Globalization is a commonly cited process in the study of political economy, but its complexities can be easily overlooked. When examined with a comparative lens across many Chinese cities, the story of globalization becomes one of institutional tension and individual ambition. 

According to emerging research by Ling Chen, a 2013­–14 Shorenstein APARC Postdoctoral Fellow in Contemporary Asia, the connection between government and industry, particularly in an authoritarian country like China, reveals a web of competition among, and within, city bureaucracies. These agencies coordinate relations between foreign and domestic firms, sometimes leading to policy manipulation.

Ling Chen

China’s increasing interest and interaction with foreign firms is clear, but the creation of policies affecting industry, and their patterns of implementation on the ground, remain vague. What happens after industrial policy is created? How does policy affect the way that local governments allocate resources among businesses? What are the implications for foreign and domestic firms going forward?

Chen, a scholar of comparative politics and political economy of East Asia, seeks to uncover the decisions and flow of resources related to foreign direct investment, and its impacts on local government and domestic firms. She finds that bureaucracies in many Chinese cities have industrial policies that favor certain firms over others, for example, in government funding, tax breaks and land allocation. And as resource competition in China rises, rivalry among and within Chinese bureaucracies is only destined to grow.

Chen gathered qualitative and quantitative data through intensive fieldwork between 2008 and 2011 on China’s east coast, and did additional follow up interviews this past June. In total, she has conducted about 270 interviews with Chinese bureaucrats and firms, and even observed a few official bureaucratic meetings, an opportunity not afforded to many. Chen’s research at Shorenstein APARC furthers her dissertation work, which she is expanding into a full book manuscript. Before her departure, she spoke with Shorenstein APARC about her research. 

Can you tell us about China’s system of local governance? What are bureaucrats competing for, and what institutional rules exist?

China’s bureaucratic system is very complicated, and being a successful bureaucrat means you are selected for promotion among the 8,000 people working for the government in a typical large city. This implies that bureaucrats compete with each other in order to improve their own status. The party branch and city governments, which are always under pressure for cadre evaluation, appoint bureau leaders based on an assessment of their performance in terms of policy targets each year. Typically, bureaucrats compete for political survival, control over policies, and resources associated with these policies. These factors can help create opportunities for political achievement and facilitate their promotion. So, in general, the institutional rules encourage competition. Whether such competition is good or bad is another question. Interestingly, I found through text analysis of interview transcripts that inter-department and intra-department competition have different influence on the implementation of policies, with the former impeding the process of policy implementation, and the latter facilitating the process. And the types of foreign firms that the government attracts precisely affect such patterns of competition.

Chen visited the Global Center in Chengdu, the largest building in the world, which houses businesses and various recreation centers.

What is policy manipulation, and which policies concern both government and foreign firms?

The policies that interest both sides include: government funding (who gets funding for projects), tax breaks (exemption or reduction), and land (who gets access to economic development zones). Policy manipulation occurs when an agent outside of the issue area diverts resources from its original purpose to another purpose. For example, the government has set up high-tech economic zones and incubators for innovation purposes. But, if bureaucrats utilize the advantages of these zones for other purposes, like attracting foreign firms interested in cheap labor, this reflects policy manipulation because the original goal of the policy is not fulfilled. Bureaucrats are the immediate agents implementing industrial policies, but foreign firms are important as business clients of particular bureaus. Foreign firms’ outsourcing strategies affect the division of labor among government agencies and their local perception regarding who to gain and lose from certain economic policies.  

How do patterns of government-foreign firm interaction and power seeking differ in the rural versus urban settings?

My work mainly concerns the urban areas, but there are interesting variations between rural and urban areas. Due to limited land availability in China, many firms now locate their manufacturing in rural areas, while their headquarters remain in urban areas. In cities that host leading global firms, such as Intel and Foxconn, the firms’ leadership and top city bureaucrats interact directly and often. Typically, the government gives those firms land in top-ranked development zones, whereas rural areas are no longer allowed to host industrial parks to attract foreign firms. If the government allowed rural areas to attract investment, those areas would garner some smaller foreign firms (guerilla investors), and cause messy overlaps with industrial park policies, especially those concerning the hiring of immigrant labor. During the early reform days in the late 1980s and early to mid-1990s, some of these firms were registered as collectively-owned firms under government corporations and only later became independent foreign-invested firms. Interestingly, they didn’t hire local peasants because their village could rent land to earn money. In this situation, you see highly planned bargaining and formal negotiation on the one hand, and on the other hand, informal deals tailored for the firm through various dense networks.

