The political economy of Singaporean investments in China.doc

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1、The Political Economy of Singaporean Investments in ChinaHenry Wai-chung YeungPublished as EAI Working Paper No.22, East Asia Institute, National University of Singapore, Singapore, 1999.Department of Geography, National University of Singapore1 Arts Link, Singapore 117570 (Tel: 65-874 6810; Fax: 65

2、-777 3091; Email: geoywcnus.edu.sg)About the AuthorHenry Wai-chung Yeung, Ph.D., is Assistant Professor at the Department of Geography, National University of Singapore. He is a recipient of NUS Outstanding University Researcher Award 1998 and Institute of British Geographers Economic Geography Rese

3、arch Group Best Published Paper Award 1998. His research interests cover broadly theories and the geography of transnational corporations, Asian firms and their overseas operations and Chinese business networks in the Asia-Pacific region. Dr. Yeung has published widely on transnational corporations

4、from developing countries, in particular Hong Kong, Singapore and other Asian Newly Industrialised Economies. He is the author of Transnational Corporations and Business Networks: Hong Kong Firms in the ASEAN Region (Routledge, London, 1998), editor of The Globalisation of Business Firms from Emergi

5、ng Markets, Two Volumes (Edward Elgar, Cheltenham, 1999) and co-editor of Globalisation and the Asia Pacific: Contested Territories, (Routledge, London, 1999) and The Globalisation of Chinese Business Firms (Macmillan, London, 2000). His research papers have been published or are forthcoming in over

6、 35 internationally-refereed journals.AcknowledgementThis is a revised version of an earlier paper presented at seminars hosted by the Department of Geography, Chinese University of Hong Kong and the East Asian Institute, National University of Singapore. The collection of materials presented in thi

7、s paper is funded by the National University of Singapore (RP960045 and RP970013). I would like to thank Wan Meng Hao and Elen Sia for their excellent research assistance. The kind help of all interviewees in this project is gratefully acknowledged. I would also like to thank George Lin, Luo Qi, And

8、rew Marton, James Tang, Eric Tsang, Wang Gungwu, Yue-man Yeung and an anonymous reviewer for commenting on earlier versions of this paper. None of these institutions nor individuals should be responsible for any errors or mistakes in this paper.31 March 1999The Political Economy of Singaporean Inves

9、tments in ChinaAbstractThe re-articulation of China into the global economy since December 1978 has led to a tremendous influx of foreign capital during the past two decades. Constrained by the limited domestic market and encouraged by home country government, transnational corporations from Singapo

10、re are increasingly regionalising into the Asia-Pacific. To date, a significant amount of Singaporean investments abroad has gone to China. Based on personal interviews with over 200 parent companies in Singapore and over 50 of their subsidiaries and/or affiliates in Hong Kong and China, this paper

11、aims to examine the political economy of Singaporean investments in China. Specifically, I argue that successful cross-border operations of Singaporean firms are embedded in dense networks of social and political relationships. These relationships provide the political leverage and strategic resourc

12、es to enable the success of Singaporean firms in China. This success, however, is contingent on blending with local politics in China through which foreign firms leverage on the partnership advantage of local governments (difang zhengfu), their enterprises and business activities. Case studies of su

13、ccessful ventures by Singaporean firms and those facing problems in China are presented to support my arguments. Together, these empirical materials shed light on the important role of home country and host country politics in understanding transnational corporations and their international business

14、 operations.Key words: political economy, foreign direct investment, Singapore, ChinaINTRODUCTIONAccelerated globalisation and growing global competition have effectively driven more national firms into international production. Many developing countries have now succumbed to the global economy and

15、welcome cross-border operations by foreign transnational corporations (TNCs). In the Asia-Pacific, the re-articulation of China into the global economy since December 1978 has led to a tremendous influx of foreign capital during the past two decades. To date, China has attracted more than US$50 bill

