The political economy of the Chinese mainland's economic cooperation with Hong Kong and Taiwan

This dissertation adopts the approach of Political Economy to study the interactions of major political and economic factors in the Chinese mainland's economic cooperation with Hong Kong and Taiwan since the end of 1970's, and important politico-economic consequences of the cooperation.; It finds that the major political factor, the PRC (The People's Republic of China) state, has accommodated itself to the major economic factors, the complementarity in factor endowment and competitiveness in commodity trade between the mainland's economy and the economies of Hong Kong and Taiwan, in the economic interchange between the two sides. For political, strategic, as well as economic considerations, the PRC central government has adopted an economically cooperative policy toward Hong Kong and Taiwan, allowing the economic factors to exert their effects. The local governments, motivated by their own interests as sub-national development states and entrepreneurial states, have selectively carried out the central government's policy: obeying and even increasing measures designed as incentives to Hong Kong and Taiwan business people, while only partially carrying out, or even completely ignoring, restrictive measures. Therefore, they have enabled the economic factors to exert effects to an extent greater than that allowed by the central government's policy. As a result, the direction and structures of actual investment flows from Hong Kong and Taiwan to the mainland, and of trade generated thereby, are consistent with the theoretical inference based solely on the economic factors.; This dissertation emphasizes two important consequences of the economic cooperation. First, the cooperation has contributed greatly to the high degree of internationalization of the mainland's economy. Second, the cooperation has deepened the fragmentation of the PRC state, by strengthening the financial independence of local governments and stimulating the flourishing of entrepreneurial bureaucracies.