Neoliberalism ‘with Chinese Characteristics’

Foreign direct investment, for its part, met with very mixed

results in the 1980s. It was initially channelled into four special

economic zones in southern coastal regions. These zones ‘had the

initial objective of producing goods for export to earn foreign

exchange. They also acted as social and economic laboratories

where foreign technologies and managerial skills could be

observed. They o

ffered a range of inducements to foreign inves-

tors, including tax holidays, early remittances of pro

fits and better

infrastructure facilities.’

14

 But initial attempts by foreign 

firms to

colonize the internal China market in areas such as automobiles

and manufactured goods did not do well. While Volkswagen and

Ford (barely) survived, General Motors failed in the early 1990s.

The only sectors where clear initial successes were recorded were

in those sectors exporting goods with high labour content. More

than two-thirds of the foreign direct investment that came in dur-

ing the early 1990s (and an even great percentage of the business

ventures that survived) was organized by the overseas Chinese

(particularly operating out of Hong Kong but also from Taiwan).

The weak legal protections for capitalist enterprises put a

premium on informal local relations and trust networks that the

overseas Chinese were in a privileged position to exploit.

15

Subsequently the Chinese government designated several ‘open

coastal cities’ as well as ‘open economic regions’ for foreign

investment (Figure 5.1). After 1995 it virtually opened the whole

country up to foreign direct investment of any type. The wave of

bankruptcies that hit some of the TVEs in the manufacturing sec-

tor in 1997–8, spilling over into many of the SOEs in the main

urban centres, proved a turning-point. Competitive pricing mech-

anisms then took over from the devolution of power from the

central state to the localities as the core process impelling the

restructuring of the economy. The e

ffect was to severely damage, if

not destroy, many of the SOEs and create a vast wave of

unemployment. Reports of considerable labour unrest abounded

(see below) and the Chinese government was faced with the prob-

lem of absorbing vast labour surpluses if it was to survive.

16

 It

could not solely rely on an ever-expanding in

flow of foreign direct

investment to solve the problem, important though this might be.

Since 1998, the Chinese have sought in part to confront this

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