How is genuine technological innovation possible in an authoritarian regime which is deeply involved in the economy? The boom of the Chinese electric vehicle (EV) sector challenges the conventional wisdom that says authoritarianism and a state-controlled economy fail to foster technological innovation.
How is genuine technological innovation possible in an authoritarian regime which is deeply involved in the economy? The boom of the Chinese electric vehicle (EV) sector challenges the conventional wisdom that says authoritarianism and a state-controlled economy fail to foster technological innovation. Meanwhile, scholars have mainly attributed China’s EV boom to successful industrial policies, while they fail to address empirical discrepancies and how inherent problems of industrial policies were minimized in China. This book project offers a theoretical framework for understanding technological innovation under decentralized state capitalism. Key developments between the 1990s and the mid-2010s, namely access to more efficient oversea capital markets, “financialization” of Chinese local governments, and a growing domestic private equity market, foster decentralized state capitalism that combines the best of the capitalist world and the statist world. The marriage between local governments’ investment and the Western capital market helps the government outsource financial expertise, identify genuine potentials for innovation, diversify risks, aligning the government’s interests with the firm’s, and lets losers go by hardening budget constraints. Meanwhile, entrepreneurial firms, particularly start-ups that need consistent and intensive private equity investments to survive, double dip from both the capital market (such as high-intensity incentives for innovation) and the state (such as counter-cyclical investment and other supports): they eventually turn out to be catfish that instigate cut-throat competition. Decentralized state capitalism requires several key conditions to work, and the Chinese EV sector has been particularly successful because of a unique window of opportunity between 2015 and 2021.
Event Speakers
Fengming Lu
Fengming Lu is a Lecturer at the Department of Political and Social Change, Coral Bell School of Asia Pacific Affairs at Australian National University. His main research interests include authoritarian politics, Chinese politics, and the Chinese political economy with a focus on the electric vehicle (EV) industry and state capitalism.