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China's State-Owned Enterprises as Climate Policy Actors

The Power and Steel Sectors

image of China's State-Owned Enterprises as Climate Policy Actors

A significant share of the greenhouse gas emitting activities of China is operated by state owned enterprises (SOEs). This report, written by Fridtjof Nansen Institute for the Nordic Council of Ministers, discusses the role of SOEs on the electricity and steel sectors, for instance, in upgrading technologies, centralizing operations and developing alternative energy sources. Informal networks, guanxi and nomenklatura, and financial ties provide the state control over SOEs. This makes SOEs a preferable alternative to private companies. As policies limiting emission growth have been economically attractive to SOEs so far, they have shown little opposition but this may change should costly measures be introduced in the future. While China’s position in climate negotiations is determined by the political leadership, the SOEs deserve attention due to their impact on China’s emission trends.

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The Governance of Chinese Industrial Sectors

With the financial crisis in 2009, the weaknesses of an export-oriented economy hit China and influenced the turn towards greater reliance on a consumption-driven model of growth. Based on the Chinese state capitalist model, China’s government has opened up to let the domestic market interact with today’s global market in order to create competitive growth. But the state capitalist model is also meant to secure domestic growth despite the fluctuations and disruptions imbedded in the liberal economic market. The model applies a combination of command-and-control, market-based and non-regulatory instruments to develop competitive industries or national champions within sectors regarded as essential for the long-term growth of the national economy. These industries are closely connected to the state bureaucracy and the Chinese Communist Party (CCP), and can be characterized as strategic and pillar industries.

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