Fragmented Development: China, East Asia and Emergent Global Production

Enabled by the ICT revolution and broad-based liberalization, global production has ‘fragmented’ as large integrated firms slice up their production processes, and national industries go global. “Fragmented Development” examines the coterminous rise of GVCs and adaptation of China to international fragmentation during the 1990s and 2000s. Utilizing new databases of large-scale Chinese firms and a complete census of trade transaction of every firm in China, the book builds a comprehensive, firm-level perspective of China’s development under international fragmentation.  Fragmented development has several implications.  First, the international firm networks linked to China vary widely in organization, and highlight China’s difficult-to-observe ‘structural emergence’ in the global economy.   Existing between markets and institutions, structural emergence refers to patterned and enduring macro-sociological structures that emerge from unintended micro-behaviors of individual actors through network organization, with varied consequences.  For instance, structural emergence in East Asia better explains a series of long-standing foreign investment anomalies in China, traditionally explained through China’s politicized institutions. Emergent structures also exist in international trade in which tightly bound networks of firms rapidly shift China’s trade patterns and performance in ways that cannot be explained by prevailing trade theories. Development under fragmentation also alters state capacities and industrial policy. While China is well-known for its interventionist state at both national and local levels, Chinese industrial policy has been highly inconsistent across similar sub-industries because state goals, such as nurturing national champions, were often ill-suited and poorly sculpted to GVCs.  Policy has been equally inconsistent in forging articulation between China’s domestic and international production chains.  Domestic producer groups and regions located at certain nodes garner substantial rents at the expense of other groups and regions that are ‘squeezed’ by chain articulation.  In contrast to perceptions of China as a manufacturing and export juggernaut, fragmented development illustrates some of the weaknesses underlying China’s industrialization, and structural constraints on developing countries more generally.