Local Responses to Global Economic Restructuring:

Chin and the West

Dr. Shiuh-Shen CHIEN

Visiting Research Fellow, East Asian Institute, NUS

Paper presented in the International Conference on Globalization and Economic Development in the Chinese Economic Circle, June 22-23, 2007

A Concept of Territorial Process

Global economic restructuring

macro responses: Territorial competition

micro responses: formation of self-interested agents

Varied entrepreneurial localities

Structure of Presentation

Introduction: the phenomenon of entrepreneurial localities

Global Economic Restructuring Local Macro Response: Territorial

Competition Local Micro Response: self-interested

agents Conclusion, Territorial Process,

Chinese Style

Introduction: entrepreneurial localities

Schumpeter’s typology for firm innovation

Typology for entrepreneurial localities

New products New spaces of production

New technical methods of production

New methods for space of productions

New consumption market

New markets for spaces of consumption

New sources of supply New financial sources

New forms of industrial organization

New positions in the urban/regional hierarchy

Introduction: entrepreneurial localitiesTypology of EL West cases Chinese cases

New spaces of production

Entrepreneurial zones,

economic develop. Zones

New methods for space of productions

Hard/ soft infrastructure

Marketization system

New markets for spaces of consumption

Entertainment/ tourist spaces

Xintiande in Shanghai

New financial sources EU structural funds

Innovative local fundraising

New positions in the local/urban hierarchy

Brussels Vice provincial city

Research Questions Weakness of these researches: EL were

naturally able to be made for the purpose of better local economic development under the context of globalization

Research question: how, why and under what circumstances and by whom entrepreneurial localities can be formed and evolved in different contexts of globalization restructuring - such as liberal democracy v.s.

one party authoritarian systems

Globalization Restructuring

The socialist regime extensive accumulation through

state-led industrialization redistributive functions of states

The Fordist Regime economy of scale Keynesian welfare state

The post-socialist regime intensive accumulation through

commoditization and spatial fix (export-orientation zones)

marketization entrepreneurial States

The post-Fordist Regime economy of scope

neo-liberalism and post-Keynesian workfare state

Tra

nsit

ion

Liberal economiesTransition economies

Macro responsesLocal Authority in Transition

After the 1970s/80s, local authorities as a new spatial form to manage economic development (the tendency of decentralization)

Local authorities become more entrepreneurial (instead of managerial), and therefore, compete with each other.

Cultural Capital

Competition in the EU

Casino Application Competition

in the UK

Chicago v.s. Dallas for Boeing

SH v.s. HK competing Disney

TSMC location selection

Airport Competition in the Pearl Delta

Regional Consequences of TC

Weak competition efficiency-depleting(vicious circle)

-- race to the bottom-- free charge of

infrastructure-- lowering regulations for

labour/environmental conditions

Strong competition growth-enhancing(positive feedback loop)

-- race to the top-- external networking-- benchmark

assessment-- labour training-- helping establishment

of business

Race to the top for Local Business

Southeast

BohaiNortheast

CentralSouthwest

Northwest

Taxes and Fees relative to sales 4.1 % 4.5 % 5.4 % 5.0 % 6.3 % 5.8 %

Annual bureau. Interactions (days)

52 72 63 52 66 78

Entertainment (to officials) /sales

1.0 % 0.9 % 1.4 % 1.2 % 1.2 % 1.3 %

Average Custom clearance (days)

7.3 8.6 12.6 13.8 14.0 16.8

Source: World Bank (2006). China: Governance, Investment Climate, and Harmonious Society: Competitiveness Enhancements for 120 Cities in China. Report NO. 37750-CN

Table: Business environment in China

War of development zones- in 2003, nearly 70% of 5,000 zones in China were developed without permits of the central government

Tax rebate policy competition-

3 mein 2 jian bain 5 mein 5 jian bain Duplicate constructions- more airports, seaport

s, and industry….

Race to the top for Local Business

The West: residents and investors and products can move cross boundary freely, and unified jurisdiction system

China: local protectionism in (1) productive resources and capital

(2) trade semi and final goods (3) movement of individuals(4) fragmented juridical system

Market fragmentation (MF) in China

Overproduction price war Miniaturization of investment projects Limited regional specialization of industrial

structures Too reliance on FDI because MF applies to

domestic investments than to FDI, e.g. HK one-day export trip

Regional Consequences of TC behind Market Fragmentation in China

Local Micro Responses: self-interested agents in the West

Elite-dominated local politics (instead of pluralist local politics)

self-interested parties with strong stakes in territorial economic success, particularly elected politicians and local land developers growth machine, urban regime…..

collective actions leading to public-private coalitions;

Self-interested agents in China (1) Difference (1): property right issue

-- protection of property right in China only exist after 2007 March limited influences of the private sectors in the past

Difference (2): party-government relations

-- one party control in China with state-led civil society and medial

local officials are rule makers, rule enforcers, referees and players de facto owners of public-owned companies

Self-interested agents in China (2) Difference (3)- political incentives

-- leaders not elected locally but selected by the upper-level governments with performance-based management in China

political centralization under the party and careerism in local officials: the more growth, the better the chances to get personal advancement, with increasing power and other rewards

Upward/downward accountability

Local govt.

Central Gov.t

Decentralized economic powers and resources

Development plans; Preferential policies, Infrastructures

Aggregate economic performances: GDP, revenues, jobs

performances reviews: career reappraisal

career appointments: yearly performance targets, 5-year plan China’s context

Western context

Local citizens and firms

Popularity survey; lobbying, community participation

election, funding, ‘voting with feet’

Micro-level economic and service and quality-of-life outcomes

Conclusion: TP, Chinese Style (1)

Territorial process (TP), composing of macro and micro mechanisms, is a good theoretical framework to understand local responses to global economic restructuring

TP taking place in China, but in different mechanisms from the west– territorial competition in China was along with fragmented market, and self-interested agents are local officials in careerism

Conclusion: TP, Chinese Style (2)

Theoretical contributions: as a supplements to existing literatures on the phenomenon of new regionalism, as well as to the discussion on various types of local officials involving economic development

Further research- territorial competition (at the macro level) and upward accountability (at the micro level) in relation to local good governance

THANK YOU

crison@gmail.comeaics@nus.edu.sg

Local Responses to Global Economic Restructuring:

China and the West