Über die Autorin bzw. den Autor

Mary Elizabeth Gallagher is Assistant Professor of Political Science at the University of Michigan, Ann Arbor. She is also a faculty associate of the Center for Chinese Studies and the Institute for Labor and Industrial Relations.

Von der hinteren Coverseite

"Contagious Capitalism is a first-rate book that presents an important, new argument about Chinese political economy and reform. Well-written and thoroughly researched, it makes a novel contribution to the literature."--Marc Blecher, Oberlin College

"The relationship between foreign direct investment and the evolution of labor reforms in China is much misunderstood. This book contributes in significant ways to this important area of knowledge."--Doug Guthrie, New York University

Auszug. © Genehmigter Nachdruck. Alle Rechte vorbehalten.

Contagious Capitalism

Princeton University Press

Chapter One

In opening up to the outside world, we must actively make use of things from developed Western countries ... but we must be careful not to take the decadent things for miracles, or ulcers for treasures. -Jiang Zemin, President of the PRC, 1997

How does an authoritarian state renegotiate its duties and obligations to society without sacrificing political control? One of the key explanations for the disintegration of socialism in the Soviet Union and Eastern Europe is that these states failed to keep up their end of the "social contract." Whether through the effects of continual market reform (Hungary, Yugoslavia) or the effects of stagnation (Romania, Bulgaria), these societies were no longer willing to sacrifice autonomy and a liberalized political sphere for a dwindling supply of welfare benefits and job security. As scholars of the region point out, the fusion of economics and politics under socialism made the failure of the economy a moment of political opportunity.

In the Chinese context, however, the state has extricated itself out of the "social contract" with the urban working class without losing its grip on political power. The sequencing of foreign direct investment (FDI) liberalization before significant reform of the state-owned enterprise (SOE) sector and development of domestic private industry has enhanced the staying power of the Chinese Communist Party (CCP) and delayed societal demands for political change. Early opening to FDI was an integral factor in China's success in breaking the "iron rice bowl" and in spreading capitalist labor practices and new legal institutions out from the non-state sector to the large state-owned sector of China's urban economy. In addition, the large influx of FDI and the new competitive pressures emanating from this sector helped to reformulate the ideological debate central to socialist reform: the debate over the importance of state-owned industry. This debate has been redirected from the public/private dichotomy toward a debate over the need for Chinese national industry amid ever-increasing foreign competition.

For the last ten years, the People's Republic of China has attracted more FDI than any other developing country in the world. In 2002 China surpassed the United States as the most favored destination for FDI. The policy of "reform and openness" of which FDI liberalization is a central part is widely seen as a great success-so successful, in fact, that by 2001, the Chinese leadership successfully negotiated membership in the World Trade Organization. Accession to the WTO marks China's full-fledged acceptance into the global economy and shows the leadership's determination to continue to pursue increased openness, increased foreign investment, and dramatically increased competition within the domestic economy.

There is great debate among economists and policy analysts on the economic effects of FDI. An equally vigorous and perhaps more polarizing debate surrounds the political and social effects of China's FDI policy, in particular, and China's rapid integration into the global economy, in general. Advocates and supporters of "reform and openness" portray FDI as the bearer of all that is good, legal, and advanced. Critics of the social consequences of FDI liberalization portray it as the Trojan horse of exploitative global capitalism. This debate is unsatisfying because it often fails to acknowledge that both of these characteristics co-exist in time and space. One major reason for the polarization of this normative debate surrounding the benefits of FDI and economic integration is that these broad Manichaean conclusions are often drawn from research that is focused on particular regions or industrial sectors.

FDI's political and social effects are highly complex and differ widely across different regions, firms, and individual workers. The behavior of foreign investors is also shaped by their respective home country practices and business cultures so that regions with a heavy concentration of overseas Chinese "foreign" capital look different from areas with more diverse sources of overseas funding. Normative conclusions are dependent on the region, industrial sector, and, if at the firm level, where the firm is placed within international production networks. A researcher studying foreign-invested enterprises in the footwear industry will usually come to different conclusions from a researcher examining labor practices in a multinational producing goods with its own brand name attached. Alternatively, research at greenfield development sites (where foreign and private factories are built from scratch and are often separate from local industry) will yield different insights from research at former state-owned enterprises that have been recently transformed into joint ventures. Finally, interviews with migrant workers employed at one of the many labor-intensive foreign-invested enterprises in China's coastal and southern regions will differ dramatically from interviews with the domestic managerial elite of foreign-invested enterprises in Shanghai and the north. These characteristics and China's large size make it difficult to make broad generalizations about the effects of FDI on the shape of China's developing capitalist economy and its effects on Chinese workers in particular.

Due to these constraints, the broad political consequences of FDI liberalization have either been simplified down to the good/bad dichotomy or have been overlooked. This does not mean, however, that broad, systemic effects of FDI liberalization do not exist but rather that these broad systemic effects impact regions, firms, and workers differently. These differences matter greatly. In China, the liberalization of FDI creates winners in some circles and losers in others. It has spawned competition and fragmentation, but slowly and only at the margins at first. The liberalization of FDI was dynamic and led to a contagion of capitalism across the economic and ideological boundary of public ownership. The power of FDI liberalization as a catalyst for social change is exactly here: It is its ability to create competition, to encourage the development of new institutions, both at the firm level and through the legal system, and to alter fundamentally the debate over socialist ownership by placing ownership in a more global and competitive context.

During my field research, these ideas of competition, fragmentation, and globalization came up repeatedly and among many different kinds of people. At the Beijing headquarters of the Chinese Enterprise Managers Association (CEMA), the official organization representing state enterprise managers, the representative complained bitterly that the unfair advantages granted to foreign firms made it impossible for state firms to compete. State firms needed the autonomy to hire workers, fire workers, raise salaries to retain skilled workers, and cut benefits to reduce the social welfare burden. How would Chinese industry survive without a level playing field against the foreign investors?

At an SOE in Tangshan, Hebei Province, a manager made this general concern very specific. "After the Sino-Japanese joint venture opened in Qinhuangdao, we lost a large number of managers who were attracted by the higher salaries of foreign firms ... After that we began to pay attention to the problem of retaining...