Visualizing a US Economy Modeled after China's System of Managed Competition

A simulated seminar featuring Professor Gnivri and a group of students, based on the document "Inside China's State-Owned Enterprises: Managed Competition Through a Multi-Level Structure" by Kyle Chan, Department of Sociology, Princeton University. The seminar begins with Professor Gnivri summarizing the document and posing a thought-provoking question about envisioning a US economy modeled after China's system of managed competition among state-owned enterprises (SOEs). The dialogue then unfolds with responses from students and follow-up discussions.

Simulated Seminar: Managed Competition in the US Economy

Professor Gnivri with students Inary, Jean, and Yhanna

Professor Gnivri:

"Good morning, everyone. Today, we’re delving into an intriguing concept from Kyle Chan’s article on China’s state-owned enterprises (SOEs), published in the Chinese Journal of Sociology [1]. The document outlines how China’s state-owned enterprises (SOEs) operate under a system called 'managed competition,' which balances competitive forces with state intervention to ensure a robust field of players. This is achieved through a multi-level structure, where parent state-owned enterprises (SOEs) oversee subsidiaries that compete with each other. The parents allocate resources and personnel to prevent any single subsidiary from becoming too dominant or too weak.

To provide a concrete example, the article examines two major state-owned enterprises (SOEs) in China’s infrastructure construction sector: 

• China Railway Group Limited (CREC) 
• China Railway Construction Corporation (CRCC). 

These firms, ranked 42nd and 51st on the Fortune Global 500, dominate China’s high-speed rail and other infrastructure projects, as well as international initiatives such as the Belt and Road Initiative. Each has a three-level structure: the parent SOE at the top, core subsidiaries that act as the leading operators and competitors, and further subsidiaries beneath them. The parent companies manage competition through tools such as performance evaluations and resource allocation, ensuring that stability and competition coexist.

Now, here’s your challenge: Imagine the US economy redesigned to mirror this system. How might industries like technology, energy, or transportation function under a managed competition model with state-backed firms? What could be the benefits and drawbacks? I’d love to hear your thoughts on how this might play out in the US context."

Student Inary:

"I think applying this to the US could bring more stability to key industries. Take technology, for example. Instead of private giants like Google or Amazon dominating, we could have multiple state-backed tech companies competing. This might prevent monopolies and spur innovation through rivalry, much like how CREC and CRCC subsidiaries compete in China."

Professor Gnivri:

"That’s a compelling idea, Student Inary. You’re suggesting managed competition could regulate markets and curb monopolistic tendencies. In China, the state ensures subsidiaries stay competitive through oversight. How do you think the US government could keep these state-backed firms from getting complacent?"

Student Jean:

"In the document, China uses a performance evaluation system—like the railway credit evaluation for CREC and CRCC subsidiaries, where they get A, B, or C grades. The US could adopt something similar, assessing companies on metrics like innovation or efficiency, then allocating resources based on those scores. It’d push them to perform rather than coast."

Professor Gnivri:

"Good point. The article does highlight that credit evaluation system, where grades influence contract opportunities. It’s a way to enforce accountability. But let’s consider the parent company role. In China, CREC and CRCC coordinate their subsidiaries. Who or what would play that role in the US?"

Student Yhanna:

"I’d imagine the government or a federal agency acting as the parent entity. In energy, for instance, you could have several state-owned companies competing—like in oil or renewables—and the Department of Energy ensuring they’re evenly resourced. It’d be like a referee keeping the game fair."

Professor Gnivri:

"An agency like the Department of Energy as a coordinator—interesting. But here’s a wrinkle: the US has a deep-rooted tradition of free-market capitalism and skepticism toward government intervention, unlike China’s state-driven model. How do you think the public and private sector would react to this shift?"

Student Inary:

"There’d be pushback, no doubt. Private companies would cry foul over state-backed competition—think of it as government overreach. Plus, people might worry about efficiency. The article notes criticism of Chinese SOEs for being less efficient than private firms, though managed competition tries to fix that. Americans might fear bloated bureaucracies."

Professor Gnivri:

"Resistance is a fair prediction, especially given that cultural contrast. The document suggests China’s system counters inefficiency with competition, but it’s not foolproof. Could managed competition actually boost efficiency in the US, or would it falter?"

Student Jean:

"It could work if done right. The trick is keeping competition real—not just propping up weak players. China balances subsidiaries with resources and personnel reshuffling. In the US, a transparent evaluation system, free of favoritism, could drive efficiency. Corruption’s a risk, though—China’s system isn’t immune to it either."

Professor Gnivri:

"Transparency is critical, as you say. The article mentions risks like soft budget constraints if management overshadows competition. Let’s shift gears: globally, China’s SOEs, like CREC and CRCC, flex muscle through projects like the Belt and Road. How might a US managed competition system affect its international clout?"

Student Yhanna:

"It could amp up the US’s global game. State-backed firms with government support might tackle massive projects—like infrastructure in Africa or Asia—rivaling China’s BRI. It’d boost economic influence, but other nations might see it as overreach, sparking trade tensions."

Professor Gnivri:

"A double-edged sword, then—power abroad, but potential friction. The document shows CREC subsidiaries like No. 18 Group thriving internationally. What about innovation? Free markets supposedly drive it, but China directs resources strategically, like in 'Made in China 2025.' How would innovation fare here?"

Student Jean:

"China’s model lets the state target areas like AI or green tech, which could work in the US—say, pushing renewable energy. But too much control might choke creativity. The US thrives on entrepreneurial freedom, so you’d need a balance to avoid stifling startups."

Professor Gnivri:

"Balance is the key word. The article hints at that tension in China too. Here’s a thought: the US already has public-private mixes in sectors like defense, with competing contractors. Could that be a blueprint for managed competition elsewhere?"

Student Yhannna:

"Yeah, defense is a good analogy—companies like Lockheed Martin compete under government oversight. You could extend that to infrastructure or healthcare. It’s not a total overhaul, just scaling up what’s already there."

Student Inary:

"But even in defense, there are cost overruns and inefficiencies. The challenge is designing a system that keeps the upside of competition and state support without those downsides."

Professor Gnivri:

"Exactly—it’s about execution. We’ve covered benefits like stability and monopoly prevention, and challenges like resistance, efficiency risks, and global fallout. To close, do you think managed competition could work in the US? What tweaks would it need?"

Student Jean:

"It’s viable in strategic sectors—think national security or infrastructure—where markets sometimes fail. You’d need real competition, not micromanagement, and strong, corruption-free oversight."

Student Yhanna:

"I’d go hybrid: state-backed firms competing with private ones. It keeps private innovation alive while adding state stability. The US wouldn’t go full China—it’d need a mix that fits our system."

Professor Gnivri:

"Thoughtful ideas. A hybrid or sector-specific approach could indeed tailor China’s model to the US’s unique landscape. Thanks for a great discussion—this concept’s complexity really came alive today."

Summary

This seminar examines how China’s managed competition system, as outlined in Chan’s article, can be applied to the US. Professor Gnivri summarizes the multi-level SOE structure and its application in firms like CREC and CRCC, then guides students through a debate on its feasibility. Students weigh stability and innovation against cultural resistance and efficiency concerns, proposing adaptations such as hybrid models or targeted sectoral use, thereby reflecting the document’s insights while adapting them to a new context.

Reference:

1. Chan, K. (2021). Inside China's state-owned enterprises: Managed competition through a multi-level structure. Chinese Journal of Sociology, 8(4), 453-473. https://doi.org/10.1177/2057150X221123388