughton explains.

“The instruments used so far are very clumsy. Abolish the private tutoring industry. Punish [big private firms like] Ali, Ant, Didi, and Tencent. Encourage charitable donations from large corporations. What we haven’t seen is the utilization of much more effective policies that are known to work and have been applied in scores of countries around the world, in particular income tax policy.”

A Gap Between Intent and Impact
Naughton sees this haphazard roll out of directives as having unintended consequences that may weigh on future growth.

“What’s happening is that there are many built in conflicts between the different objectives and the different instruments and the way those instruments are deployed … without consideration for what their implications are going to be in other areas.”

Naughton points to the education sector as one example.

“Some of the policies that come from the desire to lower burdens on families in order to encourage them to have children,” – like the reduction in homework and elimination of cram schools – “But now a highly educated, high skilled labor force, which was always considered to be a part of the high-tech push, is suddenly in question.”

Naughton sees a similar contradiction at play in the real estate sector.

“[Embattled real estate giant] Evergrand is clearly caught between Chinese policies that are trying to push down the price of housing [for the middle class] and other policies that are trying to de-risk the financial environment by reducing leverage to property firms.”

In light of these contradictions, “you really have to wonder in any specific arena what's the particular outcome is going to prevail,” Naughton says. “And in the meantime, they have very substantial costs, particularly costs on private business.”

A Major Turning Point
Naughton concludes that the summer of 2021 is a turning point where China has begun to attempt to shape and steer China’s society and economy far more aggressively than what has been seen for the last 40 years.

Without a doubt the policies are ambitious. But the proliferation of ambitions has outrun the instruments that are available to actually achieve them, and as a result we’re already seeing increased conflicts, contradictions and difficulties.
Barry Naughton

“Without a doubt the policies are ambitious. But the proliferation of ambitions has outrun the instruments that are available to actually achieve them, and as a result we’re already seeing increased conflicts, contradictions and difficulties. I think that is going to continue…and will have extremely important ramifications that will ripple out not just in China, but on a world scale.”


 

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During the summer of 2021, a “regulatory storm” shook markets in China. While the crackdown had its most immediate effects on private education, internet business, and finance, the government has also rolled out new policies to shape manufacturing and infrastructure, and even household fertility and income distribution.

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