Edited by Susan Trevaskes, Elisa Nesossi, Flora Sapio and Sarah Biddulph
Chapter 5: Regulation by escalation: unrest, lawmaking and law enforcement in China
Since 1978 the rise of a private or semi-private market in China has coincided with a growth of regulatory rules and institutions. These have now formed into a complex system that seeks to regulate most forms of economic behaviour. This chapter aims to understand how the development and actual functioning of regulation fits with China’s resilient (cf., Nathan 2003) authoritarian settings, and more particularly how China’s form of regulation interacts with actual and potential unrest. Regulatory theory offers two key perspectives that help us to understand why regulation has become such an important part of China’s authoritarian mode of governance. The first is public interest and market failure theory, which explains how the development of a market and the move towards a market from a planned economy require regulation to deal with failures of such markets. The predominant paradigm of this perspective is one of broad public interest or utilitarianism, namely that regulation helps to change market behaviour that does not serve the public interest and as such helps to sustain economic growth (Baldwin and Cave 1999, Morgan and Yeung 2007). Regulation can help developing markets deal with market failures such as monopolies, externalities, information asymmetries or inequality. The second perspective is private interest theory, which holds that regulation is a product of the interests of the regulators who can use it as a source of rent seeking (Baldwin and Cave 1999, Morgan and Yeung 2007).
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