UC Berkeley

This dissertation investigates the effects of international linkages on regional economic development in China, with a specific focus on China's burgeoning automotive industry. Whereas most scholars predicted that China's entry into the WTO would increase economic liberalization, I argue that China's WTO entry ironically enabled local governments to gain increased authority and incentives to undermine domestic competition by restricting the Chinese Central government's ability to monitor and control local protectionism. In order to enter the Chinese automotive industry, foreign corporations must form JVs with local governments. These governments frequently manipulate public policy to favor their JV partners over those of neighboring regions. Therefore, China's entry into the WTO has only resulted in what I call "fragmented liberalization," whereby sub-national governments selectively adopt measures of liberalization and protectionism rather than wholly adopt liberalizing measures imposed by the WTO on the Chinese Central government. Second, I also contend that multinational corporations are not necessarily the main drivers of liberalization as often assumed in the literature, in that the foreign partners within sub-national JVs foster fragmented liberalization in China. Third, while China has increasingly integrated its economy into the global economy, it has been using state-owned enterprises to promote economic development and industrial upgrading. Yet I find a great deal of variations in the extent to which state-owned enterprises have been able to engage in backward and forward linkages by drawing on their global automaker partners. Thus, understanding the micro-foundations of industrial policy is critical to understanding its impact on the global economy and international institutions. To show this, I conducted a structured comparative case study of three automotive JVs (Shanghai GM, Beijing Hyundai, and First Auto Works-Tianjin Toyota). I collected data through in-depth interviews and the analysis of secondary publications, primary documents and archival materials. I spent 18 months in China and conducted 112 in-depth interviews in Chinese, English, Korean and Japanese. My research highlights the importance of considering industrial policy at the sub-national level precisely because this is the level at which nation-to-nation agreements and national regulations are implemented and reinterpreted on the ground. By examining the interplay of international, national and sub-national politics, I show that international agreements like the WTO have complex effects that are both counterintuitive and heavily dependent on the local context.