Networking China

The Digital Transformation of the Chinese Economy

Yu Hong

• Publisher: University of Illinois Press
• Year: 2017
• ISBN:
  9780252099434
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

In recent years, China 's leaders have taken decisive action to transform information, communications, and technology (ICT) into the nation's next pillar industry. In Networking China, Yu Hong offers an overdue examination of that burgeoning sector's political economy. Hong focuses on how the state, in conjunction with market forces and class interests, is constructing and realigning its digitalized sector. State planners intend to build a more competitive ICT sector by modernizing the network infrastructure, corporatizing media-and-entertainment institutions, and by using ICT as a crosscutting catalyst for innovation, industrial modernization, and export upgrades. The goal: to end China's industrial and technological dependence upon foreign corporations while transforming itself into a global ICT leader. The project, though bright with possibilities, unleashes implications rife with contradiction and surprise. Hong analyzes the central role of information, communications, and culture in Chinese-style capitalism. She also argues that the state and elites have failed to challenge entrenched interests or redistribute power and resources, as promised. Instead, they prioritize information, communications, and culture as technological fixes to make pragmatic tradeoffs between economic growth and social justice.

CHAPTER 1

Driving Capitalism to Western China

IT and the Unwieldy Export-Processing Regime

Over the past three decades, China’s economic miracle was built on heavy investment in production-related facilities and infrastructures and was propelled by a China-centric production system capable of assembling large volumes of final products for Western consumer markets. This model of economic growth has not produced equity at home. Western China with its large peasant and worker populations falls far behind the coastal provinces; backwardness is a label separating the hinterland, including Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shanxi, Gansu, Qinghai, Ningxia, Xinjiang, Inner Mongolia, and Guangxi, from the coastal pursuit of capitalist modernity in the image of Western industrialized countries. In terms of political economy, however, the western China region has always been an integral part of Chinese-style capitalism, as a supply base for cheap labor and natural resources, a virgin territory to absorb large sums of investment, and probably a potential market to consume mass-produced commodities.

The Western China Development Program (WCDP), which started in the late 1990s and was renewed and reenergized in the wake of the 2008 global economic crisis, pushed the region back into the policy stage. After 2008, under structural pressures, export-processing enterprises, many in the business of ICT moved inland with the assistance of hosting governments. While the central state was doing something that had rarely been seen before—critically rethinking development—why did local governments in western China develop an information economy by adopting the coastal model that was denounced for future purposes?

To begin exploring the making of a new, network-based economy in tandem with China’s restructuring scheme, this chapter sets up the temporal-spatial positioning of the export-processing regime, underscoring the dominance of ICT manufacturing, and examines the export-processing regime from the perspective of western fringe areas, situating them in the historical and transnational flux. After laying out the historical and structural causes for regional “disadvantages,” the chapter examines recent measures of spatial rebalancing, focusing on the dynamics between state policy and transnational capital.

This chapter argues that under the banner of economic restructuring, state authorities endorsed westward relocation of mega ICT manufacturers, but the western relocation does not change the existing political economy of global digital capitalism. Benefits accruing to local communities in western China are dubious and limited. When the regulatory authority on labor conditions remains decentralized, peasants and peasant-based migrant workers continue to take the brunt of the development around ICT export-processing production. Although the westward industrial relocation may temporarily relieve downward pressure on corporate profits, it undercuts the state’s capacity for increasing the residential income share of the GDP and, thus, diminishes the prospect of higher domestic consumption—a key ingredient for economic restructuring.

This chapter asks two sets of questions: Why and how do communication-related industries—whether hardware manufacturing or network services—become a vehicle for achieving or not achieving regional development? In light of the post-2008 wave of industrial relocation as a spatial fix, what is the prospect for the export-processing regime? And what does the changing position of western China in the global networks of production tell us about the unchanged character of digital capitalism?

