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One of the core assumptions of recent American foreign policy is that China's post-1978 policy of "reform and openness" will lead to political liberalization. This book challenges that assumption and the general relationship between economic liberalization and democratization. Moreover, it analyzes the effect of foreign direct investment (FDI) liberalization on Chinese labor politics. Market reforms and increased integration with the global economy have brought about unprecedented economic growth and social change in China during the last quarter of a century. Contagious Capitalism contends that FDI liberalization played several roles in the process of China's reforms. First, it placed competitive pressure on the state sector to produce more efficiently, thus necessitating new labor practices. Second, it allowed difficult and politically sensitive labor reforms to be extended to other parts of the economy. Third, it caused a reformulation of one of the key ideological debates of reforming socialism: the relative importance of public industry. China's growing integration with the global economy through FDI led to a new focus of debate--away from the public vs. private industry dichotomy and toward a nationalist concern for the fate of Chinese industry. In comparing China with other Eastern European and Asian economies, two important considerations come into play, the book argues: China's pattern of ownership diversification and China's mode of integration into the global economy. This book relates these two factors to the success of economic change without political liberalization and addresses the way FDI liberalization has affected relations between workers and the ruling Communist Party. Its conclusion: reform and openness in this context resulted in a strengthened Chinese state, a weakened civil society (especially labor), and a delay in political liberalization. Mary Elizabeth Gallagher is Assistant Professor of Political Science at the University of Michigan, Ann Arbor. She is also a faculty associate of the Center for Chinese Studies and the Institute for Labor and Industrial Relations.

List of Illustrations
List of Abbreviations

Chapter 1. Introduction

Chapter 2. Contagious Capitalism

  • FDI as Competitive Pressure
  • FDI and Laboratories for Change
  • FDI and Ideological Change
  • "Opening Up" in Comparative Perspective
  • Conclusion

    Chapter 3. Blurring Boundaries

  • Chapter Overview
  • FDI in China
  • The Evolution of Foreign Ownership
  • "Letting Go The Small: " FDI and the Sale of SOEs: 1992
  • Competitive Liberalization and Its Effects
  • Conclusion

    Chapter 4. The Unmitigated Market

  • Policy Liberalization and Labor Flexibility
  • Chinese Firms under Socialism, Pre-1978
  • The Era of Partial Reform, 1978-1992
  • Contagious Capitalism, 1992
  • Contracts and Employment Insecurity
  • Management Domination over or Suppression of Worker Organizations
  • Conclusion

    Chapter 5. "Use the Law as Your Weapon!"

  • China's Turn to the Rule of Law
  • Labor and Legal Institutionalization
  • The Labor Contract System
  • The National Labor Law
  • Rising Conflict: Labor Disputes in the 1990s
  • Labor Disputes in Comparative Perspective
  • Trends in PRC Labor Disputes
  • Labor Conflict and Foreign Investment
  • Conclusion

    Chapter 6. From State-owned to National Industry

  • Giving Up on Socialism
  • Developmentalism in Practice: From the Center to the Firm
  • Conclusion
  • Conclusion: The Contradiction of "Reform and Openness"

    Appendix: Firms and Interviews