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.

"Growth has helped millions to avoid malnutrition but it still threatens to hold back a generation of rural Chinese."

A recent article in The Economist about malnutrition in rural China cites REAP's research on anemia.

“The propaganda message, scrawled in white paint on the side of a wood-frame house, could hardly be more blunt: ‘Cure stupidity, cure poverty’. The cure for both, in one of China’s poorest counties, seems to be a daily nutritional supplement for children. At a pre-school centre in Songjia, as in more than 600 other poor villages across China, children aged three to six gather to get the stuff with their lunch. If China is to narrow its urban-rural divide, thousands more villages will need to do this much, or more....

"'Babies are probably 50% malnourished' in poor rural areas, says Scott Rozelle, co-director of the Rural Education Action Programme (REAP), a research outfit at Stanford University which has done extensive tests on anaemia in rural China. 'But almost no mums are malnourished.' Mr Rozelle says that in one of his surveys rural mothers showed a better understanding of how to feed pigs than babies: 71% said pigs need micronutrients, whereas only 20% said babies need them."

Read more here.

REAP's Gansu eyeglasses project was featured on CNN's Global Public Square, a program that invites international thinkers and leading journalists to discuss global issues .

When asked about his theory to "think small," Stephen Dubner, the co-author of "Think Like a Freak," said, "We write about these economists who wanted to help education like a lot of people do, and they were in China doing some research and they noticed something very small, which was that if you look at a class picture of these kids in Gang Su province in China, which is rural and poor generally, none of the kids were wearing glasses. And they thought well, that's either because they need them and they don't have them or there, you know, there's no myopia here. And so they did some tests and they found there was plenty of myopia, plenty of kids needed them, but they didn't have them.

"So, they thought let's run an experiment. Just take something as simple as providing free glasses. Half the kids they gave them to, the other half they left as a control group, they left them as is. And after one year, the kids who got the glasses were basically a full grade ahead. Does that solve the education problem? Of course not. But it's an example of how whoever is out there hearing this, whatever realm they're working on, if you peel off a small piece where you can actually get data, figure out what's going on, you can make some progress. I would rather have 100 smart people working on small versions of one big problem than 100 people shouting at each other about the big problem and getting nowhere."

Watch the full clip here.

REAP's efforts on childhood anemia were featured in an article in Scope, an award-winning medical blog produced by writers at Stanford University School of Medicine.

"How can health and nutrition education needs in rural China be addressed? Start by examining infant-feeding practices.

"Scott Rozelle, PhD, director of the Rural Education Action Program, part of the Freeman Spogli Institute for International Studies (FSI) Center on Food Security and the Environment at Stanford, conducted a study on 1,800 babies in China’s Shaanxi province to address high rates of anemia and cognitive delays in children owing to poor nutrition, though not necessarily lack of funds for healthy food...The study is ongoing through April, 2015, but 12 months into the program, the researchers have found that the supplements have reduced anemia rates by 28 percent..." 

Read the article here

Read more about REAP's study on anemia here