China adopted a market economy in 1979, pulling nearly 800 million people out of poverty.[1] As growth slowed, China turned to new policies to nurture its fledgling socialist market economy.[2] In 2007, China adopted the Anti-Monopoly Law (“AML”), sparking international debate.[3] Rather than trying to position itself as a superior alternative to the U.S., China’s reasoning behind adopting AML reveals that it wants to protect its survival above all.

 

Specifically, cultural and historical context suggest that China wanted to adopt the AML to reach economic independence. The Chinese are proud of their cultural heritage, but also fear the chaos brought on by “a long history of destructive imperialism” that has deeply traumatized the Chinese way of life.[4] Thus, while American antitrust theory accepts market instability to maintain innovation,[5] Chinese leaders are willing to sacrifice innovation to promote China’s long term social order.[6] China wants to control the efficiency of its domestic organizations in order to protect itself from larger foreign competitors.[7]

 

Two main differences between Chinese and U.S. antitrust enforcement illustrate this dichotomy. First, China's enforcement decisions tend to be more anticompetitive when social harmony or stability matters are at stake. Chinese antitrust regulations measure industry and employment effects as well as impacts on efficiency and consumer welfare of competition-related concerns.[8] For example, China’s Ministry of Commerce agreed to accept Google’s acquisition of Motorola Mobility in 2012 only if Google honored Motorola’s commitment to licensing its patents on “fair, reasonable, and non-discriminatory terms.”[9]

 

Second, China uses AML to respond to unique regional burdens and to mitigate protectionist behavior. Before AML took effect, China lacked significant private companies that could compete in multiple domestic geographies, resulting in many smaller, local companies instead.[10] Officials worried that foreign companies with superior management and experience would push out Chinese industries if the government did not shield them sufficiently.[11] In the meantime, if foreign companies continued to acquire Chinese businesses, they could dominate China’s domestic markets, putting its long-term independence at risk.[12] While China faces organizational challenges in aligning its central and local governments to combat this issue, China has demonstrated its desire to protect its economy above all else.[13]

 

Many believe preventing China from acquiring U.S. industrial practices through cybertheft and industrial espionage will lead to more technological self-reliance on China’s part, posing a “sustained threat to U.S. global economic competitiveness and national security.”[14] This outcome seemingly pushes the U.S. into a corner where it must choose between decreased trade via protectionist tariffs and tolerance of China’s illicit trade policies.

 

However, China’s AML journey suggests that it is trying to maintain legitimacy as a country rather than usurp the U.S.’s economic position. China could instead benefit from the U.S. by helping it overcome issues such as local protectionism. By respecting that China cannot abandon its schema completely, the U.S. could create a willing and helpful ally, benefiting the quality of life for citizens on both sides.

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[1] Congressional Research Service, China’s Economic Rise: History, Trends, Challenges, and Implications for the United States 1, 1 (2019), https://crsreports.congress.gov/product/pdf/RL/RL33534.

[2] Id. at 9.

[3] Angela Huyue Zhang, Taming the Chinese Leviathan, 51 Stan. J. Int'l L. 195, 196 (2015).

[4] Thomas J. Horton, Confucianism and Antitrust: China’s Emerging Evolutionary Approach to Anti-Monopoly Law, 47 The Int’l Law. 193, 199-200 (2013).      

[5] See R. Hewitt Pate, What I Heard in the Great Hall of the People – Realistic Expectations of Chinese Antitrust, 75 Antitrust L.J. 195, 200 (2008).

[6] See Thomas J. Horton, Antitrust or Industrial Protectionism?: Emerging International Issues in China's Anti-Monopoly Law Enforcement Efforts, 14 Santa Clara J. Int'l L. 109, 114–15 (2016).

[7] See R. Pate, supra note 5, at 202.

[8] Horton, supra note 6, at 118.

[9] Id. at 121.

[10] See Pate, supra note 5, at 204.

[11] See id. at 204–05.    

[12] See id.

[13] See id.

[14] U.S.-China Econ. & Sec. Rev. Comm’n, 2019 Report to Congress of the U.S.-China Economic and Security Review Commission: Executive Summary and Recommendations 5 (2019), https://www.uscc.gov/sites/default/files/2019-11/2019%20Executive%20Summary.pdf.