From the perspective of the degree of regulatory power centralisation, Chinese state-owned enterprises’ (SOE) regulatory regimes can be roughly distinguished as being either a separated regime or an integrated regime. The separated regime refers to more regulators and a lower degree of power centralisation; the integrated regime refers to fewer regulators and a higher degree of power centralisation. In the past three decades, the main trend of Chinese SOEs’ regulatory reform is to move from separation to integration.
In this seminar Zhen Qi will argue that a trade-off between efficiency and avoiding collusion exists between these two regimes, and that the optimal choice of regulatory regime depends on market structure. In the competitive market the integrated regime should dominate because competition from non-SOEs can serve as an outside screening mechanism and reduce the rent of collusion between SOEs and their regulators. Therefore, the state can stress enhancing regulatory efficiency by designing an integrated regulatory regime. By contrast, in monopolised markets the benefit of preventing collusion outweighs the cost of regulatory inefficiency associated with separated regulation. Thus, a separated regime should be chosen. The implication of that logic is that the combination of central State-owned Assets Supervision and Administration Commission (SASAC) and central monopoly SOEs would lead to more collusion. Zhen Qi’s research establishes a three-tiered hierarchy, principle regulator and SOEs theoretical model to analyse the optimal choice of regulatory regime under different market structures.