Regulating decentralized state industries: China's auto industry

A growing body of literature on China's "regulatory state" has analysed the efforts of the Chinese government to regulate strategic yet highly centralized state-owned industries. Yet how does decentralization affect this need for regulation? This article analyses the pattern of regulatory governance for one of China's most decentralized but strategic industries, the auto industry. The central contention is that in industries where there is already a strong local component (local ownership and substantial autonomy of local governments), regulation occurs differently than in other strategic state-owned industries. However, the central government remains important, and sometimes invisible, mechanisms of control, even where there is local ownership. The article will begin with a discussion of the dominant literature on China's regulation of strategic industries and auto firms. It proceeds to introduce institutional mechanisms for central and local auto manufacturing. It then examines the two case studies, and we find that the crucial mechanism for managing the problems from decentralized control is the organization of an "invisible" supervising body. Clear distinctions are drawn with the quite transparent regulatory bodies established to regulate centrally controlled monopolies. The article concludes with an evaluation of the underlying logic of regulatory politics in the Chinese political economy.