A Brief History

For centuries, China, then known as the middle kingdom, faced trouble from the tribal warriors from inner Asia but little from the sea. In the late nineteenth century, however, invasions over the sea from modern Europe posed devastating threats. Qing rulers were overwhelmed by relentless encroachment from the seaboard and were unable to comprehend the expansionist logic of industrial capitalism. The inertia of the court and the inability of the society to respond to the “pull of Western gravity” eventually led to decades of imperialist coercion, political disorder, and economic devastation.1 Thus, the great revolution of the twentieth century, in the view of John King Fairbank, a historian of China, was a long series of domestic struggles attempting to adjust China to the new Eurocentric capitalist system.

China was a semi-colonial and semi-feudal country up to 1949. The domestic household economy, including subsistence agriculture and handicraft manufacturing, was dominant. Although they sprouted in foreign-controlled treaty ports, modern factories were exceptional and irrelevant to the rural hinterland. Except during the 1930s when Chongqing became a wartime national center and industrial enterprises moved in from the northeastern fronts, the hinterland was, by and large, a remote, poor, and even alien-looking space. The state power, although modern in urban enclaves, depended on foreign power to rule; its powerful constituents, compradors and the landed gentry, suppressed socioeconomic reforms, and national programs barely favored the rural majority.2 The turning point did come with the rise of the Chinese Communist Party (CCP) in 1921. As political scientist Lin Chun remarks, the CCP forged a revolutionary alternative against colonial modernity and capitalist integration; succeeded in combating imperialism, feudalism, and bureaucratic capitalism; and established a sovereign socialist nation-state.3

This socialist sovereignty gave China a remarkable capacity for self-determination after 1949. An inward-looking strategy prevailed in the face of international isolation Western industrialized countries imposed. In the First (1953–57) and Second (1958–62) Five-Year Plans, the state ramped up heavy industries in the western backwater. During the First Five-Year Plan, out of 156 Soviet-aided projects, 24 were assigned to Shanxi and 16 to neighboring Gansu province. After China’s relationship with the Soviet Union went sour in the 1960s, the Maoist state further steered resources to its Third Front project intended to foster heavy and defense industries in the west. As a result, Sichuan, Chongqing, and Shanxi all had good industrial bases, with the bulk in the southwestern region led by Sichuan and Chongqing.4 This landward strategy, however, rendered these locales dependent on Beijing for material supply, budgetary support, and purchase orders, with little benefit accruing to hosting locales and their residents, especially rural residents.5

The 1980s saw China’s reentry into the global production and trade system. The changes from the pre-1949 era included the presence of a powerful party state, the absence of indigenous capitalist and landlord classes, and the availability of a self-reliant state industrial sector and millions of peasants free from the feudalistic land bondage. As technocratic leaders survived Mao’s political crusades from 1966 to 1976, they moved fast to nullify the Cultural Revolution and to reinstate economic construction as the top priority. In a gradual way, the post-Mao state joggled loose the planning economy to improve productivity at home. To avoid falling further behind Western industrial economies and especially China’s outward-looking, export-driven East Asian neighbors, the post-Mao state enabled select areas to experimentally relink with the global system. A coastal strategy was underway to allow local initiatives and global forces to interact in special economic zones and open cities.6 Empowered by decentralized authority, local governments in these zones harnessed various channels of resources and actively instituted an outward-looking system.

In the 1990s, the selective, “reformist” integration with global capitalism gave way to a “radicalized” version.7 By 1995 the whole country was virtually open to foreign direct investment (FDI). A biased liberalization policy that gave foreign investors preferred incentives found earnest implementation on the local level. Endowed with incentive and authority to act in an entrepreneurial fashion, local governments at various levels established industrial parks and development zones to ramp up export-processing trade where cheap land, modern infrastructures, friendly administrative procedures, and generous fiscal incentives were available. Transnational corporations and joint ventures, increasingly joined by private enterprises, formed a global logistic network on the Chinese soil.

