Ernst, Dieter

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    China's emerging industrial economy : insights from the IT industry
    (London: New York: Routledge, 2008) Ernst, Dieter ; Naughton, Barry
    Since the turn of the 21st century, a distinctive Chinese variety of industrial capitalism has taken shape. In this chapter, we trace the contours of China's emergent industrial economy, giving special attention to the role of the information technology (IT) industry. Throughout China's reform era, the IT industry has often been a forerunner of broader trends in the industrial economy, and this continues to be true today. For most of the socialist period, development was equated with large, heavy industrial plants. Even under market transition, the Chinese government at first maintained its faith in guided development and invested resources in large, state-owned firms in the hope of creating "national champions." However, over the past decade planners have moved away from the "big-is-better" model of industrialization, and instead placed their hopes in science and technology-intensive industry. The first section of this chapter describes how China's contemporary industrial economy emerged from the state-run economy and introduces our first illustrative case of a Chinese IT company, the computer firm Legend Lenovo. The next section describes the emergence of a broader three-tiered industrial system, and indicates where Chinese IT companies fit in. The third section highlights new opportunities and challenges for Chinese IT firms that result from their progressive integration into global production and innovation networks. The fourth section introduces Huawei, China's largest telecommunications and networking equipment manufacturer, our second illustrative case. We examine Huawei's business model and show how the company is seeking to exploit the new international division of labor to foster managerial and innovative capabilities.