Institutions, foreign investment and the local state in Kunshan, China

Abstract

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Inspired by Douglass North’s work on the role of institutions in economic structure and\r\nchange and in particular the role of state institutions, this thesis attempts to explore the\r\nprocess of economic transformation through analyzing state-business community\r\nrelations in the city of Kunshan, Jiangsu, China. The author uses primary data from\r\nKunshan to demonstrate how the open-door policy of China has led to changes in the\r\ninstitutional environment parallel to the economic transformation. Kunshan’s institutional\r\ndevelopment is analyzed in terms of two factors. First is ‘autonomy’ as in the ability and\r\ncapacity of the local state to define and pursue its own development strategy. Second is\r\n‘embeddedness’ as in the local state developing a regular relationship with economic\r\nelites that share its goals of economic transformation. These two are seen as\r\ncomplementary necessities for economic transformation. This thesis shows how the local\r\nstate in Kunshan has strengthened both its capacity and integrity to pursue economic\r\ntransformation and the actual pursuit of it through closer and more institutionalized\r\nrelations with the business community.