Going Out or Opting Out? Capital, Political Vulnerability, and the State in China's Outward Investment

How do state-business relations interact with outward investment in authoritarian regimes? This paper examines this question in the context of China’s rapid transformation into major capital exporter. While most political economy scholarship focuses on firms’ economic profiles to discern preferences toward international openness, this paper shows the importance of domestic political status and specifically business’s vulnerability to the state in explaining the behavior of firms as they invest abroad and the state’s reaction. I present three types of domestic capital that differ in economic and political logic as they go abroad: tactical capital pursues political power and prestige, competitive capital pursues commercial goals, and crony capital seeks refuge from the state and asset expatriation. The Chinese regime’s approach to outward investment, which I characterize as mobilization campaigns adjusted over time and combined with targeted domestic regulation, endeavors to treat these different kinds of capital differently, deploying and disciplining tactical capital, enabling competitive capital, and constraining crony capital.