Lyratzakis on Wu, “China Inc.”: Asking the right questions

On March 2, 2018, the Sawyer Seminar on Corporations and International Law welcomed Professor Mark Wu from Harvard Law School as the third speaker of the spring Seminar series. The topic of the discussion was, broadly, the modern Chinese political economy, and the extent to which the rise of the modern Chinese corporation within that political economy framework poses a destabilizing risk for international economic governance. Professor Wu addressed this issue with references to a previously published article, “The China Inc. Challenge to Global Trade Governance,” and to an unpublished discussion piece/thought-experiment he shared with Seminar participants prior to the discussion.

Professor Wu opened the discussion by explaining the rationale behind his “thought-experiment”, which posed a series of hypothetical questions. The questions were centered around a specific issue: If there is a corporation A that is economically dependent on a different corporation or entity X, and corporation A takes unilateral legal action that benefits corporation X to the detriment of a different entity, should domestic or international law intervene to hold entities A and X liable? Professor Wu observed that the vast majority of readers, reading these questions in the abstract, would answer “no: regulation of the contemplated activity would not be legally warranted.”

He then proceeded to explain that the structure of the modern Chinese state very much resembles this thought-experiment in terms of the interdependence and beneficial relationships forged between different actors within the Chinese system. It is precisely this relationship between different actors within China that Professor Wu carefully and thoughtfully examined in his “China Inc.” article, arguing that, in many cases, these relationships can have detrimental effects to other players (i.e corporations) in the international economic system. Many observers would call for greater regulation of Chinese corporate activities, in an effort to square such activity within the boundaries of current WTO rules. But prof. Wu argued that, because of the unique structure and development of the Chinese economic system, corporate activity of Chinese firms cannot squarely fall into existing WTO rules. In fact, WTO rules were not made with China in mind, and therefore cannot effectively respond to the challenge presented by China’s rise. Professor Wu then offered the connecting thread between his thought-experiment, his China Inc. paper, and his Seminar discussion: If we cannot reasonably argue for greater regulation of corporate activity in the abstract thought-experiment that was offered, how can one argue for greater regulation of Chinese economic and corporate activity in a principled way that does not resemble mere discrimination against China?

The remainder of the discussion and questions from the audience focused on several details emerging from that question: What is the relationship between Chinese businesses, the State, and the Party? Can WTO rules adapt to China’s rise, or will the WTO become obsolete? Can China’s economic internationalization solve some of the posed problems by itself, without regulation/intervention? Professor Wu answered these questions thoughtfully, in some cases giving detailed suggestions, such as treating WTO rules as “evolving,” in the same way that we treat the US Constitution as a living document. But Professor Wu never lost sight of the bigger picture: International economic negotiations are invariably a product of international economic and geopolitical tension. Addressing the “China challenge” through multilateralism will necessitate a determination regarding China’s (and the Chinese model’s) place in the world economy; a decision many have postponed, but can no longer afford to disregard.

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