Organizer: Szuchien Yau, Columbia University
Chair: Szu-chien Hsu, National Cheng-Chih University
Discussant: Wanru Su, Yuan-Ze University
This panel seeks to examine the impact of China’s integration with the international community on the process of the country’s economic reform and its developmental prospects. It is so designed that each paper addresses a different issue area, or the research is conducted at a different level of analysis, in order to provide diverse yet complementary perspectives. Centering on a common concern about the interaction between international and domestic factors, the four papers in the panel deal with China’s industrial policies, banking system reform, the management of environmental issues, and foreign capital and rural development.
The first paper examines the relationship between foreign direct investment (FDI) and China’s industrial policies from a sectoral perspective. It identifies four different modes of governance toward FDI. Comparing across six industries, the paper argues that changes in the governing modes arise out of incompatibility between the sectoral attributes of multinational enterprises and the government’s priority in industrial development. The second paper focuses on the reform of China’s banking system. It argues that domestic bureaucratic processes largely determine China’s reform in this area, in spite of the tide of liberalization in global financial services. The third paper investigates the interaction between the international environmental regime and China’s management of domestic environmental issues. The author provides a causal explanation of China’s environmental policy by tracing the sequence of policy evolution and by examining the relative importance between external pressure and domestic agenda. The last paper addresses the channeling of foreign capital at the grass-root level. The author examines the foreign capital in two coastal regions of rural China which has been channeled primarily through bureaucratic coordination and kinship ties respectively. It is further argued that the inflow of foreign capital has contributed to the transformation of local institutions and property rights arrangements.
In order to generate the maximum amount of discussion, this panel will take the following format: (1) Instead of summarizing their own research, the presenters are asked to review and comment on one paper other than his or her own, focusing particularly on the difference in each other’s findings. The presenters will have the chance to respond to comments and elaborate on his or her own research during discussion; (2) Rather than duplicating the presenters’ role, the discussant is asked to approach the issues raised in the papers from the perspective of business operations, focusing on corporate strategies and the potential effects of those strategies on the adjustment of government policies.
Foreign Direct Investment and Industrial Policies in China: A Sectoral Analysis of State Intervention
Szuchien Yau, Columbia University
This paper examines the relationship between China’s industrial policies and the patterns of state intervention in foreign direct investment (FDI) in the 1990s. Rather than using sweeping concepts such as developmental or interventionist state, the paper recognizes that the Chinese government intervenes in foreign-invested enterprises in a selective manner which varies across industrial sectors. Drawing on the literature of industrial policy, multinational corporations, and organization theory, the paper argues that the patterns of such selective intervention are determined jointly by two sets of variables—the sectoral attributes of multinational enterprises and the government’s priority in industrial development. The interactions between these variables generate four identifiable modes of governance with regard to FDI. Comparing the experience of foreign-invested enterprises in six industries (i.e., telecommunications, automotive, computer, consumer electronics, textiles, and consumer goods industries), the paper proposes that the government can assume the roles of producer, allocator, promoter, or gatekeeper by using either interventionist measures or market-conforming strategies. The paper proceeds to argue that changes in the governing modes arise out of incompatibility between the two sets of variables. Finally, the paper suggests that a particular mode of governance tends to produce unique institutional consequences that influence the paths of future development. Three important issues—the changes of state capacity, the reorganization of government, and the potentiality of societal collective action—are examined.
Internationalization and Domestic Politics: The Case of Financial Reform in Transitional China
Yifeng Tao, Columbia University
China’s integration into the world economy has brought prosperity to numerous non-state enterprises in the coastal area. Most of them are small, labor-intensive, and export-oriented enterprises. Conventional wisdom has it that the political influence of these newly rich should have been reflected in the process of policy-making because their capability to organize themselves in demanding their interests should have increased tremendously in comparison with the losers of internationalization. However, recent effort by the Chinese government to establish a modern financial system focuses on the creation of a main bank system that ignores these private enterprises. The main bank system is a government-designed, contractual arrangement between China’s four major banks and five hundred largest state-owned enterprises. According to the system, the four major banks have to guarantee preferential bank loans for the five hundred government-selected, largest state-owned enterprises to develop international competitiveness in the 2lst century. In other words, the creation of the main bank system is in essence reflecting the interests of the losers, rather than the winners, of internationalization. Why is this the case? This paper argues that the non-democratic policy-making process in China excludes actors other than bureaucrats to articulate and aggregate their interests. The policy outcomes at most reflect the interests and values of different sectors in the bureaucracy. This case demonstrates the importance of domestic political institutions when we examine the effect of internationalization on policy-making. This study is a historical analysis of the policy-making process of the creation of main bank system in China. It intends to contribute to the dialogue between the studies of Chinese political system and international political economy. The empirical data are based on the author’s intensive interviews and archival research in Beijing, Shanghai, Henan and Hong Kong.
International Linkages and China’s Environmental Policy
Szu-chien Hsu, National Chengchih University
This paper intends to analyze how international factors influence China’s environmental policies in the 1980s and 1990s. It first reviews the evolution of China’s environmental policies along each stage of the country’s economic development, in light of its changing relations with the international community. Secondly, the record of China’s participation in and relations with the international environmental regime is examined, the focus of which is on whether China has kept a friendly, cooperative, and participatory attitude toward the international environmental regime, or a hostile, suspicious, non-cooperative, and alienated one. This paper also examines the extent to which international organizations have involved in China’s management of domestic environmental issues, in terms of the attitudes, the agenda, and the model of implementation of the international organizations. Finally, this paper addresses the roles, attitudes, and behaviors of the governmental bureaucracies mediating these international impacts. One key issue under investigation is whether China or the international organizations took the initiatives for contacts and cooperation. Another important issue concerns how the Chinese government perceived its national interest on this policy issue and whether there were conflicting views within China, such as between the government and non-governmental groups, or between different governmental offices. Also addressed in this paper is the issue of how and to what extent international influence has changed China’s policy on environmental issues.
Local Institutions and Foreign Capital: Regional Variations in Chinese Rural Reforms
Chih-Jou Jay Chen, Academia Sinica
This paper studies the relationships and interactions between local institutions and foreign capital in China’s rural development. It first examines economic and social institutions in the rural communities in the Yangtze Delta region and southern Fujian, and then compares the content and forms of foreign capital mobilized by local entrepreneurs in these two regions. Finally it looks at the impacts of foreign capital on the transformation of local institutions. In the early reform period, foreign capital in the Yangtze Delta region was mainly channeled through bureaucratic coordination in the form of joint operation among collective units. In the 1990s, as foreign direct investment rapidly increases, the collectives (township and village governments), relying on their control rights over various kinds of property (enterprise assets, land, and even labor forces), still play the predominant role in the Sino-foreign cooperation projects. In southern Fujian, on the other hand, foreign capital has been mobilized through kinship and clan ties rather than through the command system. As the reforms proceed, family coordination dominates bureaucratic coordination, and becomes the major means of channeling foreign resources into the local society. Finally, as foreign capital keeps flowing into local societies, it also affects the changing property rights arrangements and transforms the political and social institutions in the localities.
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