Also in the 1990s, ICT manufacturing began to spearhead this foreign capital–led, export-processing mode of industrialization. In 1994 the Ministry of Electronics Industry (MEI) encouraged domestic firms to seek foreign, collective, and private capital and to “build a trade structure of importing upscale computers and exporting downscale computers.”8 In 1995 the ministry called upon domestic enterprises to shift from producing household electronics only to making more computer systems and telecom equipment.9 In 1997 developing ICT production became a general economic objective not only for the MEI: To improve the profile of the national economy and its efficiency level, the State Planning Commission, which was replaced by the State Development and Planning Commission in 1998, decreed to cultivate new growth outlets, especially by developing electronics and housing industries and by furthering opening-up.10

Up to 1997, the amount of foreign direct investment in ICT manufacturing was 40 percent of the total industrial investment; between 1990 and 2002, foreign investment in this sector amounted to $70 billion, dwarfing the domestic investment of $22 billion.11 What came out of this FDI boom was a manufacturing powerhouse—with enormous assembly-and-processing capacities. However, the implications are mixed: If South Korea, Japan, Taiwan, and Hong Kong had achieved industrial upgrading by participating in globalized production in the 1960s and 1970s, the global capitalist system was far less lenient toward newcomers in the 1980s and 1990s—as the global neoliberal reform ushered in an “epoch of unprecedented concentration of global business power”—and the ICT sector was no exception.12 Becoming a downstream hub in this production system, China saw its domestic spatiality being reshaped and even distorted to an extreme, which is discussed later.

This export-processing regime is predicated on millions of disciplined workers and their significantly suppressed wage. Between 1995 and 2002, electronics and telecom equipment manufacturing was one of only three industrial sectors with positive job growth, whereas traditional industries, including textile, machinery, steel, and transportation equipment production, all experienced common job losses.13 With foreign-invested enterprises making the majority of sales revenue, ICT manufacturing as a rapidly growing sector for employment fueled the general process of slashing the veteran rank and file in the state-owned sector and expanding the peasant-based workforce in the foreign-dominated sector. Spearheaded by ICT manufacturing, capitalist labor relations were instituted for an externally oriented circuit of accumulation driven jointly by foreign investment and overseas demand.

Although human livelihood was at stake, the attention of top-level leaders was fixated on the “inefficient” economic profile. They noted some undesirable characteristics of the macro-economy, especially the huge waste of natural resources and duplicate construction of low-end manufacturing capacities. In response, the Ninth Five-Year Plan (1996–2000) pledged an economic restructuring.14 Among others, landmark measures included moving welfare services and public goods into the market arena. On the heels in the late 1990s of monetizing housing, education, and health care in conjunction with privatizing state enterprises, a consumer society was forming among China’s urban bureaucratic and professional classes. Yet, the root cause for lagging residential consumption, for example, intense labor exploitation, remained untouched. Between 1995 and 2005, the proportion of residential income in the GDP dropped by 9.8 percent in contrast with the rising shares of corporate and governmental revenue.15

China’s WTO accession in 2001 conveniently brought in enormous investment from transnational corporations, further expanding China’s share in transnational production and global trade. As the export-processing economy-continued to heat up, the call for economic restructuring became subdued. As a resu...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Introduction: China, Crisis, and Communications
• 1. Driving Capitalism to Western China: IT and the Unwieldy Export-Processing Regime
• 2. Repurposing Telecoms for Capital: Networking and Inequality
• 3. Forging Broadband for the Commanding-Heights Economy: State-Business Relations in Networking
• 4. Making a Home-Base Strategy: 3G and 4G Mobile Communications and Industrial Policy
• 5. Recasting the Media System: Network Convergence and Digital TV
• 6. Building Network Nation: Domestic Thrusts and Global Impacts
• Conclusion: Communications and China’s Political Economy
• Appendix
• Notes
• Index