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ABSTRACT
The current global financial crisis has prompted researchers to revisit the export-oriented development models, known as the ‘Washington Consensus’ paradigm, that have prevailed in East Asia during the past few decades. Host domestic markets have been generally neglected in the conceptual construct and empirical analysis of export-oriented development. Drawing upon the global production networks (GPNs) perspective, the study advances an evolutionary framework to shed light on the rising domestic market in China as emerging dynamics of regional transformation in contemporary economic globalization. The study is conducted based on updated investigations of the market rebalancing of transnational corporations (TNCs) in China, and particularly the Pearl River Delta (PRD), in response to the post-crisis global–local interaction. It argues that the institutional and network embeddedness of TNCs in the processing trade regime have hampered their ‘recoupling’ with the domestic market and ‘decoupling’ from external markets. Instead, a domestic market oriented production network is emerging, driven by strategic contract manufacturers through relocation to inland China. As a pilot attempt to articulate the domestic market in the GPN framework, this study urges more research to reflect the implications of the restructuring of GPNs and market reorientation of TNCs for reshaping regional trajectories in the post-Washington Consensus global economy.
ACKNOWLEDGEMENTS
An earlier version of the paper was presented at the international workshop on “Value Chains, Production Networks, and the Geographies of Development: Emerging Challenges and Future Agenda” held at the National University of Singapore (NUS), December 1–2, 2011. I would like to thank Henry Yeung at NUS, Jeff Nielson and Bill Pritchard both at the University of Sydney for inviting and funding me to present my paper at the workshop. I am very grateful to the participants of the workshop and three anonymous referees of RIPE for their constructive comments and suggestions. Financial supports of the General Research Grant (HKBU 457210 and HKBU 251712) from Hong Kong Research Grant Council for conducting the research are gratefully acknowledged.
Notes
1The ‘Washington Consensus’ was first presented in 1989 by John Williamson, an economist from the Institute for International Economics in Washington DC. It was a paradigm that focused on economic growth and advocated the market as a universally efficient mechanism to allocate resources and foster economic growth. Since 2000, especially following the 2008 global financial crisis, it has been replaced by a contrasting paradigm, termed the ‘post-Washington Consensus’, which emphasizes the need of different institutions for different economies and recognizes cases in which governments’ market interventions play a positive role.
2While ‘exploring the domestic market in China’ was listed among the top five driving forces by TNCs for cross-border investment, domestic sales have been constrained by the pro-export institutional environment, a particularly stringent restriction designated by the Chinese government, even though TNCs have practised ‘domestic sales’ in other ways, such as reimporting, as discussed in this paper. The notion of ‘recoupling’ is, therefore, used to reflect the on-going market reorientation of TNCs, which has been encouraged by the Chinese states as one of the measures of ‘transformation of the export-oriented development to domestic consumption-driven development’ in the recently released 12th Five-Year Plan.
3Export tax rebate refers to the money the tax authority returns to exporting enterprises for the indirect tax they pay in the production and distribution process. Value-added tax (17 per cent for most products in China) applies to all activities of value formation, including the production and distribution of goods and the provision of services. Five major adjustments to export VAT refund policies have taken place over the past 20 years due to various reasons, such as increasing fiscal revenue, adjusting to international market fluctuations, commitment to the WTO and the 2008 global financial crisis.
4Although most of the reimports travelled through Hong Kong (the so-called ‘Hong Kong one-day round trip trade’, xianggang yiriyou), they are recorded as ‘China–China’ trade and should not be confused with ‘China–Hong Kong’ trade or China's indirect trade with other countries via Hong Kong. The top five reimporters during 2000–08 were China, the UK, Canada, Thailand and Malaysia. The share of reimports in China's total imports increased from 0.12 per cent in 1980 to 9.35 per cent in 2006 and dropped to 8.2 per cent in 2008 and 7.7 per cent in 2010 (China Customs Administration, 2011). For other countries with large reimport values, such as France, the UK, Canada, Australia and Thailand, reimports made up only 0.5–1.2 per cent of the total imports.
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Chun Yang
Chun Yang is Associate Professor in the Department of Geography, Hong Kong Baptist University. Her research interests cover urbanization and regional development in China, cross-border production networks of transnational corporations, industrial clusters of Hong Kong and Taiwanese investment in the Pearl River Delta and Yangtze River Delta, regional innovation systems and indigenous innovation, and cross-border city-region governance of the Hong Kong- Pearl River Delta region. Dr Yang is currently studying restructuring of global production networks and urban/regional transformation in China.