What is the business environment like for foreign firms in China? What does the future hold?

In the eyes of many Chinese bureaucrats, few countries can compete with China in providing services to foreign firms. China attracts firms by setting up “hotel-style” hospitality to cater to the firms’ needs. Some bureaucrats, in my earlier interviews in Jiangsu in 2009, showed that accommodation of foreign firms was written into city rules in the 1980s. If you ask bureaucrats to rank who comes first in the business environment, the answer will often be foreign firms and state-owned enterprises. Domestic private firms are located on the other side of the scale. According to my later research, the situation is slowly starting to change today. Two main reasons are behind this change. First, as land resources become scarce, the city government, particularly on China’s east coast, has been more selective in its preferences. Officials are now mostly focused on the number of global Fortune 500 companies there. Second, the government now has increasingly shifted its focus to innovation and technology capabilities. In contrast to the 1990s, when local governments focused on attracting foreign firms, the support for local R&D by China’s own enterprises has steadily increased. However, the Chinese government is very cautious in saying that they promote domestic firms, at least to external media, because they don’t want to lose investment or violate any World Trade Organization rules. 

On a rainy day last November, twelve fellows made their way up the steps of San Francisco’s City Hall, a true initiation to the town that’s often shrouded in fog. But the grey didn’t affect the day’s mood. Meeting with representatives from the Mayor’s Office, the fellows learned about California’s legislature through the unique lens of San Francisco, the only city statewide that is also designated as a county.

City Hall is just one of many site visits that the fellows attended during their time in the Corporate Affiliates Program at the Shorenstein Asia-Pacific Research Center, a cornerstone initiative that has brought professionals from Asia to Stanford since 1982.

“This year, our class was one of the most diverse ever, with fellows coming from Northeast to South Asia and representing a wide array of expertise from business to aerospace,” says Denise Masumoto, the manager of corporate relations at Shorenstein APARC. “We structured the program to support their interests and spur conversation with APARC scholars, and with those in the community beyond.”

The Corporate Affiliates Program provides yearlong fellowships for professionals from Asia who come to Stanford to learn about the United States, exchange ideas and participate in activities of mutual interest. The fellows keep a busy schedule: conducting a research project, auditing classes and attending site visits and seminars.

Now at the end of the academic year, the 2013–14 class has all but just departed. Before this, Shorenstein APARC spoke with three fellows about their experience: Tetsuo Ishiai from Tokyo, Japan; Tejas Mehta from Mumbai, India; and Wendy (Wei) Wang from Beijing, China. Highlighting moments and memories, the fellows struck conversations that underlined a few common themes.   

Thinking dynamically

At the heart of Silicon Valley, Stanford offers a unique base for fellows. As a hub for technology and venture capital, the area has an entrepreneurial buzz that grabs your attention, Ishiai says.

“To move toward open architecture, this entails movement to a more service-oriented structure,” he explains, and says that industry must ask the right questions. “What specialized services and facilities are required for this? What should be developed as the standard going forward?”Ishiai, who normally works at Mitsubishi Electric’s headquarters in Japan, has examined the shift in data management practices and its implications for business during his time at Shorenstein APARC, leveraging his experiences from over twenty years at the company.

When asked if he would share anything when he arrived back home, Ishiai says a message he will convey is the importance of creativity and determination.Ishiai says Silicon Valley offered an excellent environment to perform his research; he joined conferences at Stanford and visited many IT companies in the Bay Area. Ishiai also talked with industry executives through his courses at Stanford’s d.school.

“Exciting thinking and passion for starting new business ventures was very evident in Silicon Valley culture,” he says. “This type of support and ambition should be encouraged in Japanese corporate culture, especially among young employees, who can often be less recognized.”

