China Gambles on Modernizing Through Urbanization

Kristen  Looney; Meg  Rithmire

Article | Current History

China Gambles on Modernizing Through Urbanization

by Kristen Looney and Meg Rithmire

Abstract

Contemporary discussions of urbanization and urban construction in China tend to focus on “ghost towns” on the one hand or urbanization as China’s silver bullet to growth and reform on the other. In this paper, we detail what China calls its “New Urbanization Policy.” While these plans aim to formalize previously informal movements of land, people, and capital between urban and rural, the new urbanization does not upend China’s longstanding duality between those categories. The central goals of the new urbanization are to manage urbanization so as to generate domestic demand and reorganize agricultural production without experiencing destabilizing social and political pressures. If successful, the Chinese Communist Party will forge a new path of urbanization, building cities before recruiting urban citizens. The process, however, entails possibilities of yet other social dislocations, including concentrated poverty, ill-planned cities, skyscraper villages, and rural landlessness.

Keywords: Urban Development; Development Economics; Problems and Challenges; China;

Format: Print

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Citation:

Looney, Kristen, and Meg Rithmire. "China Gambles on Modernizing Through Urbanization." Current History 116, no. 791 (September 2017): 203–209.

Book Abstract: Although comparative politics is conventionally seen as the study of politics across countries, the field has a longstanding and increasingly prominent tradition in national contexts; focusing on subnational units, institutions, actors and processes. This book offers the first comprehensive assessment of the substantive, theoretical, and methodological contributions. With empirical chapters from across the contemporary Global South, including India, Mexico, and China, as well as Russia, the contributors show how subnational research provides useful insights about substantive themes in political science, from regimes and representation, to states and security, to social and economic development. In addition to methodological chapters with specific guidance about best practices for doing subnational research, this volume also proposes a set of strategies for subnational research, assesses their strengths and weaknesses, and offers illustrative empirical applications.

Working Paper | HBS Working Paper Series | 2019

Varieties of Outward Chinese Capital: Domestic Politics Status and Globalization of Chinese Firms

Meg Rithmire

Recent focus on China’s surging outward investment has overlooked a puzzling fact about China’s policy regime governing outward investment: rather than increasing liberalization and enhancing domestic “push” factors, China’s policy toward outward investment has been ambivalent and vacillating, pushing large-scale internationalization while also embracing strict capital controls. This paper accounts for China’s ambivalent policy moves by focusing on the domestic coalitions that sustain capital openness. I show how three types of domestic Chinese capital—state capital (SOEs), private capital (SMEs and large competitive firms), and crony capital (firms who enjoy access to profits based non-market rather than market advantages)—differ in political vulnerability and therefore pursue globalization in different ways. While all prefer capital openness, they do so for different reasons: state capital uses preferential access to domestic credit to expand internationally for political power and prestige in addition to profits; private capital, in keeping with the theoretical expectations of the international business literature, seeks markets and/or efficiency; and crony capital seeks to transform domestic access into international safety as quickly as possible. China’s policy ambivalence can largely be explained as the party-state’s attempts to discipline or empower these groups.

Keywords: outward investment; capital controls; Investment; Global Range; Capital; Globalization; Policy; Government and Politics; China;

Citation:

Rithmire, Meg. "Varieties of Outward Chinese Capital: Domestic Politics Status and Globalization of Chinese Firms." Harvard Business School Working Paper, No. 20-009, June 2019. View Details

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In 2015, a surprise presidential election result seemed to imperil Chinese investments in Sri Lanka, which were associated with China’s Belt and Road Initiative to build global infrastructure. In the previous decade, China had undertaken two major projects in the country: the construction of a port in the poor district of Hambantota (also the previous president’s hometown), for which Sri Lanka borrowed 1.2 USD billion dollars from the China Ex-Im bank, and a major real estate project outside of Colombo. The new administration pursued renegotiation of both contracts. In 2016, a Chinese state-owned company purchased the asset of the Hambantota port, generating concerns about sovereignty in Sri Lanka and Chinese naval ambitions in Delhi and Washington, DC. This case explores the dynamics of China's ambitious Belt and Road Initiative, a large-scale infrastructure and connectivity project launched under its powerful leader, Xi Jinping, as well as the politics and economics of sovereign borrowing in the age of Chinese lending. Did Sri Lanka fall victim to a sort of “debt diplomacy,” or did the Chinese side fail to understand Sri Lanka’s domestic political landscape? Was the sale of the asset the right choice for Sri Lanka? The right investment for China Merchants Group, which bought the 99-year lease?

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China Gambles on Modernizing Through Urbanization

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