The Limits of Liberalization: WTO Entry and Chinese State-Owned Firms.

This article examines how China's accession to the World Trade Organization (WTO) in 2001 affected the trade behavior of state-owned enterprises (SOEs) versus private firms, focusing on import liberalization. Using detailed bilateral import data from 1993 to 2012 disaggregated by firm ownership and product strategic importance, the study finds that WTO membership increased the commercial orientation of both private firms and SOEs in non-strategic sectors, as evidenced by greater responsiveness to tariff reductions. However, in sectors deemed strategic by Chinese industrial policy—such as defense, telecommunications, and key raw materials—SOE imports showed little sensitivity to tariff cuts, indicating continued state guidance that limits liberalization. The findings suggest that state ownership alone does not block WTO-driven liberalization; rather, it is the combination of state ownership with targeted industrial policy that constrains the WTO’s liberalizing effects, highlighting challenges for global trade governance in integrating economies with significant state intervention.