FRAGMENTED DEVELOPMENT: CHINA, EAST ASIA AND EMERGENT GLOBAL PRODUCTION

 

Enabled by the information and communication technologies revolution and broad economic liberalization over the past decades, global production has ‘fragmented.’  Large integrated firms have sliced up their production processes into increasingly fine tasks and dispersed them around the world. With enhanced capabilities to communicate, monitor and coordinate from long distances, firms have de-verticalized, and industries have de-agglomerated and internationalized through outsourcing, offshoring, international licensing and strategic alliance, without sacrificing coordination and control over each fragment of their globally dispersed production networks.  This makes possible ‘control without ownership’ on a global scale.  Fragmentation SmartPhones iphone_china_flag

 

The implications of international fragmented production are difficult to judge for the developing countries and the regions that are deeply integrated into production networks — Mexico, Turkey, Eastern Europe, Southeast and East Asia and China. While they benefit from the rapid spread of industrialization through employment, growth and low level skill and knowledge enhancement, it is also possible that these new forms of production impose structural constraints on developing countries.  Pathways for firm upgrading (technology, skills, knowledge, etc.) may be circumscribed by the transnational enterprises (TNEs) that coordinate the global production networks or ‘global value chains.’ These production transformations also have important implications for public policy and industrial catch-up, compared to the prior era of national production systems. Fragmentationsourcemap-running-shoe

 

Beginning in the late 1970s, China’s market reforms and opening up to the international economy was coterminous with these structural transformations of production, and over the course of the 1990s, China became intimately integrated into East Asian regional production and trans-regional commercial networks.

 
My book project, Fragmented Development: China, East Asia and Emergent Global Production, is Janus-faced in examining the contemporaneous transformations of the international political economy and China’s integration and adaptation to them.

 

First, from the perspective of China, the book examines the growth of  inter-firm networks which link together ‘lead’ or network-coordinating TNEs, East Asian intermediaries, Chinese-located factories and intermediate goods suppliers. Utilizing new and unique data sources, I find that these networks constitute difficult to observe ‘structural emergence’ in the international economy.  In contrast to ‘markets and institutions’ approaches to IPE, structural emergence consists of patterned and enduring macro-sociological structures which emerge from unintended micro-behaviors of individual actors through network organization.  Existing between markets and institutions, structural emergence offers new explanatory leverage to IPE scholarship. For instance, the book finds that TNE-coordinated production networks in East Asia better explain a series of foreign investment anomalies in China, which both general and China-specific FDI literatures have traditionally explained through China’s weak and politicized institutions. The book’s network approach also finds new emergent structures in international trade (called ‘trade channelization’), which does a better job of explaining China’s trade patterns and performance in export-oriented industrialization than existing firm heterogeneity trade literatures.

 

These insights rely upon unique micro-data sources, including a Chinese transactional trade database (every import and export transaction recorded by every firm located in China), large scale firm-level surveys, economic census data and GIS data, which are part of my China Transactional Trade and Investment Data Project (CTTID). These data are unique because they are simultaneously both micro-level and full census data, allowing for a comprehensive, firm-level perspective of the international economy and Chinese development.


Second, looking inwards to China, the book turns to examine the relationship between international fragmented production and Chinese industrial policy, regional development and producer groups interlinked along China’s domestic chains of production. Using an inter-industry and intra-industry research design and process tracing, the book investigates characteristic traits of fragmented development, including an enduring division and hierarchy between foreign and domestic firms, distinct trajectories in Chinese regional development based on international linkages and disarticulation across China’s domestic production chains.  In contrast to the perception of China as a manufacturing and export juggernaut, fragmented development illustrates some of the limitations and weaknesses underlying China’s industrialization. This second, China-focused part of the project draws from in-country interviews, newspaper and trade journals, internal government documents, yearbooks, local gazetteers, and digital mapping techniques (ArcMap), from almost two years of fieldwork in China.

 
Please contact me if you would like more information about this project (dallasm@union.edu).