Local Dynamics of Industrial Upgrading: The Case of the Pearl River Delta in China

238 Pages·2020·5.159 MB·English

by  Yi Liu

Economic Geography
Yi Liu
Local
Dynamics
of Industrial
Upgrading
The Case of the Pearl River Delta in
China
Economic Geography
Advisory Editors
Dieter Kogler , UCD School of Architecture, Planning & Environmental Policy,
University College Dublin, Belfield, Dublin, Ireland
Peter Dannenberg , Geographisches Institut, Universität zu Köln, Cologne,
Nordrhein-Westfalen, Germany
Nuri Yavan , Dil ve Tarih-Coğrafya Fakültesi, Ankara Üniversitesi, Ankara,
Turkey
Päivi Oinas , Turku School of Economics, University of Turku, Turku, Finland
MichaelWebber ,SchoolofGeography,UniversityofMelbourne,Carlton,VIC,
Australia
DavidRigby,DepartmentofGeography,UniversityofCaliforniaLosAngeles,Los
Angeles, CA, USA
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Yi Liu
Local Dynamics of Industrial
Upgrading
The Case of the Pearl River Delta in China
123
YiLiu
Schoolof Tourism Management
SunYat-sen University
Guangzhou, China
ISSN 2520-1417 ISSN 2520-1425 (electronic)
Economic Geography
ISBN978-981-15-4296-1 ISBN978-981-15-4297-8 (eBook)
https://doi.org/10.1007/978-981-15-4297-8
©SpringerNatureSingaporePteLtd.2020
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Singapore
To my father Liu Liqiang
and mother Zhong Huiwen
Foreword
As the world economy is moving into a new decade of the 2020s, we are experi-
encing major transformations and challenges in the global geopolitical economy.
Oneofthekeyissuesatstakeiseconomicglobalizationthathasbeenunderpinned
by the emergence of global production networks in all sorts of industries and
national economies since the 1990s. During the past two decades, China was one
of the national economies that benefited much from its deepened participation in
economic globalization. Its strategic coupling with the dynamics of global pro-
duction networks has led to the rapid emergence of major economic corridors and
high growth regions within its vast national territory. And yet not all regions and
localities in China have gained equally from such coupling with globalization
dynamics.
It is in this context of massive and unequal industrial transformation in China
that this book makes a major contribution to the existing debates on industrial
upgrading. Liu’s careful approach to conceptualizing the different coupling
mechanisms and their geographical implications for understanding industrial
development in a particular high-growth region of China, the Pearl River Delta
(PRD), is especially welcomed. His richly grounded empirical analysis not only
eschewsthegeneralinput–output approachinmanysweepingeconomicstudiesof
global value chains, but also compels us to focus more sharply on the economic
actors who actually perform such upgrading and, in doing so, hold down both
benefits and perils associated with economic globalization to their specific places
and regions. To illustrate his actor-specific mechanisms of strategic coupling, Liu
offers very useful in-depth material on electronics, apparel, and automotive—three
major industries in the PRD that have been coupled differentially with global
production networks.
Atamorepersonallevel,itgivesmeenormouspleasuretowritethisforewordto
Liu’s new book that is based on his doctoral work at the National University of
Singapore.Ashismainthesissupervisor,Iwitnessedfirsthandhistirelessenergyin
both work and leisure! So it is a great outcome to see his ideas and hard work
during doctoral research being further refined and developed into this book-length
publication.Thisbookwillbeanenduringcontributiontoourunderstandingofthe
vii
viii Foreword
dynamics of industrial transformation in China and serving as a useful guide for
researchersandpolicymakerscontemplatingtheroleofglobalproductionnetworks
in economic development in many different parts of the world. I am sure like me,
you will find many instructive lessons to be learnt in this work.
January 2020 Henry Wai-chung Yeung
Distinguished Professor
National University of Singapore
Singapore, Singapore
Preface
Industrial upgrading is a non-stop episode between later-comer and advanced
economiesinourcontemporaryglobaleconomy.Someregionsarecatchingupand
chasing each other, while some are left behind and perished. Living in the Pearl
River Delta (PRD) in China, I have been worried by the question that how late-
comer local firms in China can upgrade before those foreignfirms decide toleave.
This question spurred me to change my major from urban planning to economic
geography while pursuing the Ph.D. degree.
