Q+A
Ning Leng, Assistant Professor at the McCourt School of Public Policy at Georgetown University, and former postdoc at the Rajawali Foundation Institute for Asia, answers questions on her newly released book Politicizing Business: How Firms Are Made to Serve the Party-State in China, exploring politics, economy and authoritarian institutions in China.
Q: Your book reframes firms not just as economic actors but as extensions of the political system. How does this reshape our understanding of “state capacity” in China compared to other authoritarian or hybrid regimes?
A: First of all, I would add an adjective: firms often function as “involuntary” extensions of the political system. By involuntary, I mean that companies usually do not take on political roles because they freely choose to or coordinate with one another, but because the state holds stronger bargaining power in the relationship, and saying no can bring political or economic punishment. With that in mind, an implication of the book is that state capacity in China cannot be understood solely as something located within formal state agencies. Instead, capacity can be produced through the state’s ability to activate, discipline, and repurpose societal actors, including firms, to serve as tools of governance.
This partly explains Chinese governments’ effectiveness. Local governments often lack fiscal or administrative capacity to deliver large projects on their own, but they compensate by mobilizing firms—through informal pressure, selective enforcement, or political incentives—to supply capital, expertise, and speed.
At the same time, this model reveals a tension in Chinese state capacity. When the state uses firms to create capacity, that capacity varies widely, is often contested, and is costly to maintain. Firms with harder budget constraints—mostly private firms— resist more, exit earlier, or demand compensation; those with softer constraints—mostly state-owned enterprises— are more compliant but can generate inefficiency. Thus, the same tools that make the Party-state powerful—its ability to pressure firms—also create problems. Politicizing business can discourage firms from investing, reduce governments’ incentives to redistribute, and compromise balanced economic growth.
Q: Many observers interpret Beijing’s recent gestures toward the private sector as signs of recalibration. Based on your research, what indicators would genuinely signal a structural—not rhetorical—change in how the Party treats business?
A: Rhetorical reassurance alone is not a reliable indicator of recalibration, and firms in China have long learned to discount speeches, slogans, and policy documents. Based on my research, a genuine structural shift could manifest in the following ways:
First, a reduction in the scope of discretionary intervention, not just its tones. This would include fewer ad hoc regulatory campaigns, clearer limits on inspections and enforcement actions, and credible constraints on local governments’ ability to reinterpret contracts or licenses in the name of political priorities.
Second, if firms that decline to undertake politically motivated projects no longer face selective punishment, or if loss-making “political contributions” are no longer informally compensated through bailouts, subsidies, regulatory forbearance, or preferential access, this would signal a meaningful change in governance logic.
Third, legal remedies would need to become credible ex ante, not just symbolic ex post. A strong indicator would be changes in court case acceptance rate, not just outcomes. In China, the decision to accept an administrative or commercial case against the state is itself a political act, and firms understand this well. A structural shift would mean higher acceptance rates for administrative litigation challenging regulatory enforcement, contract revisions, or expropriation-like interventions—and, crucially, greater predictability in acceptance across jurisdictions. Acceptance that varies less by locality would signal a real constraint on discretionary power rather than isolated experimentation.
Equally important is what happens after acceptance. Structural change would be reflected if case filing no longer triggers retaliation—such as intensified inspections, licensing delays, or pressure from party committees—even when firms ultimately lose. Firms pay close attention to whether merely invoking the courts carries political risk; reduced fear at the filing stage would matter as much as win rates.
Fourth and finally, we would see a decoupling of political incentives of officials from firm behavior. If local officials’ career incentives become less tied to mobilizing firms for visibility projects, employment, or other political services, the pressure on firms would diminish. Without changes to cadre evaluation and promotion criteria, demands on firms are likely to persist regardless of central rhetoric.
Q: As China’s economy slows, do political services become more costly for firms—or more essential for officials? How might this tension evolve over the next decade?
A: For firms, providing political services—such as financing policy projects, absorbing losses, or taking on politically motivated investments—becomes more expensive in a low-growth environment. Profit margins are thinner, credit is tighter, and the benefits of cooperation with government is less certain. Even if these political costs were manageable before, they might start to feel like a serious threat to a firm’s survival, especially for private companies with hard budget constraints.
For officials, however, political services become more valuable, not less. Slower growth reduces fiscal revenues and limits what local governments can do on their own. At the same time, pressures from above remain high: officials are still expected to maintain stability, deliver economic growth, and support national priorities. Firms therefore become even more important as sources of funding, capacity, and risk absorption.
This tension is likely to have two outcomes. First, we may see greater pressure on a smaller set of firms, especially large state-owned enterprises and politically connected private champions, as officials concentrate demands where resistance is lowest. Second, exit and retrenchment by private firms may accelerate, reducing market competition.
In short, economic slowdown makes political services harder for firms to provide but harder for the state to give up—deepening both dependence and strain in state–business relations.
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