Ishiai says he made many connections here, and looks forward to returning to Stanford in the future.

Finding partners

When asked to describe a favorite memory, Wang says that challenges have brought forth her richest experiences as a fellow. Speaking English on a daily basis and finding a stride in university life again were obstacles at first, she says, but when paired with the right people and resources, good things happened.

“I connected with a graduate student at CEAS, who I met with weekly to practice my language skills and share cultural observations,” she says. “We became close friends – I even hosted members of his family when they visited California.”Wang normally works in corporate banking at the Industrial and Commercial Bank of China (ICBC), an entity with an expanding scope of business overseas. To suit this trend, Wang says she sought to improve her English skills while in the United States. Masumoto encouraged her to seek out Stanford’s Center for East Asian Studies (CEAS), which offers advanced Chinese language instruction. There, Wang found a surplus of graduate students who were eager to help.

The theme of collaboration echoed in the courses she audited at the Graduate Business School, which allowed her to interface with top executives from JetBlue and Nike in a small group setting, and through dialogue with her research advisor, Jean C. Oi, a professor and director of the Stanford China Program at Shorenstein APARC. 

“Each time I met with Jean, she would offer up a slew of new questions,” Wang says. “She pushed me to really examine the details of my research – a different experience than I’m used to in China where expression is less direct, open.”

Comparative perspective

The global pharmaceutical industry sees extensive overlap between the government, business and academic sectors worldwide, but the variation across countries is what makes it so interesting, says Mehta, who has worked in medical marketing at Reliance Life Sciences for nearly a decade.

“A significant difference between India and the United States is the two country’s health care systems with respect to their insurance structures,” he says. “However, all stakeholders, whether in the United States or India or elsewhere, share the common objective of improving patient’s treatment outcomes and reducing overall cost of healthcare.”

Mehta analyzed challenges for pharmaceutical businesses through his courses at the Graduate Business School, such as “Leading Strategic Change in the Health Care Industry.” The course is structured to examine the environment for incumbent health care players like companies and hospitals, but also to look at the dynamics for entrepreneurial start-ups. A prime opportunity, given the budding initiatives for innovative treatment and health information services in Silicon Valley. A comparative perspective is necessary to learn from and question how things are done both at home and abroad. Mehta says being at Stanford, an institution with a strong foundation in medicine, greatly informed his research. His focus on theranostics, an emerging field of customizable testing and treatment for patients, was enhanced through dialogue on- and off-campus.

The classroom experience, coupled with visits to a variety of businesses in the Bay Area, gave Mehta a fuller view of the intricate market for U.S. medicine, and its relations with government and the private insurance system.

Looking back, he says it is hard to single out a few memories because there are many, but one that would top his list is visiting City Hall.

Northeast Asia is a global center of economic dynamism, propelled by phenomenal growth in social and cultural interactions among the region's nations. Still, wounds from past wrongs, committed during times of colonialism and war, have not yet fully healed, and the question of history has become a highly contentious diplomatic issue. After one and a half years in office, the leaders of China and South Korea (Korea hereafter) still refuse to hold bilateral summits with their Japanese counterpart, largely due to disputes over the past. Questions about history touch on the most sensitive issues of national identity, making it very difficult for countries to compromise.

How should we understand and approach current historical tensions in Northeast Asia? Pessimists worry that the legacies of the past will persist and that there is not much we can do about it. Optimists believe that these issues will inevitably fade over time as the wartime generation passes away and the countries of the region become increasingly integrated economically and culturally.

Last summer, I had an opportunity to deliver a special lecture series at a Korean university. More than 30 students from China, Japan, Korea, the U.S. and Europe attended the lectures, which focused on problems related to the modern history of Northeast Asia and territorial disputes. I asked students whether they thought Japan had apologized for its past actions of aggression. Korean and Chinese students mostly replied that Japan had either "not apologized at all" or was "not sincere." In contrast, most Japanese students were hardly aware of the misfortunes of the past and the controversies about the government's stance.

