Globalization, Market Transition, and Variety of Developmental Models: a comparison of Four Automakers in the Chinese Car Industry

Abstract iv

Table of Contents v

List of Abbreviations x

Acknowledgement xii

1. Introduction 1

1.1 The Puzzle of Differing Developmental Models 4

1.2 Literature Review 12

1.2.1 Specific Studies about the Chinese Automobile Industry 12

1.2.2 The Market Transition Arguments 14

1.2.3 Perspectives of Technological Upgrading 15

1.3 Toward a Theoretical Framework of Social Construction 20

1.3.1 Two General Propositions 20

1.3.2 Approach of Social Construction 22

1.4 Selection of Cases 30

1.5 Outline of Chapters 31

2. FAW, Senior Son of the Chinese Automobile Industry 33

2.1 Persistent Dominance of the Central Government 33

2.1.1 Northeast, The National Heavy-industry Base 34

2.1.2 FAW, A National Automobile Workshop 36

2.1.3 Enduring State-enterprise Relationship in the Reform 42

2.2 New Orientations of the National Car Industry 47

2.2.1 Promotion of Domestic Automobile Production 48

2.2.2 FAW, A Loyal Follower 53

2.3 Transforming FAW for National Interests 54

2.3.1 From State-managed Factory to State-owned Corporation 55

2.3.2 Upgrading under Directions 62

2.4 Case Summery 68

3. Shanghai Automobile, King of Domestic Market 70

3.1 Growth of a Centrally-sponsored Local Developmental State 71

3.1.1 An Industrial Base in the Planned Economy System 71

3.1.2 Shift in the Local Political Structure 77

3.2 Local Plan and National Breakthrough 83

3.2.1 Shanghai’s Initiatives for Cars 83

3.2.2 Ideas about China’s First Joint Venture 87

3.3 Starting a New Age for the Chinese Car Industry 92

3.3.1 Going toward a Locally-owned Corporation 92

3.3.2 Establishing Joint Venture and Making Cars 97

3.4 Case Summery 107

4. Chery Auto, Champion in Making National Cars 108

4.1 Local States Rising in Decentralization 108

4.1.1 Anhui in the Planned Economy Era 109

4.1.2 Decentralization and Local Autonomy 112

4.1.3 “Businessman with Red Hat” 114

4.2 Local Dream versus Central Regulations 119

4.2.1 Making Cars, A New Answer for Anhui Economy 120

4.2.2 Industrial Concentration: A Conflicting Logic 126

4.3 Chery, the Unexpected Automaker in China 129

4.3.1 Hijacking the Central Government for Acknowledgment 130

4.3.2 Making Cars Alone 135

4.4 Case Summery 143

5. Geely Auto, The First Grass-roots Automaker 145

5.1 Market Transition, Zhejiang Type: Rise of Private Economy 145

5.1.1 “Zhejiang Phenomenon” 146

5.1.2 Private Economy, Rising Up in Transition 150

5.2 The Dream for Cars: Personal Impulse or Local Culture? 154

5.2.1 “Taizhou Manufacture”: A Special Local Industrial Culture 154

5.2.2 The Automobile Maniac and His Opponents 162

5.3 Geely Auto, Developed without Official Backgrounds 164

5.3.1 Survival in Discriminations 165

5.3.2 Geely’s Upgrading Road: Challenges and Passion 172

5.4 Case Summery 180

6. Conclusion and Discussion 182

6.1 Four Developmental Models under Social Constructions 182

6.2 Transnational Corporations in the Chinese Car Industry 191

6.3 New Trends of in the Chinese Automobile Industry 195

Appendix I: Chinese Enterprises in the Planned Economy Era 202

Appendix II: The Current Management of Chinese Automobile Industry 203

203

References 204

Biography 219

Table 1: The Automobile Industry of China in the World 3

Table 2: Car Makers in China with a Sale over 50,000 in 2003 10

Table 3: Distribution of “156 Projects” (unit: 1 million yuan) 35

Table 4: Comparisons between Toyota and FAW in 1980s 53

Table 5: National and Shanghai Fiscal Income and Expense (unit: 1 billion yuan) 76

Table 6: Major Joint Venture Projects in the Chinese Car Industry, 1983-2004 91

Table 7: SAIC Group on the Stock Market, 1997 to 2007 97

Table 8: Introduced Cars in Shanghai Automobile, 1985 to 2001 99

Table 9: Major Cases of “Businessman with Red Hat” in Anhui 115

Table 10: The Rank of Anhui Economy across China, 1985 to 1999 120

Table 11: The Rank of Zhejiang Economy across China, 1980 to 2001 147

Table 12: Comparing Zhejiang, Guangdong, Jiangsu and Shandong in 2006 148

Table 13: A Summery of Social Constructions of the Four Chinese Car Makers 186

Table 14: Assembler Projects of the Incoming Transnational Corporations in China 193

Table 15: VW, GM and Toyota in China 194

Figure 1: The Foreign Trade of Automobile in China 3

Figure 2: Developmental Models of Major Chinese Car Makers in Recent Years 6

Figure 3: Geographic Distribution of the Chinese Major Car Makers 7

Figure 4: The Approach of Social Construction 28

Figure 5: The Organizational Structure of FAW 38

Figure 6: Automobile Output of FAW, 1956 to 1980 (unit: vehicle) 39

Figure 7: The Product Structure of the Chinese Automobile Industry, 1955-1981 50

Figure 8 China’s Car Import, 1980s and 1990s 51

Figure 9: The Industry Structure of Shanghai, 1952 to 1978 75

Figure 10: National and Shanghai’s GDP Growth, 1980 to 1990 (unit: percentage) 77

Figure 11: Output of Shanghai-VW and Shanghai-GM, 1985 to 2006 (unit: 1,000) 98

Figure 12: The Ratio of Domestic Production of Santana, 1987 to 1996 104

Figure 13: The Fiscal Decentralization of China, 1980s and 1990s 114

Figure 14: Total Number of Chinese Automobile Assemblers, 1950s to 1980s 127

Figure 15: Patent Number of Automakers in China by February of 2006 141

Figure 16: The Industry Structure of Taizhou, 1978 to 2004 (unit: 1 billion) 155

Figure 17: Geely Auto Going Public, 2003 to 2005 169

Figure 18: Sale of Geely by Models in 2007 (total: 18, 1517vehicles) 176

Figure 19: Chinese Enterprises in Planned Economy Era 202

Figure 20: The Current Management System in the Chinese Automotive Industry 203