Market Creation by Leninist Means: The Regulation of Financial Services in the People’s Republic of China

Abstract: Within the process of China’s transition from a centrally-administered to a more market-oriented economy, financial services have played a very special role, but in a counter-intuitive way: what looks like Western market economics turns out to be a Leninist regulatory model. Even as international financial service providers and regulatory communities are invited to play a role in the creation of a Chinese market in financial services, the Communist Party has strengthened its control of top personnel, the judiciary and the media. The reform of the central bank and the establishment of technically independent regulatory agencies seemed to have taken China down the path of OECD economies. The model of a very specific post-regulatory state with Chinese characteristics, however, has not fully incorporated the notion of private authority. Such an acceptance would pose a threat to the CCP monopoly on political power. The attempt to use only semi-private organisations to develop financial markets undermines the long-term stability of the political and economic order.