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  • China Leadership Monitor

CLM Insights Interview with Ya-Wen Lei

Ya-Wen Lei. The Gilded Cage: Technology, Development and State Capitalism in China. Princeton, NJ: Princeton University Press, November 2023. 416 pp.  ISBN 10-0691212821, 13-978-0691212821


Ya-Wen Lei CLM Issue 80 June 2024
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Ya-Wen Lei. The Gilded Cage: Technology, Development and State Capitalism in China. Princeton, NJ: Princeton University Press, November 2023. 416 pp.  ISBN 10-0691212821, 13-978-0691212821

Insights Interview

How does the metaphor of a “gilded cage” capture the essence of China’s technology policy?  What are its inherent tensions and contradictions? What are the unique policy instruments used by the Chinese Communist Party in pursuing its techno-utopian vision?  How have these instruments changed in the last two decades, which is the period covered in your book?

 

Let me clarify that the focus of my book is economic development rather than narrowly defined technology policy. I use the metaphor of a “gilded cage” to capture two key aspects of China’s socioeconomic transformation since the mid-2000s: first, the success of China in creating the second-largest digital economy and some of the world's largest tech firms; second, the expanding legal and technical instruments established by both the Chinese government and China's big-tech firms during China's shift from a labor-intensive, export-oriented economy to a more high-tech-oriented developmental model. These instruments can be thought of as the rules of the game. Thus, the metaphor of a “cage” reflects how these rules constrain and shape people’s behavior and interactions.


I also want to emphasize that the book examines both a developmental state and digital capitalism, without fitting squarely into either scholarly tradition. The literature on the developmental state focuses on the role of the state in economic development, while the literature on digital capitalism often focuses on the role of big-tech companies, especially in the U.S. context, in imposing instrumental control over a wide range of actors from users to workers, based on their technological capacity and data. In the case of China, one of the most important aspects of the economic transformation since the mid-2000s has been the emergence of a digital capitalist system characterized by the rise of tech capital and an asymmetrically symbiotic relationship between tech capital and the state.


When considering the uniqueness of this case, it is crucial to recognize not only the role of the Chinese state but also the role of China’s big-tech companies and their relationship with the state. Both have been important builders of China’s gilded cage. In a way, until the recent crackdown, firms were placed in a relatively free environment to pursue their endeavors and to build their own digital kingdoms. Although the Chinese state has always played a critical role in China’s post-reform socioeconomic development, it previously left more space for both state and nonstate actors to improvise, and it was less equipped and interested in using technical and legal instruments for micromanagement. Furthermore, no enterprises—state-owned or otherwise—in the past were able to regulate and influence as many people as do large tech companies today.


I write about four kinds of tensions or contradictions in the book. The first contradiction exists between the efforts by many local governments to maximize calculability, legibility, and efficiency, and the disconnect between these efforts and the actual outcomes. These state and nonstate actors create numerous metrics and indices to evaluate businesses and government performance, but they both regularly mobilize personal networks and collude to produce desirable metric values and classification outcomes.

 

A second kind of contradiction exists between the state and capital in terms of (un)predictability. With the proliferation of metrics, classification schemes, and administrative and regulatory rules, the Chinese state aims to create a predictable economic and legal environment for state and nonstate actors while maintaining its control over capital. However, the Chinese state tends to oscillate between not regulating certain forms of capital as a reward to being exceedingly harsh on capital in ways that seem arbitrary and unpredictable. This fosters extreme outcomes, ranging from excessive capital expansion to a seemingly chaotic legal environment.


The third contradiction emerges from the government’s stated commitment to socialist egalitarian values and the real conditions and possibilities for different groups of citizens. Embracing a capitalist logic of facilitating techno-development, local governments, especially those in the most prosperous areas, have enacted metrics and classifications that systematically discriminate against people with less human and economic capital, specifically the working class.


Tensions between tech capital and labor have emerged as well. The state’s goal of achieving techno-development contributed to the tech giants' monopolistic power and provided the unfettered regulatory conditions that enabled them to impose meticulously calculated technological and legal control on platform workers. This intensified control has, in turn, triggered protests and strikes as platform workers have come to realize that algorithms, technology, and the law serve as instruments for platform companies to control workers. Similar capital-labor tensions have emerged between tech companies and software engineers. Although it is their technical expertise that helps tech firms optimize revenue and efficiency and that aids the Chinese state in advancing digital governance and the economy, software engineers’ human capital does not necessarily protect them from exploitation.

