To say that good institutions are a fundamental condition to foster economic growth is close to platitude. However, it is important to explain how it happens, and therefore the main aim of this chapter is to present and discuss the role played by both private and public institutions in decision making processes related to the implementation of economic policies encouraging economic growth. By discussing the lessons from the Iberian experience throughout the nineteenth and twentieth centuries, the chapter tries to disclose the similarities and differences between both countries, with a main focus on the way how the institutional environment helps to explain the circumstances that favour or hinder economic performance. This comparative approach begins with the age of the liberal revolutions in the early years of the nineteenth century and closes with the processes of democracy building and European integration in the two last decades of the twentieth century. The study of institutional changes and continuities in Spain and Portugal during this long period offers multiple opportunities to better understand the articulation between the economic and business environment, the dynamics of the markets and the economic policies designed or implemented by the state, in fulfilment of its regulatory role.

This chapter compares the differences between the UK and China in their regulations and practices of bankers’ remuneration and analyses the institutional reasons for the differences.The problem of bankers’ remuneration in the UK was the distorted market practice. The purpose of the regulation is to correct market failures. Nevertheless, the regulators also intend to keep the balance between regulatory intervention and bank autonomy. In China, the practice of bankers’ remuneration was based on the administrative and politicised approach. The regulation is to guide banks to modernise their remuneration systems. However, it is not effectively implemented, as the state maintains its decisive role. The differences between the two countries are due to the different institutional traditions of their financial systems, as the current regulation and practice of bankers’ remuneration have been profoundly influenced by the traditional model of state–market interaction.

This chapter analyses the regulatory framework of bankers’ remuneration in China. The framework is comprised of the CBRC Guidelines and the MOF Measures. The CBRC Guidelines are based on the FSB principles and standards, aiming to guide banks to apply modern remuneration incentives. The MOF Measures are special for SOCBs and SOE-controlled banks, which contain a series of compulsory rules on the level and structure of remuneration and a detailed system of performance assessment. In addition, the MOF imposed a temporary ban on equity-based remuneration, and the CPC issued a policy to reduce and cap the level of remuneration in these banks. These requirements are intrusive, which consolidate state intervention in the practice of bankers’ remuneration while contradictory to the objective of the regulation-led reform.

This chapter describes and analyses the traditional way adopted by Chinese banks to manage and incentivise bankers in the context of state ownership and intervention. It provides an overview of the modernisation reform of Chinese banks and argues that the essential factor that contributed to the successful reform was the predominant role of the state. The governance of banks was subject to state intervention, and bankers were identified and managed as state cadres. Therefore, bankers’ remuneration was administratively managed, and bankers were incentivised with the opportunity of political promotion. Reciprocally, the administration of remuneration and political incentives acted as a channel for state intervention in banks. However, this administrative and politicised approach was inconsistent with the principles of modern corporate governance, and reform to push forward the modernisation of bankers’ remuneration was considered necessary.

This chapter investigates the practices of remuneration and political incentives in major Chinese banks in recent years and the implementation of the regulatory initiatives. The investigation is split into two parts, focusing on SOCBs and listed JSCBs, respectively. Low remuneration level, weak pay-performance sensitivity, the lack of economic incentives, and the predominance of political incentives are the major features of the practices of SOCBs, which are consistent with the traditional administrative and politicised approach. It is found that the regulatory initiatives based on international principles are not effectively implemented; however, the requirements that enhance state intervention have been strictly followed. The majority of the listed JSCBs are connected to the central or local state through direct or indirect ownership. Political incentives also play an important role in these JSCBs. In contrast, remuneration incentives are effective in privately owned JSCBs.

Chapter 4 analyzes how mineral resources shape the state–capital relations in resource-rich regions. It argues that the symbiotic relationship between local state and resource capital can easily become collusive under the resource boom. Through studies of resource-related corruption cases, it demonstrates how the state’s regulation and interference in the resource sector create structural opportunities for rent seeking and collusion between the regulators and regulatees and how the resource windfalls turn local government departments into hotbeds for corruption. Through panel data analysis on the corruption rates of Chinese provinces, it testifies that resource-rich regions are indeed more corrupt than other regions. This chapter suggests that mineral resources amplify the existing loopholes in the Chinese political economic system and highlights the danger of local state capture by resource capital.