Financializing state capitalism: Exchanges, financial infrastructures & the active management of capital markets in China

DCE trading floorThe development of capital markets has been a core focus of financialization research. For Epstein, financialization ‘means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies’, while Pike and Pollard define financialization as the ‘growing influence of capital markets, their intermediaries and processes in economic and political life’. Other scholars also attribute a significant role to capital markets in financialization processes, be it in the dissemination of market-based financial activities and practices, the rise of shareholder value-oriented corporate governance, or ‘the increased ability to trade risk’. At the heart of and as a precondition of many aspects of financialization stand capital markets and their development. 

This is not only the case when it comes to financialization in advanced economies, but also with respect to the study of financialization in developing and emerging economies. Financialization processes are not uniform, they are rather variegated and refracted by national institutional settings that lead to different trajectories of financialization. As Lapavitsas and Powell emphasized, ‘both the form and the content of financialization vary according to institutional, historical and political conditions in each country’. This has also been picked up in debates about the relationship between financialization and the state. Previously, many scholars argued that financialization often results in a relative loss of state power vis-à-vis finance and the effects on developing economies are often described as potentially negative with financialization for instance decreasing their borrowing capacity and thereby policy space or deepening existing power asymmetries between states. But stemming from earlier discussions on transformations of the developmental state, more recent scholarship has highlighted that financial market development has often been actively facilitated by states. It argues that an increasing hybridization of financialization processes takes place in which state and (quasi-)state institutions often co-constitute financialization processes. 

Contributing to the growing literatures on variegated financialization and the state, in a paper titled ‘Financialization with Chinese characteristics? Exchanges, control and capital markets in authoritarian capitalism’ (recently published in Economy & Society) I argue that states are not only important actors facilitating financialization but can also exercise a considerable degree of control over financialization, thereby shaping its very form. Instead of a financialization process that follows a neoliberal logic and constrains state power, what we see in China is a ‘financialization with Chinese characteristics’ where the state actively tries to manage financialization and its social outcomes. Read More »