16、ion investments by ethnic Chinese abroad which accounting for about 80% of total realised foreign direct investments (FDI) in China. These ethnic Chinese have formed more than 100,000 joint ventures in China (Weidenbaum and Hughes, 1996: 27; see also Yeung, 1999a; Yeung and Olds, 2000). In Guangdong

17、 province alone, investments from ethnic Chinese abroad account for some one-quarter of gross output value of all industries. In 1993, ethnic Chinese investors from Hong Kong, Macao, Taiwan, Singapore and other Southeast Asian countries contributed some RMB$85.4 billion to the gross output value of

18、all industries in Guangdong province (RMB$371.7 billion). These figures are very significant when in 1995, China was the largest recipient of total FDI to all developing countries. The UNCTAD (1998) estimates that at US$45.3 billion in 1997, inward FDI to China accounted for 11% of total global FDI

19、(US$400 billion) and 30% of total FDI into developing countries (US$149 billion).Based on personal interviews with over 200 parent companies in Singapore and over 50 of their subsidiaries and/or affiliates in Hong Kong and China, this paper aims to examine the political economy of Singaporean invest

20、ments in China. Constrained by the limited domestic market and encouraged by home country government, transnational corporations from Singapore (SINTNCs) are increasingly regionalising into the Asia-Pacific. Since the establishment of official diplomatic relationships between China and Singapore in

21、October 1990, Singapores FDI into China has increased substantially. China is now ranked as the third largest recipient of Singapores FDI, after Malaysia and Hong Kong. In this paper, I argue that successful cross-border operations of Singaporean firms are embedded in dense networks of social and po

22、litical relationships. These relationships provide the political leverage and strategic resources to enable the success of Singaporean firms in China. This success, however, is highly contingent on blending with local politics in China through which foreign firms leverage on the partnership advantag

23、e of local governments (difang zhengfu), their enterprises and business activities. This aspect of localising global investments is critical because a lot of previous research attention has been paid to the role of production costs and market access in explaining the success or failure of foreign fi

24、rms in China (e.g. Kamath, 1990; Pearson, 1991; Pomfret, 1991; Zhang and Ow, 1996). Similarly, many initiatives by the Singapore government in China have focused on higher level negotiations and agreements with the central government. These projects subsequently face implementation problems because

25、of conflicts of interests with local authorities and officials. Through selective case studies, this paper shows how the understanding and appropriation of local politics in China can enable successful cross-border operations by Singaporean firms in China, irrespective of whether these Singaporean f

26、irms have strong home country government support (e.g. government-linked companies). These case studies are based on successful ventures by Singaporean firms as well as those ventures facing major problems. Together, these empirical materials shed important light on the ways through which Singaporea

27、n firms can achieve success in the host China market. They also demonstrate the important role of home country and host country politics in understanding transnational corporations and their international business operations.The paper is divided into four major sections. The next section offers some

28、 conceptualisation of the role of politics in understanding transnational operations. Such concepts as political leverage and strategic resources of TNCs are developed. Section Two gives an overview of the temporal and spatial organisation of Singaporean investments in China. Empirical observations

29、in this section are based on official FDI data published by Chinese authorities and Singapores Department of Statistics as well as authors survey in Singapore. The third section examines the politics of Singaporean investments in China. Based on personal interviews in Singapore, Hong Kong and China,

30、 three specific case studies are presented to illustrate specific arguments concerning the role of home country and host country politics in explaining the success (and failure) of China operations established by private sector firms and government-linked companies (GLCs) from Singapore. The conclud

31、ing section draws some implications for the strategies and future success of Singaporean firms in China.THE POLITICS OF CROSS-BORDER INVESTMENTS: STATES AND FIRMS IN GLOBAL COMPETITIONThe political economy of transnational corporationsThe role of the nation state has been a key problematic in the th

32、eorisation of TNCs and their global operations. Two streams of theoretical literature can be identified in the study of the relationships between nation states and TNCs: (1) mainstream neoclassical economics and (2) radical political economy (Pitelis, 1991; Yeung, 1998a; 1998b). There is, however, a

