Grounded Globalization: Foreign Capital and Local Bureaucrats in China’s Economic Transformation

Abstract

How does a globalized context influence domestic development policies and the allocation of government resources in an authoritarian country like China? This study explores the coalitional politics in China’s transition from foreign direct investment (FDI) attraction to domestic technology upgrading, which created winners and losers in the local allocation of government resources. Drawing on comparative case studies, semi-structured interviews and newly compiled data at the city level, the study finds that the varied levels of government support for domestic upgrading are shaped by coalitions for or against the transition. The major obstacle for bureaucrats within a city government to garner resources for domestic technology does not directly depend on the overall level of FDI. Rather, it comes from the vested interest of international commerce bureaucrats. These bureaucrats are more likely to form a cohesive coalition when the export share of foreign firms is large. At the same time, such a coalition is more likely to gain political influence when industrial sales are concentrated in large firms. The direction and magnitude of foreign capital influence, therefore, is channeled and manifested through local bureaucratic coalitions. This study sheds light on the politics of implementing development policies in an era in which globalization has cultivated fragmented interests within the local bureaucracy.

Keywords: China, FDI, Coalitions, Industrial Policy, Bureaucrats, Industrial Upgrading, Development Policies, Technology, R&D