What is the role of the state in industrial upgrading and promoting innovation? How does China, known for its low-end manufacturing goods, also produce innovators such as Huawei and ZTE? Manipulating Globalization answers these questions by advancing a new theory of economic policies and bureaucratic politics in an authoritarian context. Using a wealth of materials including in-depth interviews, original surveys, and archival materials, Ling Chen convincingly shows that, even when there is a national mandate to increase domestic firms’ innovative capacity and sufficient resources to do so, subnational bureaucrats have varying incentives that could either help or hinder domestic businesses to upgrade. Instead of one China model of economic development and industrial upgrading, there are a variety of models of development in China. And these variations are rooted in local political and economic history.
In Chen’s argument, the key players shaping local business environment and economic outcomes are subnational bureaucrats, not national policy makers. By examining industrial policies and their implementations in the 2000s, Chen argues that cities that benefited from the previous national economic strategy—the FDI attraction policy in the 1990s—became less able to garner resources and to implement new policies, because existing coalitions between powerful global firms and local bureaucrats were trying to block the implementation of new policies. In contrast, cities that were not able to attract large and influential global firms in the previous decade were more likely to take advantage of new policies, and newly empowered bureaucrats could help domestic firms become more innovative and competitive.
What sets Manipulating Globalization apart from other works on China’s economic policies is its deep understanding and serious treatment of interest-group politics. Chen provides detailed descriptions of how subnational bureaucracies work and how bureaucrats compete with each other for resources, power, and influence. Tracing bureaucracies is an extremely difficult task to accomplish, given how opaque bureaucracies in authoritarian regimes are. The paired cases of Suzhou (in Jiangsu Province, located in the Yangtze River Delta Region) and Shenzhen (in Guangdong Province, located in the Pearl River Delta Region) in chapter 4 are emblematic of her approach. Chen shows that, after the rollout of new policies of domestic technology upgrading in the mid-2000s, bureaucrats empowered by previous national economic strategies felt threatened and quickly started to work with powerful foreign firms to fight these new policies. Surprisingly, institutions such as the prefectural-level Bureau of Science and Technology (BST), a bureaucracy that was supposed to be empowered by the new national mandate, lost the local political battle in Suzhou to what Chen calls “the international commerce coalition”—a group of local bureaucracies competing with BST and its allies. As a result, local domestic firms in Suzhou did not enjoy much policy benefit in terms of government funding in science and technology (table 4.3, p. 83). In comparison, the southern city of Shenzhen did not have a strong “international commerce coalition” because the average foreign firm was much smaller and less influential, and had not formed strong alliances with relevant local bureaucrats in the previous decade. Shenzhen had a strong tradition of policy openness and experimentation, and in the 2000s, the “domestic technology coalition”—the competing coalition to the “international commerce coalition”—successfully pushed for the establishment of new institutions such as “incubators and innovative valleys for hatching smaller start-up technology firms” (p. 83). As a result of conducive policies, supportive and empowered local bureaucrats, and an innovative culture, Shenzhen became the home of many of China’s most competitive and innovative private firms, including Huawei, Tencent, ZTE, Skyworth, and DJI. Manipulating Globalization also stands out in its careful treatment of culture as an important factor in explaining developmental trajectories. In addition to highlighting the role of bureaucratic competition and interest-group politics, Chen also points out important differences in culture and norms surrounding entrepreneurship and innovation in different locations. Shenzhen entrepreneurs “were embedded in norms that often encouraged them to challenge existing successors,” whereas Suzhou entrepreneurs were often “suffocated by pro-MNC institutions” (p. 119). Such norms were not formed overnight, and Chen skillfully traces the path-dependent nature of regional economies all the way to the pre-Mao era.
For those interested in economic development from a historical perspective, chapter 6 makes for a particularly fun read. It documents that, as early as the Late Qing and early Republican period, Suzhou—already viewed as the central metropolis and the most advanced commercial and manufacturing center at the time—developed a tradition favoring gentry bureaucrats and large businesses and discriminating against small businesses. In contrast, the Pearl River Delta Region grew into an economy that preserved the “development of small merchants and traders,” and there the gentry group was less mobilized (pp. 140–41). Interestingly, Suzhou also produced more zhuangyuan (high-level bureaucrats) than Guangdong Province (where Shenzhen is located) or any other province in imperial China (figure 6.3, p. 142). In the Mao era, Jiangsu cadres were often at the forefront in demonstrating their political zeal to Beijing, whereas Guangdong cadres showed much less enthusiasm and sometimes even resistance to central policies. In the first decade of the post-Mao reform era, under a top-down development model—in which government was responsible for “reaching targets assigned from top level” and public firms were preferred over smaller private firms (p. 152)—Jiangsu surpassed Shanghai, becoming the province with the largest industrial output in China by 1988, and Suzhou achieved a total industrial output of 58.4 billion yuan, almost three times that of Shenzhen at the time (p. 152). The “reversal of fortune” only happened in the 2000s, when the bottom-up approach of Shenzhen—in which local bureaucrats protected local and small private businesses—was more conducive to innovation and upgrading.
For readers interested in learning about entrepreneurial development in China, this book is full of interesting stories about Chinese entrepreneurs and business history (mostly in chapter 5 but also throughout the book). I enjoyed learning about the rise and fall of the “four little giants” of the Suzhou consumer electronics and appliances industry, how Kunshan built the world’s first-class “Optoelectronics Valley,” and the paths of industrial upgrading for Shenzhen electronics producers such as Huawei and ZTE.
Although Chen delineates the role of bureaucrats and the inner workings of bureaucracies in painstaking detail, what is left out largely in her discussion is how exactly businesses, especially big foreign businesses, build alliances with local bureaucrats in China. Do foreign firms hire well-connected local staffers to establish and maintain government relations? Or do they just overwhelm local politicians and bureaucrats with their market power, their ability to hire locals, and their advanced technologies? Do foreign firms that form joint ventures with large state-owned enterprises behave differently from those working with smaller private firms? When I encountered a fascinating interview quote such as “bureaucrats actively seeking to take advantage of foreign capital end up being taken advantage of by foreign capital” (利用外资反被外资利用, p. 81), I grew very curious to learn what the interviewee meant and how the process would look, but was left unsatisfied when the book did not provide further details.
Finally, the book raises important questions about the generalizability of the new East Asian development model or the Pearl River Delta model of industrial upgrading. How can the experience of Shenzhen be replicated in other contexts? Is Huawei—now a powerful foreign firm in countries outside China—already too big, too powerful, and too embedded in local politics to help small domestic firms in Africa or Latin America achieve upgrading? Overall, Manipulating Globalization advances our understanding of business–state relations, interest-group politics and industrial policies in contemporary China. It should be on the reading list of any scholar interested in these topics.