Now, the answer is in this book. But unfortunately, there is no easy and quick
solution for latecomer regions like the PRD to upgrade. Somewhere, later-comer
economies can learn from previous experiences and bypass or even overtake;
somewhere they have to pave their own paths; and somewhere surely fail. The
earlier movers, earlier-mover firms, surely will not be waiting for their potential
competitorstogrowupwithoutdoinganything.Incontrast,theywillkeepshaping
their capabilities to secure their leading position. Hence from the perspective of
geography, the trajectory of industrial upgrading is bounded to be a highly geo-
graphically variegated landscape across different regions. The key is to reveal in
what spatial conditions, firms can better work with their foreign counterparts and
upgrade.
Drawing upon a perspective of relational economic geography, the research
question of this book is further detailed into how strategic coupling between late-
comer regions and the global economy affects local industrial upgrading and how
institutional and spatial conditions matter during the process of local upgrading.
Thecentralargumentofthisbookisthatlatecomerregionsstrategicallycouplewith
the global economy in different ways which lead to dynamic outcomes of local
upgrading. In order to explain the dynamics, this book conceptualizes a fourfold
typology of strategic coupling including: captive, cooperative, reciprocal, and
absorptivecoupling.Thevarietyresultsfromdifferentconfigurationsofknowledge
gaps and power relations between local firms and foreign firms. This book further
argues that these knowledge gaps and power relations are not only influenced by
inter-firm governance patterns but also subject to changing capabilities of local
ix
x Preface
firms and institutional–spatial contexts in which they are embedded. The more
developed synergy within strategic coupling is, the more upgrading will occur.
This book empirically investigates the development of thePRD from the 1980s
to the 2000s to show that the region has been upgraded from an agricultural
backwaterintooneoftheworlds’leadingmanufacturinghubs.Startingwithcaptive
coupling, the PRD’s regional trajectory of upgrading has gradually become
divergent among different industries. In the electronics industry, the captive cou-
pling has been developed and reinforced whereby foreign-invested enterprises
(FIEs) dominate the pace of upgrading and the achievement of local upgrading is
limited. In the apparel industry, the captive coupling has evolved into cooperative
coupling in which local private enterprises have taken over the dominant role of
FIEsandachievedsubstantialupgrading.Intheautomotiveindustry,thereciprocal
coupling has been developed in the form of joint ventures between local
state-owned enterprises and global automakers under strong national intervention.
Process upgrading has been significantly achieved in the joint ventures and their
localsuppliers.Thisbookhasyettoidentifytheformationofabsorptivecouplingin
the PRD, but it would probably be developed in the apparel industry in the future.
The PRD case demonstrates that the domestic market, regional supply networks,
and competitive dynamics within the global production networks (GPNs) are the
most important assets for fostering local upgrading. Successful cases of local
upgradinglargelyderivefromthesynthesisofvariousassets,ratherthanrelyingon
one single type of assets.
Echoing with many studies in economic geography, international political
economy,anddevelopmentstudies,thisbookaimstorevealthedynamicprocessof
upgradingembeddedintheglobalindustrialshiftsbetweentheNorthandtheSouth
thatbeyondtheexplanationfrommainstreameconomics.Itwouldcontributetoboth
the studies of industrial upgrading and GPNs. To the former, this book delineates
how diverse geographical outcomes of industrial upgrading are produced by three
keyactors(foreignfirms,localfirms,andstateinstitutions).Thisprocesscannotbe
simplified into a rigid trajectory or mystified as a secret that latecomer economies
cannot know. To the later, this book theorizes the causality between strategic
coupling and local upgrading on the basis of the case of the PRD. It provides a
geographical reinterpretation for the studies of the global value chain (GVC) and
offers a typology of strategic coupling as a critical complement to the framework
of the GPNs. This book reminds policy makers of seeking for niche strategies by
identifying multi-scalar conditions, rather than placing their hopes in some
corner-cuttingstrategies,mathematicmodelsorthehelpsfromthegloballeadfirms.
Guangzhou, China Yi Liu