Industrial restructuring in China : an institutional analysis of state-society relations and its policy impacts

Abstract

After more than 30 years of rapid industrialization, China has developed a relatively sound economic structure. However, it has been experiencing slowdown in growth as its GDP annual growth rate has dropped below 7 in recent years. Economists warned China in a 2012 World Bank report of an imminent economic crisis if its continuous reliance on the export-dependent, investment-led development model. China’s capability to restructure its economy from one that depends on low-value manufacturing exports to a knowledge-based one, is presented as an imminent challenge to policy makers both at the central and local levels, given its economic and political constraints. This dissertation looks at the disparity in performance of industrial restructuring among six cities across the Pearl River Delta and the Yangtze River Delta regions, and tries to answer three research questions, including 1) the extent to which previous modes of industrialization affect the policy options of industrial restructuring, 2) the determining factors that lead to the different behaviors of local governments in industrial policy making and implementation, and 3) how industrial associations as an emerging societal actor can facilitate industrial restructuring through participation in policy making. First by using both quantitative and qualitative approaches, this study tests and examines the hypothesized correlations between the independent variables of 1) the degree of horizontal diversity of industrialization, 2) the level of devotion of local officials to industrial policy implementation, and 3) the level of institutionalization of industrial associations, and the dependent variables of congruence of industrial development stage with industrial policy programs, and level of effectiveness in policy implementation. Regression of two sets of data confirms the correlations between the one set of indicators of the second independent variable, i.e., the R&D expenditure, and one aspect of the second dependent variable of policy effectiveness. Since qualitative part of the study is significantly constrained by the availability and reliability of data, this study is predominantly a qualitative one. By tracing the development paths of the six cities, and highlighting some of their critical junctures where determining events fostered policy shift and laid the foundation for later industrial development, this study finds that historical institutional conditions and critical juncture, together with exogenous conditions and institutional capacity of localities, could have constraining effects on the policy options available to future industrial restructuring. This study also finds government officials’ levels of devotion in policy implementation that are constrained by other institutional factors, such as upper level government, established decision making processes, and institutional flexibility, are instrumental to the effective implementation of industrial policies. In cities with more institutionalized channels of participation in policy making for societal actors, policy programs are found to be congruent with the stages of development, and are more likely to see positive results of industrial upgrading and restructuring in strategic emerging sectors. This study contributes not only to the theoretical and empirical debates, but also to the policy making realm, that a wide range of experiences and lessons are offered to policy makers and advisors of other developing countries.