One of the core assumptions of recent American foreign policy is that China's post-1978 policy of "reform and openness" will lead to political liberalization. This book challenges that assumption and the general relationship between economic liberalization and democratization. Moreover, it analyzes the effect of foreign direct investment (FDI) liberalization on Chinese labor politics. Market reforms and increased integration with the global economy have brought about unprecedented economic growth and social change in China during the last quarter of a century. Contagious Capitalism contends that FDI liberalization played several roles in the process of China's reforms. First, it placed competitive pressure on the state sector to produce more efficiently, thus necessitating new labor practices. Second, it allowed difficult and politically sensitive labor reforms to be extended to other parts of the economy. Third, it caused a reformulation of one of the key ideological debates of reforming socialism: the relative importance of public industry. China's growing integration with the global economy through FDI led to a new focus of debate--away from the public vs. private industry dichotomy and toward a nationalist concern for the fate of Chinese industry.
In comparing China with other Eastern European and Asian economies, two important considerations come into play, the book argues: China's pattern of ownership diversification and China's mode of integration into the global economy. This book relates these two factors to the success of economic change without political liberalization and addresses the way FDI liberalization has affected relations between workers and the ruling Communist Party. Its conclusion: reform and openness in this context resulted in a strengthened Chinese state, a weakened civil society (especially labor), and a delay in political liberalization.
Mary Elizabeth Gallagher is Assistant Professor of Political Science at the University of Michigan, Ann Arbor. She is also a faculty associate of the Center for Chinese Studies and the Institute for Labor and Industrial Relations.
List of Illustrations ix Acknowledgments xi List of Abbreviations xv Chapter One: Introduction 1 Chapter Two: Contagious Capitalism 9 FDI as Competitive Pressure 11 FDI and Laboratories for Change 14 FDI and Ideological Change 18 "Opening Up" in Comparative Perspective 19 Conclusion 28 Chapter Three: Blurring Boundaries 30 Chapter Overview 33 FDI in China 33 The Evolution of Foreign Ownership 37 "Letting Go The Small: " FDI and the Sale of SOEs: 1992-45 Competitive Liberalization and Its Effects 56 Conclusion 60 Chapter Four: The Unmitigated Market 62 Policy Liberalization and Labor Flexibility 65 Chinese Firms under Socialism, Pre-1978 66 The Era of Partial Reform, 1978-1992 70 Contagious Capitalism, 1992-76 Contracts and Employment Insecurity 76 Management Domination over or Suppression of Worker Organizations 82 Conclusion 96 Chapter Five: "Use the Law as Your Weapon!" 98 China's Turn to the Rule of Law 101 Labor and Legal Institutionalization 103 The Labor Contract System 105 The National Labor Law 110 Rising Conflict: Labor Disputes in the 1990s 114 Labor Disputes in Comparative Perspective 116 Trends in PRC Labor Disputes 121 Labor Conflict and Foreign Investment 130 Conclusion 131 Chapter Six: From State-owned to National Industry 133 Giving Up on Socialism 136 Developmentalism in Practice: From the Center to the Firm 139 Conclusion 153 Conclusion: The Contradiction of "Reform and Openness" 154 Appendix: Firms and Interviews 159 Notes 163 Bibliography 215 Index 235