- Anti-competitive practices in China's domestic markets, such as pervasive but opaque state ownership, can make Chinese companies difficult for Western institutions to regulate while enabling China's own antitrust regulator to sometimes target Western companies for political reasons.
Driving the news: The Chinese government has launched a high-profile anti-monopoly campaign against domestic tech firms, including Alibaba, Ant Group, Meituan and others.
Details: In her new book "Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation" (Oxford University Press, May 2021), legal scholar Angela Huyue Zhang makes three key points:
1. The anti-competitive behavior of some Chinese state-owned and private enterprises as they trade with the rest of the world is often due to China's complex domestic economic environment, rather than intentional, top-down orders from Beijing, as some have speculated.
- The takeaway: U.S. pressure on Beijing to change its laws so that they more closely resemble Western antitrust law isn't effective, because bureaucratic and economic complexities have shaped how China's antitrust law is carried out.
- Instead, America's "top priority should be to help China promote structural reform of its bureaucracy and enhance due process in administrative enforcement," Zhang writes.
2. The Chinese government sometimes uses its muscular domestic antitrust regime to support its larger international interests and exert pressure on foreign firms and governments — a type of extraterritorial influence that the U.S. has long wielded, though often in different ways.
- The U.S. has used its extraterritorial influence to shape the global regulatory environment, whereas the Chinese government has sometimes used its growing regulatory clout to pursue geopolitical interests, such as pushing back on boycotts.
- The takeaway: The line between antitrust action and national security has become blurred, especially since the U.S.-China trade war under the Trump administration saw both governments take economic actions against each other's companies for what appeared to be underlying security interests.
3. China's antitrust laws are superficially similar to Europe's but their enforcement is vastly different, a result of the fundamentally different political-economic systems of China and the West — a tension that presents a major challenge to globalization.
- Western regulation often requires a "clear delineation of a firm’s boundaries at the outset," Zhang writes, but Chinese firms may be partially or fully state-owned, and even private Chinese companies know they have to court the Chinese government to get ahead.
Zhang's solution: Zhang says she is still optimistic the two different systems will eventually arrive at a live-and-let-live kind of compromise.
- "As Chinese antitrust agencies hold foreign businesses hostage through the aggressive enforcement of antitrust law, foreign regulators can do the same by holding Chinese firms hostage, not necessarily through antitrust but also via other regulatory rules such as investment and trade," Zhang writes.
- "It is this reciprocal exchange of hostages that gives me hope for a peaceful resolution of the conflict."
Go deeper: China wants to avoid America's tech monopolies problem