The historical amnesia of Japanese students is most worrisome, but the insistence by Chinese and Korean students that the Japanese have not apologized at all is troubling, too. Although the definition of "apology" may vary depending on circumstances, it is undeniable that Japanese leaders, including prime ministers, have directly expressed regret about Japan's actions of aggression to Koreans and Chinese. Of course, legitimate doubts arise in Korea and China as to Japan's sincerity. More than once, a prime minister's apology has been undercut by the denial of wartime responsibility by his education minister, or by a subsequent visit by the prime minister to the Yasukuni Shrine to Japan's war dead.

My teaching experience illustrates the danger posed by a crucial gap in perceptions. History does not merely narrate events or developments. In reconstructing the past, it is inevitable that certain parts are omitted or stressed, producing different views. Divided historical memories separate nations, resulting in distinct, often contradictory, perceptions. Those perceptions become deeply embedded in the public consciousness, transmitted to succeeding generations formally by education and informally through the arts, popular culture and mass media.

Time isn't a cure-all

Why have these nations developed distinct, and incomplete, memories of the wartime period?

One common answer is that Japan was an aggressor while China and Korea were victims, but this is too simplistic to explain the complexities of modern history and collective memory in Northeast Asia. Different events acquire disproportionate weight in the formation of each nation's historical consciousness. For China and Korea, Japanese acts of aggression -- such as the Nanjing Massacre or forced labor and sexual slavery -- constitute the most crucial elements. For Japan, events related to U.S. actions, such as the firebombings of Japanese cities or the nuclear attacks on Hiroshima and Nagasaki, are more important. Korea and China are a less significant element in Japan's memory, while Japan looms large in theirs.

Japan's focus on U.S. actions, over the sufferings of Koreans and Chinese, explains the country's historical amnesia and reluctance to come to terms with its Asian neighbors. Unlike Germany, postwar Japan developed a mythology of victimhood, shaped by the sacrifice of hundreds of thousands of civilians in the massive incendiary and atomic bombings of its cities. Victim consciousness provided fertile soil for the growth of postwar neo-nationalism that justified colonialism and war and denied Japan's responsibility for atrocities.

Balanced historical memory with a better understanding of the perspective of the other side is urgently needed. Japan needs to clearly comprehend the mindset of its neighbors, instead of complaining about its "apology fatigue." China and Korea are also responsible for educating their citizens about Japan's own struggle to come to terms with its past. That kind of mutual understanding rests on resuming efforts at joint historical study with a commitment to open-minded debate. Only then can the nations of Northeast Asia begin to narrow perception gaps and forge a shared view.

This is a task not only for governments but for civil society. We should encourage exchanges among young people from the three countries, including joint visits to historic sites such as the Nanjing Massacre Memorial Hall, Hiroshima Peace Memorial Park and Seodaemun Prison History Museum in Seoul. Such gatherings would constitute a regionwide attempt to share and heal the pains of the past. Disregarding or ignoring dark events means not only evading historical accountability but also missing the opportunity to learn from history. Germany's failure to learn from its defeat in World War I led to the rise of Nazism and another world war. The German experience should provide a valuable lesson for all, especially Japan.

We cannot depend on time alone to heal these wounds. When issues of the past posed a stumbling block in improving relations between China and Japan in the 1970s, Chinese leader Deng Xiaoping said, "Because our generation is not wise enough to resolve all of the pending questions, let's leave the unsettled ones to the next generation." Contrary to his expectations, however, the two countries are stricken today with a worse situation involving history and territorial disputes, and the younger generation tends to be even more swayed by the fever of nationalism.

This is a moment of both danger and opportunity for Northeast Asia. The current impasse in regional relations demands a commitment to confronting the corrosive nationalism fed by the unresolved issues of history. As the wartime generation passes from the scene, they are called upon to leave behind a wiser generation capable of realizing the potential of Northeast Asia to be the center of the 21st century.

This article was originally carried by Nikkei Asian Review on 25 July and reposted with permission.

