China in the world market: International sources of reform and modernization in Chinese industry

This dissertation provides new data and theory on the impact of the outside world on economic and political change in China. Specifically, the effects of international farces are examined in two manufacturing sectors: textiles and shipbuilding. For textiles, it is argued that export success and industrial restructuring have been achieved because of, rather than in spite of, the protectionism of the Multi-Fiber Arrangement (MFA). A similar conclusion is reached for shipbuilding: global surplus capacity (GSC) actually facilitated China's long-term competitiveness by providing the impetus for reform and rationalization that would not otherwise have occurred. In this sense, hard times provided fortuitous, not disastrous, timing for China's entry into the world market. As a result, the dissertation suggests that reform, modernization, and export success is most pronounced for individual Chinese industries when the international environment is characterized by moderate economic closure, not the ideal-typic economic openness assumed by most observers. Specifically, the case studies show how forces of moderate economic closure (MFA and GSC), by restructuring the options available to state officials, induced a change in the pattern of state intervention from bureaucratic to market coordination.While the case studies do show that international forces had a profound influence on policies taken at the industrial level, domestic institutional constraints were also critical for explaining the timing, sequence, and specific content of policy choices. To explain the specific path of industrial change observed in China, the dissertation focuses on three aspects of state capacity: the organizational structure of the state, the nature of the government-industry relationship, and the set of policy instruments available to state officials. Here, the argument is that state capacities structure the adjustment strategies available to a country in responding to external challenges. Based upon this analysis, the dissertation suggests that China has only a limited ability to pursue successfully the kind of strategic industrial policy often associated with Japan, South Korea, and Taiwan. While China's economy and foreign trade may well continue to grow impressively, the pathway it will take as a latecomer is likely to differ substantially from that followed by its high-performing neighbors in East Asia.