Explaining China's Financial Policy Interests: Discursive Contestation, Economic Crisis, and Policy Change (1988-2020)

Abstract

From the late 1980s to 2020, China's financial reform has followed a slow and fragmented path. Plans for financial liberalisation were varyingly constrained, postponed, or reversed, especially during times of economic crises. What explains China's financial policy interests from the late 1980s, and how have economic crises influenced those interests? Conventional analyses typically point to the structural effect of the distribution of state capabilities, domestic coalitional struggles, or prevailing ideas on state interests, where crises are exogenous shocks that disrupt and reconfigure structures. While these analyses offer useful insights into structural constraints, they nevertheless underrate actors' agency to think, speak, and act beyond those constraints, enabled by the intersubjective nature of international politics. They overlook how actors can strategically contest and reconstruct the meanings of ongoing events, including economic crises, through ongoing discursive interaction. Addressing the oversight, this thesis develops a theoretical framework for the discursive construction of state interests across periods of stability and crisis, one that takes both structural constraints and agency seriously.

Through this theoretical lens, this thesis examines how China's financial policy interests have been discursively constructed from the late 1980s, with a focus on four major economic crises: the late-1980s inflation crisis, the 1997 Asian Financial Crisis, the 2008 Global Financial Crisis, and the 2015 stock market crash. It argues that China's financial policy interests are shaped by ongoing discursive contestations, particularly during crises, over how the financial market should serve the party-state's goals. First, China's financial policy interests are subject to discursive contestations among domestic stakeholders over how the financial market operates, particularly in relation to the lessons learned from economic crises. Second, these interests have been influenced by China's distinct and enduring conception of state-market relations, which views the market as a tool to advance the state's political objectives. To offer deeper insights into this conception, this thesis further traces China's historical understanding of state-market relations from the Warring States period to the late Qing dynasty over a span of more than 2,000 years, suggesting that this conception was historically developed, deeply rooted in China's economic thought, and has provided a structural context in which contemporary China's financial policy debates occur. Taken as a whole, China's financial policy interests are contingent on the dynamic interplay between structural contexts and actors' strategic efforts to interpret, navigate, and reshape them through discursive interactions.