China's Emerging Global Businesses: Political Economy and Institutional Investigations (review)

Observers of China's economy have during the last two decades or so focused on the domestic reforms of China's economy and the huge inward investment both from foreign countries and from Hong Kong and Taiwan. In spite of scattered news stories on Chinese business acquisitions abroad and some attention paid by business journalists since the early 1990s to Chinese activities on international financial markets, academic research on emerging Chinese multinational corporations has been rather slow off the ground.

Zhang Yongjin's book is a most welcome and well-written account of how three Chinese state corporations became multinationals and played a major role in establishing China as an international investor. The main strength of the book is that it provides an overview based on a narrative of corporate strategies at the top level of the companies, outlining overall changes in policy and explaining in general the changes in the international climate. This focus allows the casual observer of China's economy to follow easily what is potentially an extremely complex process. For those who have watched China's development more closely over the last twenty-five years, the comprehensive exposition of the issues is helpful, as it demonstrates the scope and mechanisms of China's outward investment in a way that chimes in with our general understanding of China's political economy.

Among the great virtues of the book is the level-headed analytical insistence on political-economy explanations of both policy and business behavior, understanding the whole process as intimately linked with the reform policies and gradual political and institutional change, explaining convincingly how the virtually fenced-off Chinese economy in the late 1970s began to interact with the rest of the world on a new scale and using methods originally rejected for ideological reasons.

Zhang resists the temptation to interpret as a sign of "familism" and "traditionalism" the ability of senior cadres-cum-CEOs to place their offspring in plum positions as CEOs of international subsidiaries, and he also gently avoids the much more appropriate accusation of nepotism to describe such behavior. Zhang's evidence is so rich and the accounts of events so well researched that he does not need such effects to spruce up his narrative.

Zhang focuses on three case studies, arguably the largest and most important Chinese multinationals, and he examines them at a general corporate level, placing them in relation to the main economic policies and indicating the preferential treatment they received from the Chinese authorities. While this allows the reader to focus on core developments, the book does not examine the companies and their corporate cultures, the way they dealt with SOE reform, how they piggybacked individual traders, and whether or not their foreign ventures had an effect on changing the corporate culture in domestic branches and subsidiaries. Did they, for example, have as an aim the developing of "international" business practices and thus helping to change the Chinese corporate landscape? Zhang does not tell.

While Zhang presents the Chinese multinationals as independent companies, one cannot escape considering to what extent their top leaderships are drawn into national politics. How are they appointed? And which decision-making state and Party positions do they hold? How well were the roles of principals (owners) and agents (directors) in reality distinguished? Were the resources of the corporations exclusively utilized to maximize their profit and turnover—or were they meshed in with national political strategies of wider significance? Although Zhang's presentation steers clear of these issues, they are latent throughout the book and ought to have been discussed in more depth. Even if the Chinese authorities are in general quite scrupulous in asserting the divisions of authority, one may ask whether SOEs (be they multinational or not) enjoy the freedom to pursue their profit aims single-mindedly. Conversely, it would be good to know to what extent leaders of Chinese multinationals can manipulate Chinese politics to...