Local politics and foreign ventures in China's transitional economy: the political economy of Singaporean investments in China

The re-articulation of China into the global economy since December 1978 has led to a tremendous influx of foreign capital during the past two decades. Constrained by the limited domestic market and encouraged by home-country government, transnational corporations from Singapore are regionalising increasingly into the Asia Pacific region. To date, a significant amount of Singaporean investments abroad has gone to China. Based on personal interviews with parent companies in Singapore and their subsidiaries and/or affiliates in China, this paper aims to examine the political economy of Singaporean investments in China. Specifically, I argue that successful cross-border operations of Singaporean firms are embedded in dense networks of social and political relationships. These relationships provide the political leverage and strategic resources to enable the establishment of Singaporean firms in China. This establishment, however, is contingent on blending with local politics in China through which foreign firms use leverage on the partnership advantage of local governments (difang zhengfu), their enterprises, and business activities. This rise of local corporatism is a key institutional consequence of the recent rescaling of China's political economy. Case studies of ventures by Singaporean firms in China are presented to support my arguments. Taken together, these empirical materials shed light on the importance of understanding the role of politics at different spatial scales in influencing transnational corporations and their international business operations. (C) 2000 Elsevier Science Ltd. All rights reserved.