Political Embeddedness and Environmental Regulatory Capture in China

• In Event: State Actors and Public Goods Provision under Democracy and Authoritarianism

Abstract

Regulation often falls prey to capture by regulated industries, especially in authoritarian regimes lacking the rule of law and suffering political clientelism. Previous studies primarily focus on government incentive structure, regulatory capacities, and corporate economic clout to explain regulatory capture but overlook the influence of the political embeddedness of regulated industries and their proactive daily interactions with the regulators. Studying the case of environmental regulation in China and drawing on in-depth fieldwork, interviews with government officials and industrial stakeholders, as well as secondary data sources, this study examines the diverse nature of regulatory capture by heavily polluting enterprises with varying degrees of embeddedness within local political structures.
We identify three major types of businesses and their distinctive capture tactics. First, central and non-local state-owned enterprises (SOEs), not deeply embedded locally but possessing exclusive political ties with higher authorities, are more likely to preempt regulatory enforcement through proactive self-regulation, lobbying through higher levels, and sponsoring local socio-economic projects. Second, local SOEs, deeply embedded within the local Party-state and social networks, tend to leverage institutional channels, clientelist networks, and reciprocity to influence local regulators. By contrast, non-state-owned enterprises, lacking institutional channels to engage with authorities, predominantly rely on expressions of loyalty, Party-building, and support for local policies to capture regulators. These diverse patterns of regulatory capture showcase how industrial enterprises with or without political embeddedness in the local regulatory system navigate the complexities of a multi-tiered Party-state and thwart top-down environmental regulations.

Authors

• Wenya ZHANG, The Chinese University of Hong Kong

• Jing Vivian Zhan, The Chinese University of Hong Kong