Manipulating Globalization: The Influence of Bureaucrats on Business in China (Studies of the Walter H. Shorenstein Asia-Pacific Research Center)

The era of globalization saw China emerge as the world’s manufacturing titan. However, the “made in China” model—with its reliance on cheap labor and thin profits—has begun to wane. Beginning in the 2000s, the Chinese state shifted from attracting foreign investment to promoting technological competitiveness of domestic firms. This shift, however, caused tensions between winners and losers, leading local bureaucrats to compete for resources in government budget, funding, and tax breaks. While bureaucrats successfully built coalitions to motivate businesses to upgrade in some cities, in others, vested interests within the government deprived businesses of developmental resources and left them in a desperate race to the bottom. In Manipulating Globalization, Ling Chen argues that the roots of coalitional variation lie in the type of foreign firms with which local governments forged alliances. Cities that initially attracted large global firms with a significant share of exports were more likely to experience manipulation from vested interests down the road compared to those that attracted smaller foreign firms. The book develops the argument with in-depth interviews and tests it with quantitative data across hundreds of Chinese cities and thousands of firms. Chen advances a new theory of economic policies in authoritarian regimes and informs debates about the nature of Chinese capitalism. Her findings also shed light on state-led development and coalition formation in other emerging economies that comprise the new “globalized” generation. The era of globalization saw China emerge as the world's manufacturing titan. However, the "made in China" model--with its reliance on cheap labor and thin profits--has begun to wane. Beginning in the 2000s, the Chinese state shifted from attracting foreign investment to promoting the technological competitiveness of domestic firms. This shift caused tensions between winners and losers, leading local bureaucrats to compete for resources in government budget, funding, and tax breaks. While bureaucrats successfully built coalitions to motivate businesses to upgrade in some cities, in others, vested interests within the government deprived businesses of developmental resources and left them in a desperate race to the bottom. In Manipulating Globalization, Ling Chen argues that the roots of coalitional variation lie in the type of foreign firms with which local governments forged alliances. Cities that initially attracted large global firms with a significant share of exports were more likely to experience manipulation from vested interests down the road compared to those that attracted smaller foreign firms. The book develops the argument with in-depth interviews and tests it with quantitative data across hundreds of Chinese cities and thousands of firms. Chen advances a new theory of economic policies in authoritarian regimes and informs debates about the nature of Chinese capitalism. Her findings shed light on state-led development and coalition formation in other emerging economies that comprise the new "globalized" generation The era of globalization saw China emerge as the world's manufacturing titan. However, the "made in China" model--with its reliance on cheap labor and thin profits--has begun to wane. Beginning in the 2000s, the Chinese state shifted from attracting foreign investment to promoting the technological competitiveness of domestic firms. This transition led local bureaucrats to compete for government funding and tax breaks to benefit their business clients. While bureaucrats successfully motivated local businesses to upgrade in some cities, in others, vested interests within the government deprived businesses of developmental resources and left them in a desperate race to the bottom. In Manipulating Globalization , Ling Chen argues that the roots of regional variation lie in the type of foreign firms with which local governments forged alliances as well as the historical preferences of the bureaucrats. Cities that initially attracted large global firms in the 1990s were more likely to experience manipulation from vested interests down the road. The book develops the argument with in-depth interviews, original surveys, and quantitative data across hundreds of Chinese cities and thousands of firms. Chen advances a new theory of economic policies in authoritarian regimes, shedding light on state-led development and coalition formation in other emerging economies that comprise the new "globalized" generation. Although China is a Global Manufacturing Titan, the "made in China" mode) has begun to wane. Beginning in the 2000s, China shifted from attracting foreign investment to promoting the competitiveness of domestic firms. The subsequent tensions between winners and losers led local bureaucrats to compete in offering businesses funding and tax breaks. While some bureaucrats successfully motivated businesses to upgrade, others left businesses in a desperate race to the bottom. With in-depth interviews, original surveys, and quantitative data. Ling Chen argues that this regional variation is rooted in how foreign firms strengthened or weakened vested interest coalitions. Chen advances a new theory of economic policies in authoritarian regimes, shedding light on the nature of Chinese capitalism, as well as emerging economies that comprise the new "globalized" generation. Book jacket. Beginning in the 2000s, the Chinese state shifted its economic policy away from trying to attract Foreign Direct Investment to strengthening its own domestic firms. Ling Chen examines the implementation of these policies at a local level, analyzing why in some cities the increased government funding and tax cuts successfully fostered domestic innovation and competition, while in others the campaign was unsuccessful. Bureaucrats, businesses, and economic policies in a globalized China -- Chasing foreign capital -- From FDI attraction to domestic competitiveness -- Local policy making, globalized coalitions, and resource allocation -- The micro foundation of state intervention and policy effectiveness -- Varieties of local capitalism in historical perspective -- Making economic policies work