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Joint Ventures in the People's Republic of China

Joint Ventures in the People's Republic of China: The Control of Foreign Direct Investment under Socialism

Margaret M. Pearson
Copyright Date: 1991
Pages: 357
https://www.jstor.org/stable/j.ctt7t39q
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  • Book Info
    Joint Ventures in the People's Republic of China
    Book Description:

    When Chinese leaders announced in late 1978 that China would "open to the outside world," they embarked on a strategy for attracting private foreign capital to spur economic development. At the same time, they were concerned about possible negative repercussions of this policy. Margaret Pearson examines government efforts to control the terms of foreign investment between 1979 and 1988 and, more broadly, the abilities of socialist states in general to establish the terms of their own participation in the world economy. Drawing on interviews with Chinese and foreigners involved in joint ventures, Pearson focuses on the years from 1979 through 1988, but she also comments on the fate of the "open" policy following the economic retrenchment and political upheavals of the late 1980s. "Since the policy of `opening' was launched in Beijing in 1979 some Chinese leaders have favoured foreign investment, while others have feared that it would carry ideas and institutions that would corrupt Chinese socialism. This study of Chinese policies toward foreign-invested enterprises (FIFs) during the 1980s broadly charts significant changes in the impact of these competing views on policy. . . . Pearson's overview and analysis provide thought-provoking perspectives. . . . Pearson furnishes excellent evidence that throughout the 1980s the pressure for reform was so great that the conservatives had to retreat repeatedly, despite their concerns about the decline of collectivist values and the Maoist dream."--Stanley Lubman, The China Quarterly

    eISBN: 978-1-4008-2056-6
    Subjects: History

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Tables and Figures
    (pp. ix-x)
  4. ACKNOWLEDGMENTS
    (pp. xi-xii)
  5. ABBREVIATIONS
    (pp. xiii-2)
  6. INTRODUCTION AND OVERVIEW
    (pp. 3-7)

    In a dramatic shift in foreign economic policy, the Chinese leadership, in late 1978, announced that China would “open to the outside world.” As part of this new “open” policy, China embarked on a strategy to use private foreign capital to spur economic development. The post-Mao leadership believed that by absorbing foreign direct investment China would gain access to new sources of capital, advanced technology, and management skills, as well as to international markets that would absorb China’s exports and provide foreign exchange to finance China’s import needs.

    Because China’s leaders had followed a policy of self-reliance since the mid-1960s...

  7. Chapter One THE POLITICAL ECONOMY OF FOREIGN INVESTMENT IN CHINA: ISSUES AND FRAMEWORK
    (pp. 8-36)

    Developing countries such as China that incorporate foreign capital into their development plan frequently employ a dual-edged strategy: they try at once to absorb enough capital to provide the desired developmental benefits, but at the same time they try to maintain state control over the terms of investment. The strategy is an attempt to reap what these governments perceive to be benefits of investment and avoid what they view to be negative results. The success of such a strategy depends on the host state’s capacity to control the terms of investment. That capacity is in turn influenced by the domestic...

  8. Chapter Two THE CHINESE OUTLOOK AT THE OUTSET OF THE FOREIGN INVESTMENT POLICY
    (pp. 37-65)

    In legitimizing the use of foreign investment, the reformers argued that, in contrast to the past or to other developing countries, the Chinese socialist state had the capability to guard against the perceived negative effects, while absorbing the benefits. Despite the newfound justification for using foreign capital, the lessons the post-Mao leadership drew from China’s experience with foreign powers in the nineteenth and early twentieth centuries left it, in the late 1970s, with a strong legacy of concerns about the potential negative impact of foreign direct investment. This legacy shaped the outlook of reformers and conservatives toward China’s engagement in...

  9. Chapter Three THE PATTERN OF FOREIGN DIRECT INVESTMENT IN CHINA, 1979–1988
    (pp. 66-99)

    At the initiation of the foreign investment policy, the reformers, cognizant of China’s past experiences with the outside world, reasoned that the strengths of China’s socialism positioned it to reap the benefits offered by engagement in the world economy and, specifically, would allow China to both absorb foreign investment and control the terms of investment sufficiently to avoid harm. Chapters 4 and 5 describe the attempts of China’s government to use its strengths to control the terms of investment. They argue that although the Chinese government began with a very strict set of controls, and was able to maintain controls...

  10. Chapter Four CONTROLS AT THE NATIONAL AND REGIONAL LEVELS
    (pp. 100-162)

    In light of the views held by the Chinese leadership in the late 1970s and early 1980s about the risks and benefits of using foreign capital, the joint venture policy had to serve two purposes. It had to attract and keep foreign capital and at the same time meet the myriad concerns of both reformers and conservatives about possible negative effects of foreign investment. The need to control foreign direct investment thus was an integral, inseparable part of the original policy, and on a proximate footing with the goal of absorbing foreign investment. As one group of reformers stressed, “[W]e...

  11. Chapter Five CONTROLS AT THE ENTERPRISE LEVEL
    (pp. 163-198)

    A central reason of China’s reformers for deciding to attract foreign direct investment was to learn foreign management skills and improve the capability of Chinese managers. But, at the same time, the Chinese government wished to avoid domination of foreign sector enterprises by foreign managers, as they perceived to have occurred during the 1950s when Chinese managers were to learn “advanced methods” from Soviet technicians.¹ Also, their knowledge of local conditions, domestic labor, and so on, gave Chinese managers a technical basis for substantial control in some realms.² At the start of the “open” policy, then, a major goal of...

  12. Chapter Six CONCLUSION: THE CONTROL OF FOREIGN DIRECT INVESTMENT UNDER SOCIALISM
    (pp. 199-224)

    After a decade in effect, the results of China’s efforts to simultaneously absorb and control foreign direct investment proved to be highly complex. And yet several patterns in how the policy was set and how it evolved over time have become evident. These patterns, albeit uniquely Chinese in some important ways, have arisen from an interplay of forces that can be found generally in other socialist states that attempt the dual strategy of control and absorption of foreign investment. This concluding chapter explores the patterns that have emerged from the foregoing examination of national, regional, and enterprise controls in China....

  13. Appendix A METHODOLOGICAL ISSUES
    (pp. 225-231)
  14. Appendix B NONEQUITY FORMS OF FOREIGN DIRECT INVESTMENT
    (pp. 232-233)
  15. Appendix C SUMMARY OF SAMPLE DATA PRESENTED IN THE TEXT
    (pp. 234-236)
  16. NOTES
    (pp. 237-300)
  17. BIBLIOGRAPHY
    (pp. 301-320)
  18. INDEX
    (pp. 321-335)