33、 general lack of consensus on the role of the state in these two schools of thought. This theoretical impasse arises primarily from their different conceptualisation of the nature of the state and the economic system. Though it is almost impossible to synthesise these two fundamentally different per

34、spectives, it is useful to point out some possible middle-grounds which serve as a framework for analysing the role of the state in the regionalisation of Singaporean firms. Pitelis (1991) has proposed a collusion-and-rivalry framework that appears to be useful in analysing the changing relationship

35、s between states and TNCs. Nation states are conceived as relatively autonomous institutions in the framework. The framework focuses on the relative advantages of different institutional arrangements in explaining the actual or potential coexistence of nation states and TNCs. Collusion here refers t

36、o the mutual dependence and induced cooperation between the state and the TNC. Rivalry, as opposed to conflict, exists because both states and TNCs share the common objective of raising the global surplus of capital by exploiting the benefits from the division of labour and team work. The framework

37、suggests that the state-TNC relationship reflects their extent of collusion and rivalry. In other words, we would expect the state-TNC relationship to vary over time according to different configurations of their collusion and rivalry. In other words, states and firms rival each other in order to se

38、cure a better position in global competition (Stopford and Strange, 1991).What then is the determining factor in explaining these different configurations of state-TNC relationships? I argue that it is local contingency which shapes the causal relationships between nation states and TNCs. For exampl

39、e, in Dunnings (1988; 1993) eclectic framework, he argues that for a TNC to engage in international production, it must simultaneously enjoy three sets of advantages: (1) ownership-specific (O) advantages (e.g. possession of capital and technology); (2) location-specific (L) advantages (e.g. availab

40、ility of cheap labour) and (3) internalisation (I) advantages (e.g. asset specificity and lack of clearly defined property rights). I argue, however, that while the existence of these OLI advantages is necessary to enable cross-border operations by TNCs, they are not sufficient in explaining the suc

41、cess of these transnational operations. In particular, the realisation of these OLI advantages in the host countries is highly contingent upon local factors. On the one hand, some local factors may be formidable obstacles to international production. For example, the existence of intricate webs of l

42、ocal social and political relationships in many developing countries poses a major location-specific disadvantage to foreign firms. In fact, these relationships among local firms and government authorities may rival foreign firms and thereby significantly increase their transaction costs of entering

43、 into the host countries. On the other hand, the same set of local factors may be turned into key strategic advantages for foreign TNCs which are capable to tapping into these local networks and relationships. To do so, many foreign firms need to localise their global operations in the host countrie

44、s and to collude with local authorities for mutual gains. Through this process of global localisation, many foreign firms are able to build up their political leverage and, very often, dominant position in the host countries. To examine the political economy of global competition in which rival stat

45、es interact with rival firms, we turn to a socialist economy, China, which has experienced tremendous transformations during the past two decades. These transformations result primarily from economic reform in China since December 1978. The ways in which the economic dynamic is unleashed in China ar

46、e also contingent upon the continuous unfolding of central-local politics at different spatial and organisational scales.Central-local politics in ChinaTo date, much has been written on Chinas economic reform and its implications for institutional governance and economic development. It is therefore

47、 not my intention here to repeat the main arguments and observations about the reform. Rather, I intend to focus one specific aspect of Chinas economic reform to contextualise my arguments on state-firm relationships in China - the shift of central-local politics in favour of local governments, loca

48、l collectives and local enterprises. As evident later in the empirical sections, this structural shift in post-Mao Chinese politics has very important implications for understanding the success and failure of foreign investments in China. In particular, the key process in Chinas economic reform has

49、been the decentralisation of many decisions to the firm level, or at least to the local government level (Gordon and Li, 1991: 202). These decisions are related to output, production technology and the timing of production. Many state-owned enterprises (SOEs) have become much more profit-oriented, although large-scale SOEs continue to be monitored closely by the state (Guthrie, 1997; Nolan and Xiaoqiang, 1998). The implementation of self-responsibility policies and other aspects of hardening budgeting constraints