Human Capital & Ageing

as part of the "Next World Program"

Harvard School of Public Health

Boston, Massachusetts

April 13-14, 2015

Organized by:

David E. Bloom, Harvard School of Public Health, USA; David Canning, Harvard School of Public Health, USA; Karen Eggleston, Stanford University, USA; Wang Feng, Fudan University, China; Hans Groth, World Demographic & Ageing Forum, Switzerland; Alfonso Sousa-Poza, University of Hohenheim, Germany; Thomas Zeltner, Special Envoy, World Health Organization, Switzerland.

Topic

One of the challenges faced by ageing societies is maintaining a workforce large enough to supply the goods and services needed by a country's entire population. In the coming decades, industrialized countries will experience a steep increase in the share of elderly persons in the population and a fall in the share of the working-age population. In some countries, the number of people aged 60-64 (many of whom are about to retire) already exceeds the number of people aged 15-19 (the cohort soon entering the labour market). There will, however, be mitigating factors that will tend to decrease the effects of declines in the working-age share of the population: (a) the burden of caring for a high number of elderly people will be offset by there being fewer children to support, and (b) the proportion of adult women who work will rise when there are fewer children to take care of. Still, if there is no change in work and retirement patterns, the ratio of older inactive persons per worker will almost double from around 38 percent in the OECD area in 2000 to just over 70 percent in 2050 (OECD, "Live Longer, Work Longer", 2006). In Europe, this ratio could rise to almost one older inactive person for every worker over the same period.

Ageing on the anticipated scale will place substantial pressure on public finances and economic growth. According to the OECD, on the basis of unchanged participation patterns and productivity growth, the growth of GDP per capita in the OECD area would decline to around 1.7 percent per year over the next three decades, as compared with about 2.4 percent per year between 1970 and 2000. These negative consequences of ageing could be possibly offset by postponement of retirement, greater immigration, faster productivity growth, or higher fertility (although the positive economic effects of higher fertility would only come several decades after an uptick in fertility rates). While these developments would all help offset the negative effects, they need to go hand-in-hand with attempts to mobilize available labour in order to sustain economic growth. One of the most significant sources of additional labour supply is older people who are currently inactive. Indeed, as labour markets tighten, companies will soon have little choice but to be more welcoming of older employees. Prompt action to harness – and enhance – the contributions of older workers could become a key competitive advantage.

The objective of this workshop would be to discuss one important topic related to an ageing workforce, namely human capital. How does a worker’s human capital change over the life course and what role does the health and skill status of workers play? The answer to these questions is of great importance, not only for adequate human resource policies, but also for macroeconomic policies, especially those associated with retirement and economic growth. Despite the importance of this issue, this question is not easily answered.

The workshop will bring together researchers to present recent research on ageing and human capital. Research questions and topics that could be dealt with include:

• Human capital, economic growth, and the demographic dividend.
• Firm-level experience in promoting human capital among older workers.
• Evaluation of policies aimed at enhancing the quantity, quality, and value of older workers’ human capital.
• The relationship between human capital and productivity.
• Training and wages of older workers.
• Technological change, knowledge replenishment, and productivity. 

Submission for the Workshop

Interested authors are invited to submit a 1-page abstract by the 30th of September 2014 to David E. Bloom (dbloom@hsph.harvard.edu) and Alfonso Sousa-Poza (Alfonso.sousa-poza@uni-hohenheim.de). The authors of accepted abstracts will be notified by the end of October and completed draft papers will then be expected by the 28th of February 2015.

Economy class travel and accommodation costs for one author of each accepted paper will be covered by the organisers.

A selection of the papers presented at the workshop will (assuming successful completion of the review process) be published in a special issue of the Journal of the Economics of Ageing.

Submission for the Special Issue

Interested authors (also those not attending the workshop) are invited to submit papers for the special issue in the Journal of the Economics of Ageing by the 31st of May 2015. Submissions should be made online at http://ees.elsevier.com/jeoa. Please select article type “SI Human Capital.”

About the Next World Program

The Next World Program is a joint initiative of Harvard University’s Program on the Global Demography of Aging, the WDA Forum, Stanford University’s Asia Health Policy Program, and Fudan University’s Comparative Aging Societies. These institutions will organize an annual workshop and a special issue in the Journal of the Economics of Ageing on an important economic theme related to ageing societies.