Despite China’s effort to privatize many state-owned enterprises (SOEs) after 1978, SOEs remain a prevalent type of enterprise in contemporary China. Current studies have mainly employed the political or political economy theories to explain them. In this seminar, Prof. Zeng will present a law and economic theory of state ownership. The efficiency of SOEs can be conceptualized as a tradeoff between two social costs: ownership costs and regulatory costs. While SOEs generally have high ownership costs, they may alleviate the regulatory costs arising in a regulatory relationship, including the social costs associated with the enactment, alteration, and enforcement of regulatory rules, and those costs resulting from the failure to regulate enterprises adequately. Regulatory costs mainly arise due to the incompleteness of law and the opportunistic behavior that ensues. This theory can explain the changing landscape of SOEs in China’s coal, steel, banking, insurance, and infrastructure sectors. Alleviating opportunistic actions in regulatory relationships through administrative law doctrines and improving financial regulation techniques may reduce the advantages associated with state ownership, hence facilitating the promotion of the private sector.
This seminar draws from a book project currently under contract with Cambridge University Press.

About the Speaker: Prof. James Zeng, Assistant Professor, CUHK LAW