New Book from McCourt School Assistant Professor Ning Leng Examines How Businesses in China Are Made to Serve the State

Through extensive fieldwork including hundreds of interviews with government officials and business leaders, original datasets spanning decades and comparative case studies, Leng uncovers two overlooked forms of business politicization that help explain China’s puzzling retreat from market reforms in different sectors.

Visibility Projects: Building Careers Through Wasteful Investments

Without elections, Chinese officials compete for promotion by launching ambitious infrastructure projects designed primarily for political spectacle that exceed genuine demand. These “visibility projects”—from elaborate wastewater treatment plants to cross-bay bridges and massive industrial parks—prioritize scale and visibility over cost-effectiveness and sustainability.

The political logic is clear: bigger and more visible projects capture the attention of higher-level leaders, enhancing officials’ promotion prospects. But the economic consequences are severe. Officials demand financial contributions from firms to fund these expensive showcases, whose costs outweigh their benefits, placing private companies at a structural disadvantage compared to state-owned enterprises with deeper pockets and government backing. Leng demonstrates that this dynamic has driven the de-privatization of entire sectors, including China’s urban bus industry, which underwent nationwide reversal of marketization despite official pro-market policies.

Societal Control: Firms as Scapegoats and Allies

When public protests emerge over controversial projects—such as waste incineration plants that communities fear will harm their health—the state enlists firms as political tools for managing dissent. But the role firms play depends on the government’s strategy and the firm’s ownership structure.

Private firms serve as convenient scapegoats when officials choose appeasement: blame can be deflected onto greedy companies while the state appears responsive to citizen concerns. State-owned enterprises, by contrast, become allies when the government opts for suppression, leveraging their political capital and resources to help authorities maintain control.

As protests intensify within a sector, governments increasingly favor suppression over appeasement—and state-owned enterprises over private firms. Leng’s analysis of China’s solid waste treatment sector reveals how escalating public opposition has systematically shifted market share from private companies to state-owned enterprises, illustrating how political demands reshape entire industries.

Implications: The Limits of Authoritarian Capitalism

Leng’s research challenges optimistic views of China’s economic model. The politicization of business is not an aberration but a structural feature embedded in authoritarian governance. The state cannot—and will not—credibly commit to protecting business autonomy since it must prevent firms from becoming too powerful; this enables officials to use firms as flexible political tools.

This creates a fundamental problem: private firms, despite often being more efficient than state-owned enterprises, face inherent disadvantages in providing political services due to limited resources and political capital. The result is a steady erosion of the private sector and a shift toward state dominance across the economy—undermining China’s long-term ability to attract investment and innovate.

Moreover, by examining sectors critical to environmental sustainability, the book reveals a troubling mismatch between China’s stated development goals and the incentive structures driving official behavior. Without embedding long-term objectives into how officials are evaluated and promoted, wasteful visibility projects and political manipulation of firms are likely to persist, hindering China’s transition to sustainable development.

To better understand the book’s central findings and the implications of these findings, we posed three questions to Professor Leng:

The ‘China model’ in political economy typically refers to China’s state-led development. The Chinese state sets national priorities and development plans, leveraging its control over key inputs such as capital and land, its vast network of state-owned enterprises, its political system that incentivizes officials to pursue national goals, and a range of policy tools to shape the country’s development trajectory. A key question about this model concerns how the state can avoid over-interfering in the economy, based on the assumption that it seeks the right balance—a “helping hand” rather than a “grabbing hand.”

My book argues that the Chinese state almost inevitably over-interferes, because the Party-state must ensure that companies and capitalists remain subordinate and never emerge as political challengers to authoritarian rule. This survival instinct prevents complete institutionalization that would restrain state intervention, particularly political intervention, in business. Instead, the state deliberately leaves open channels of political control over firms when it deems appropriate. This institutional gap, in turn, incentivizes government officials to exploit companies under the banner of political necessity. Because this political logic is so fundamental and difficult to overwrite, it inevitably compromises China’s market economy and hinders its capacity to attract and sustain private investment in the long run.

In the sectors I study, foreign companies are often the first to lose in the competition to provide political services. While my book does not directly compare foreign and Chinese private firms both are grouped together as private companies—my observation is that foreign firms typically have even less political capital than their domestic counterparts. In other words, their ties with the Chinese government are more fragile. As a result, although they may be equally likely to be enlisted for political services, foreign companies might find it harder to recoup the costs and are more likely to become scapegoats rather than allies of the Chinese state. The political risks they face are thus higher. For foreign companies, it is crucial to identify which sectors are likely to be politicized and whether the political services expected function more like “bribes” or like “regulations.”

Knowing the right interlocutors was crucial in China—people whom my interviewees trusted. I spent over 18 months in the field, with the first three devoted solely to meeting potential interlocutors rather than conducting interviews. Gradually, doors opened, and interviews began to snowball. I was also able to speak with most interviewees at least twice. Part of what motivated officials and businesspeople to meet with me was their own curiosity: they wanted to learn what the literature said about their industry and how conditions compared across China—knowledge I, in turn, gained a great deal from. The biggest challenge was my identity as a U.S. Ph.D. student, which many interviewees distrusted. To address this, I affiliated with two Chinese universities, and interviewees were more comfortable knowing my research was backed by Chinese institutions.