Cross-Border Networks in China's Financial Markets: The Role of Power Resources in Firm-Government Relations

Abstract

This paper introduces an interdisciplinary theoretical framework that explains why the cross-border relationship between foreign firms and the domestic government is crucial for understanding capital market access in China. In recent years, more nuanced conceptualisations of power and the agents exerting it have advanced our understanding of the ways in which global production networks shape regional economic outcomes. Yet, the literature has focused on descriptive accounts of how different types of power are exercised rather than explaining why they matter. Moreover, financial networks in emerging markets have been neglected despite their growing role in the global economy. This paper addresses these shortcomings, by investigating cross-border financial networks operating in the less frequently studied yet increasingly important Chinese financial system. By exploiting conceptual synergies between economic geography, political economy and regional studies, an analytical framework is developed that outlines an exchange relationship between foreign firms and the Chinese government. This framework identifies decisive ‘power resources’ that explain the asymmetrical market access granted to foreign firms by the Chinese government. This emphasis on causal mechanisms allows for moving beyond descriptive treatments of ‘power’ and opens up a promising agenda for empirical research.