The Impact of Chinese Diaspora on Local Development in China

The article ‘The Chinese Diaspora , Foreign Investment and Economic Development in China’ authored by Alan Smart and Jinn-Yuh Hsu, draws attention of the impact that arises on Chinese local development because of resource mobilization coming from the diasporas. Additionally, the article suggests that, there is a new phase developing in this relationship, where overseas capital is no longer significant as it used to be in the richer areas like Pearl River Delta. The two authors believe that, the Chinese opening up to the world of capitalism after 1979, took the direction of a spatial sequence that was designed for resource mobilization from the Chinese who had their residence in overseas. The Chinese had Special Economic Zones that were situated in the major regions of the migrant origins. Smart and Yuh Hsu article, acknowledges that the greater part of direct foreign investment in the Republic of China comes from the Chinese who are in the diasporas. The local development pattern in China has been affected strongly, in a case, where there is lack or a limited number of emigrant connections.

The article asserts that, from the beginning of the era of China’s economic reform, the Chinese in Diasporas have provided the country with the lion’s share in terms of foreign investment. This has been mainly concentrated in sectors that are export-oriented and production networks. China’s main agenda has been to live in an environment that is peaceful where it can fully expand its flourishing economy and also boost its strength. To achieve this, China has been focused on absorbing larger portions of the foreign direct investment (FDI) which has played an important role in the China’s economic success (pg 544-546). The paper argues that the availability of a big population that posse’s investment capital and the proficiency in the labor-intensive unit of manufacture and export markets that were prepared to accept high uncertainty and high level of risk was an advantage that was very important in the reform strategy of China. It permitted China to retain a high level strategic ambiguity during a time when collaborating with capitalist society was contested strongly. This in turn was able to allow surpluses of trade and reserves of foreign currency which made it possible for Beijing to appease sectors that were powerful such as the people’s liberation army and SEO’s.

The two authors also argue that the role which is taken up by ethnic ties in sectors of high technology differs from the widely described labor-intensive industries. Rather than assuming that the ethnic social capital will fail in industries that were technologically intensive, the two authors contend that its style and role should be changed. The ethnic social capital played a crucial role in reducing costs of transactions and enhancement of mutual trust during the early stages of the Chinese investment in overseas and in the mainland China (544). Following the  change of the environment for doing business, where it became clear, and many people started seeking technological –investment, ethnic ties became an important factor, as it was used as a collective asset that assisted in the recruitment and identification of talents that were appropriate among the Chinese residing overseas in the United States and in the Taiwan Strait. Lastly, the article asserts that social ties founded upon home town and kinship ties are no longer of strategic importance. Relatives who are close are unlikely to posses the specific skills and knowledge that are required for technological competition (562-563). Instead, the weak ties which can be found through classmates and trusted relationship can work much better.

Questions

1. To what extent is the export-oriented industry important in shaping up China’s foreign            investment?

2. How did ethnic social capita reduce cost of transaction and enhance mutual trust?