Book Talk: Politicizing Business–How Firms Are Made to Serve the Party-State in China
On February 3, the Georgetown Americas Institute hosted a presentation of the book Politicizing Business: How Firms Are Made to Serve the Party-State in China (Cambridge University Press, 2025) with author Ning Leng, an assistant professor at the Georgetown University McCourt School of Public Policy. The session provided an in-depth examination of the relationship between the Chinese government and Chinese firms, both private and state-owned.
Crackdowns, Sectoral Encroachment, and Politicization
Leng questioned the general assumption that the Chinese state and private sector have found a way to co-exist. Reforms in the 1980s were aimed at improving their relationship by reducing bureaucratic obstacles, reigning in tax authorities, and restricting local protectionism. At the same time, the private sector built ties with the Chinese Communist Party (CCP), with an estimated 41% of the private sector now being party members.
Despite this progress, the state continued to indiscriminately attack businesses in the 1980s and 1990s, and it has focused on sectoral-specific encroachments since 1993. Encroachment, as defined by Leng, can take the form of forced shareholder sales, forced mergers and acquisitions with state-owned enterprises (SOEs) or local governments in China, arrest of private entrepreneurs, shutdown of specific private companies, or shutdown of an entire sector.
Leng found that a key factor resulting in encroachment from the CCP is politicization of firms, or when firms are pressured to align their objectives with those of politicians. Politicization typically appears through office-buying, employment, or monitoring and surveillance. However, Leng identified two new manifestations: visibility projects for individual politicians and societal control for the state.
Loyalty and Competence
One of the underlying causes of politicization stems from the evaluation system of government officials by the state. Leng explained that government leaders are subject to a rigorous evaluation process using competence and loyalty as benchmarks. Competence is measured through a purely quantitative process to incentivize leaders to reach policy targets of the CCP. How loyalty is measured is unclear, which leads to anxious government leaders. This results in hyper-competition in narrow areas, leading to visibility projects in which city officials aim to create public projects that are much bigger in scale and grandeur than neighboring cities.
Visibility Projects
Leng defined visibility projects as public projects that focus on appearance and scale over practicality, cost-effectiveness, and sustainability, with the ultimate goal to enhance the project leader’s visibility in hopes of advancing their careers. One example Leng included was a small city that has three massive wastewater treatment plants with five times the capacity the city required, resulting in operating losses.
Visibility projects have four features. First, they must go beyond the normal job requirements of the city official, and second, they must take place in sectors prioritized by the CCP, although these areas are not well-defined. Thirdly, visibility projects focus on top-down demand rather than needs identified at the local level. Lastly, visibility projects are often quickly executed and short-lived, as city officials are frequently reposted, and successors have no incentive to complete or maintain the projects of their predecessors.
The Private Sector as a Funder and Scapegoat
Many visibility projects are financed by the private sector because local officials do not want to run the risk of failure, and oftentimes private sector businesses seek opportunities to curry favor with local officials. In some cases, local officials coerce businesses to comply through regulations.
Leng explained this process through the example of the de-privatization of bus systems in China, which were privatized in 1992. Ten years later, with Beijing facing criticism for poor air quality, city officials began implementing visibility projects, not to improve air quality, but to signal to the CCP that they were working towards that goal. These included beautification efforts, requiring private bus companies to enhance or completely replace their fleets, and Bus Rapid Transit (BRT) projects. However, because these demands came from the top and were not carefully planned with local needs as the focus, the projects actually resulted in worse traffic congestion. As a result, private companies left the bus sector, either by choice or through coercion.
Societal Control
The government and private sector also collude, to their mutual benefit, towards achieving more societal control. Leng explained that this is especially common in controversial sectors, such as waste incineration. Because the CCP must preserve its legitimacy, when protests arise over controversial projects, the party blames the private sector.
The state then pursues one of two paths to handle protestors. The first path is appeasement. Using funds from fines levied on the private business, the government pays protesters off and demands that the private business change its practices, although rarely are these changes enforced. The second path is violence, which can be risky in an authoritarian state. As such, violence is often only implemented if the offending project is run by a state-owned enterprise (SOE). Leng concluded that if local officials believe that money will appease protestors, they will work with the private sector. In cases in which money will not appease protestors, the state will work with SOEs. Leng noted an important detail: protests do not change the outcome of these projects, but rather the business landscape.
Going Abroad
Leng posited that given the complexity of operating a private business in China, many foreign companies prefer to invest elsewhere if their sector is politicized. As a result, Chinese companies have more incentive to operate abroad. Although costs associated with labor and safety are often higher in countries with stronger rule of law, the political costs of operating in such countries are significantly lower.
Q&A
During the Q&A portion of this event, participants posed questions regarding the development goals, incentives and sustainability of visibility projects, and questioned how these projects work in democracies. Leng explained that sometimes, although not often, visibility projects can lead to actual development when bottom-up demand coincides with top-down demand, citing China’s solar panel production as an example. Leng also explained that visibility projects are not limited to local governments; the national government has pursued such projects under President Xi Jinping and his predecessors. She concluded that visibility projects do exist in democracies, however because local governments are directly accountable to their constituents rather than the central government, they tend to be smaller and more beneficial to the public, such as the construction of hospitals or public housing.