 

How does China’s approach to technological development differ from that used in Taiwan and South Korea, where the state also has played a critical role?  Overall, has the Chinese approach delivered similar outcomes?

 

As classical examples of developmental states, the developmental states in South Korea and Taiwan cultivated and intervened only in very specific new sectors, using conventional instruments for intervention (e.g., subsidies, interest rates, tax breaks, and state procurement). In comparison, the Chinese state has been involved in the process of “destroying the old and creating the new” through enacting and using numerous instruments to measure the worth and worthiness of everything from capital to labor, technology, business, and industry in order to scientifically allocate rewards and punishments. Chinese governments have also reoriented their performance evaluation systems in light of the new goal of techno-development. Some examples are illustrative of the uniqueness of the Chinese government’s approach. For instance, local governments have cracked down on businesses they consider obsolete or low-end and they have discriminated against people with lower economic and cultural capital when allocating public resources. Such measures were not seen in Taiwan or South Korea.

 

Furthermore, South Korea and Taiwan’s turn to techno-development was accompanied by the process of democratization, which further contributed to the building of the rule of law and an increasingly inclusive welfare state. Democratization freed the two authoritarian states from having to rely on economic performance as a major source of legitimacy. Democratic institutions constrain how the government can enact and use legal and technical instruments. For example, as I discuss in the book, certain practices of the Chinese state might well be considered unconstitutional or in violation of fundamental legal principles in Taiwan. In comparison, in the Chinese context there are few restrictions on how the Chinese state can enact and use legal and technical instruments to foster techno-development under the rule by law.

 

Dongguan in Guangdong is one of your case studies.  The city used to be considered a success story in attracting foreign direct investment and transforming itself into a competitive labor-intensive manufacturing hub.  About two decades ago, Guangdong’s leadership called for “emptying the cage to bring in new birds” – replacing labor-intensive manufacturing with hi-tech manufacturing.   What has been the outcome of this effort?  How does this case illustrate the advantages or limitations of state-interventionism in moving up the technology ladder?

 

Dongguan is not a successful example of state-led industrial upgrading. When Wang Yang was Guangdong's party secretary, he attempted to evict businesses he considered "low-end." The policy was highly controversial and widely criticized. After Xi took power, local governments initiated numerous political campaigns to crack down on "low-end" businesses in the name of environmental protection, work safety, and violation of construction regulations. These campaigns led to business closures and relocations. 


To be sure, many businesses in coastal China had shuttered or moved elsewhere prior to such campaigns due to growing labor costs as well as the 2008 financial crisis. The intensified campaigns against “low-end” business were the last straw. After businesses were closed and relocated, empty factories and buildings were converted into incubators, high-tech industrial parks, and lucrative real estate projects. The “new birds” in Dongguan were Huawei and the real estate industry. In a few relatively remote towns in Dongguan, no new birds moved in after the old birds left.

 

One chapter in the book analyzes policy shifts under Xi Jinping.  How does his technology policy differ from that of his predecessors, especially Jiang Zemin and Hu Jintao?  Based on the logic of the “gilded cage,” what might be the outcomes of his policy?

 

I write about how the Chinese government under Xi's leadership has rewired China's "gilded cage" by creating more laws and regulations. This shift occurred as the government realized that the new "birds" (i.e., China's big-tech companies) were nearly bursting the cage, leading to intolerable threats to financial stability, data security, and national security, especially against the backdrop of rising geopolitical tensions.


Compared to during the eras of Jiang Zemin and Hu Jintao, the Chinese state under Xi has expanded its instrumental control and has relied more on political campaigns for law enforcement. Xi can be considered a law, technology, and national security person, believing in the instrumental power of law and technology to solve all problems and placing a national priority on national security. As such, his governance style largely relies on instrumental rationality, while the space for communicative rationality has been shrinking. During the Hu Jintao period, there was more room for public discussion and expert/public influence on government policy. Under Xi's leadership, we will continue to see intensified control, increasing uncertainties, and difficulties for everyone to live within the cage and to shape it positively, except for the newly selected "birds" that are perceived to be critical to national security.

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