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Rapid Growth amid Failed Policies: Market Transition, Industrial Policy, and the Paradoxical Success of China's Auto Industry.

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Title:Rapid Growth amid Failed Policies: Market Transition, Industrial Policy, and the Paradoxical Success of China's Auto Industry.
Authors:Kim, Yong Shin
Contributors:Political Science (department)
Date Issued:May 2017
Publisher:University of Hawaiʻi at Mānoa
Abstract:This dissertation examines how growth-promoting industrial policies failed to realize policy intentions but nonetheless produced rapid growth. The dissertation study is based on eighteen months of field research in China, during which data were collected from primary archival sources and in-depth interviews. The dissertation argues that even when the functioning of state institutions is deficient, industrial policy in a transitional economy can facilitate rapid growth by relieving the commitment problem and, along with other market institutional reforms, opening up a limited amount of market competition. The study demonstrates how industrial policy as a new mode of macroeconomic management to build the socialist market economy failed amid macro institutional reforms across government organizations, state-business, and central-local relations. Nonetheless, the state’s promulgation of industrial policy settled the “credible commitment problem” of doing business in China, while its market institutional reforms freed new types of business actors and local governments to form a coalition that challenged the dominant coalition of actors legitimized by the state. In authoritarian China where legal protection of private property rights is weak, industrial policy indirectly signaled that the central government’s whimsical and predatory behaviors would be significantly reduced in the designated industries. In addition to blocking the negative actions of the central government, industrial policy also showed the central government’s support for industrial promotion. Since embarking on the socialist market economy, the central government has exercised more consistent macroeconomic control thanks to a consolidated government organization structure, enhanced its fiscal capacity through fiscal reform, and strengthened its control over the central state-owned enterprises (SOEs) as the largest shareholder. Ironically, this strengthened control by the central government unleashed market mechanisms that had been suppressed by the local
governments, eventually enabling expanded market behaviors by local governments, subprovincial local SOEs, and private actors. The rise of market competition between rival coalitions, although limited, in turn had the unintended effect of promoting rapid growth.
Previous literature generally assumes that well-functioning market mechanisms or state institutions are necessary for strong economic growth. Hence, the literature primarily emphasizes exogenous challenges arising from globalization, which would either globalize market mechanisms or weaken state capability. In contrast, this dissertation addresses how the endogenous processes of a transitioning economic system affect development outcomes. The dissertation also provides an empirical understanding of Chinese “state capitalism.” Chinese state capitalism succeeded in making selected state-owned enterprises into mega-enterprises, but these are still far from having an institutionalized and sustainable corporate governance structure. Furthermore, the private actors are tied to the central government to gain recognition as legitimate actors in the industry, while they are financially dependent on local governments. Because the private entrepreneurs in China’s auto industry are bound by two different level of constraints, they tend to be “allies of the state,” rather than posing a threat to the incumbent authoritarian regime.
Description:Ph.D. Thesis. University of Hawaiʻi at Mānoa 2017.
Rights:All UHM dissertations and theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission from the copyright owner.
Appears in Collections: Ph.D. - Political Science

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