Foreign direct investment (FDI) is a crucial factor in China's economic miracle. This FDI fever (the “pro-FDI paradigm”) is most prominent in the 1990s. From the mid-2000s, a type of techno-nationalism advocating domestic upgrading (the “indigenous innovation” paradigm) joins the national economic policy initiatives. It poses a direct challenge to the pro-FDI policy paradigm. However, throughout manufacturing cities that share similar levels of economic conditions and industry compositions, policy heterogeneity persists. To explain such heterogeneity, Ling Chen, in her book Manipulating Globalization, elegantly connects these two paradigms and convincingly argues that FDI attraction is critical for indigenous innovation. She contends that the type of alliances formed between the local officials and foreign invested enterprises (FIEs) in the FDI fever stage shapes the policy interpretation, resource allocation, and bureaucratic competition in the indigenous innovation stage. Ceteris paribus, she shows that cities that initially focus on attracting top-ranked and large-scale FIEs are less efficient in industrial upgrading compared with cities that attract smaller FIEs on the lower end of the value chain. Her book explains the policy implementation in China from the perspective of local politics. It is a feast not only for China watchers but also for anyone interested in Chinse politics, its global implications, and the political economy of development in general.
Theoretically speaking, the book delves into the politics of local bureaucrats (the prefecture city level), especially the competition between international commerce departments and domestic technology departments, to examine the influence of local politics on national-level policy implementation. This approach joins the fragmented authoritarianism literature to scrutinize how factional interests and coalitions shape policy implementation and enforcement. Furthermore, Chen carefully evaluates the interaction between FIEs and local bureaucrats, and how this interaction, as a response to the national-level policy initiative, functions at both the city level and firm level. At the city level, Chen demonstrates that cities where FIEs and export overlap and where FIEs are concentrated in large firms are the least likely to provide financial and policy support for technology upgrades (Chapter 4). At the firm level, Chen shows that large-scale global firms that are located at the top of the value chain reduce the effectiveness of upgrading policies on domestic firms (Chapter 5). Also, Chen presents a detailed picture of the paradigm shift from pro-FDI (Chapter 2) to indigenous innovation (Chapter 3). She further traces the divergence between Jiangsu's top-down capitalism and Guangdong's bottom-up capitalism to the historical process of state-preference formation dated back to the Late Qing and early Republican periods, echoing the varieties of capitalism literature (Chapter 6).
Methodologically speaking, Chen's utilization of the mixed-method approach is impressive. Her controlled comparative case studies (Suzhou, Shenzhen, Ningbo, and Wuxi, with the focus on the first two) are based on more than 270 in-depth interviews with different government officials and business people throughout 2008 and 2011. These high-quality interview data provide insider information and smoking-gun evidence. These four cases face different levels of concentration of foreign firms and overlap levels between foreign firms and exporters, two essential variables in her theory. Additionally, she manages to gain special permission from the National Bureau of Statistics (NBS), which gives her access to the original dataset of more than 400,000 firms in 41 industries across 300 prefecture-level cities over multiple years. This dataset enables her to apply the hierarchical linear modeling (HLM) to test her theory quantitatively.
Chen's research is prescient. She started her research about a decade ago and included cases like Huawei and ZTE, which were only known by few people at that time. Such firms have become global technology leaders and play a significant role not only in their corresponding industries but also in Sino-American relations. At the same time, Chen's book stays humble and opens the door for future research that may strengthen or undermine her argument. Chen assumes that local officials and FIEs are rational. This assumption may be reasonable enough to explain short-term interests but may fail to describe long-term interest pursuits. It would be hard to believe that the Shenzhen officials who attracted the guerilla FIEs were aiming for future industrial upgrading at that time. The transition of different government officials and business managers involve socialization and learning process. However, these factors are not counted in the book.
Second, the cases she selected are typical cases. Outlier cases may present different stories, and such stories may confirm or disaffirm her causal logic. For instance, the four cities she picked are not directly administered by the central government. Therefore, the local officials may possess a certain level of discretional power, which helps shape the alliance relations. However, in the four direct-administered municipalities of China (Beijing, Shanghai, Tianjin, and Chongqing), the local officials would lose such power, and the relationship between the type of FIEs and indigenous innovation would change. Besides, the nature of industries matters. The central government may decide to intervene in some strategically important industries directly, and such intervention would bypass the local officials and build an uninterrupted connection between the central government and the FIEs.
Manipulating Globalization contributes to the growing literature of fragmented authoritarianism in China's political economy and the relationship between local politics and foreign investment. Though the book focuses on China exclusively, it has important implications for other developing countries. More importantly, considering China now is investing enormously in many other developing countries, this book may help Chinese policymakers adjust their investment strategies with local officials from other countries. Besides, compared with the study of the Jiang Zemin-Zhu Rongji era and the Xi Jinping-Li Keqiang era, Hu-Wen has not received enough attention, and this study helps fill this research gap. It sheds light on the future research of the comparison between Hu-Wen and other Chinese leadership eras. This book is thus a must-read for all Chinese politics students and anyone interested in the political economy of development.
