Threats to Privately-Owned Small and Medium-Sized Enterprises (SMEs) in China from the State-Owned Enterprise Policy and the State’s Interest: Towards Developing an Effective Legal Framework for the Protection of Chinese Privately-Owned SMEs

The research presented here investigates State intervention in the marketplace in China, by way of certain laws and industrial policies, to assess how various aspects of these interventions have impacted on the development of privately-owned small and medium-sized enterprises (SMEs) in certain traditional State-controlled industries, namely the steel, gas station, and fixed-broadband sectors. This thesis demonstrates weaknesses in the legal framework of Chinese laws designed to promote competition and advance the interests of SMEs, and identifies reasons why this framework has failed, as well as providing recommendations for improvement. During China’s economic transition era, the State-market relationship has been tightly controlled by the Central Government. The Economic Charter, namely the Anti-Monopoly Law of China 2007, did not come into force until 2008. However, although dynamic enforcement of this Law commenced in 2014, it has so far failed to alter the parameters of the State-market relationship: industrial policy retains its traditional prominence and dominance in State intervention, and continues to protect the anti-competitive exercise of specific or exclusive rights by administrative agencies and State-owned enterprises (SOEs). Therefore, privately-owned SMEs often experience confrontations with SOEs. This tendency not only prejudices fair competition, but also harms the uneven-balance between different types of interest groups in the Chinese marketplace. Privately-owned SMEs and consumers suffer discrimination from the anti-competitive application of State industrial policies and the administrative actions of implementation agencies. Accordingly, the “public interest”, the reconciliation between the State’s interest, the interests of enterprises, and consumer welfare, has not been advanced under the 2007 Act. Hence, this thesis proposes key reforms which are necessary in order to establish, and bring about the operation of an effective legal framework for the promotion of the interests of Chinese privately-owned SMEs, in order to ensure their sound growth, and in order to bring about the realisation of the “public interest”: First, this work recommends measures designed to improve the enforcement of the Anti-Monopoly Law of China 2007, by proposing to restrain inappropriate administrative intervention, in order to restrict the State’s industrial policies and the abuse of administrative rights from adversely impacting on SME-generated growth and competition. Second, the work suggests increasing the alignment between the Anti-Monopoly Law of China 2007 and other elements, such as dministrative discretion and corporate social responsibility, in order to establish a fair competition environment for privately-owned SMEs in traditional State-controlled industries