Inside China’s state-owned enterprises: Managed competition through a multi-level structure

Abstract

China's state-owned enterprises are among the largest firms in the world, dominating key sectors of the Chinese economy and playing a major role in Chinese projects abroad through the Belt and Road Initiative. This article describes a system of “managed competition” among China's state-owned enterprises that attempts to harness the forces of competition while intervening to ensure a robust field of capable competitors. This system is implemented through a multi-level structure where parent state-owned enterprises coordinate and balance competition among a set of similarly resourced subsidiaries through the allocation of management personnel and resources. This article examines how this approach works in practice through an in-depth empirical case study of two of China's largest infrastructure construction firms: China Railway Group Limited and China Railway Construction Corporation. Understanding the internal structure and operations of China's state-owned enterprises sheds light on a crucial part of China's political economy and on China's efforts to extend its influence globally.