Restructuring and Spatial Change of China's Auto Industry under Institutional Reform and Globalization

Abstract

This paper employs an embeddedness approach to study the restructuring and spatial change of China's auto industry since the 1980s. The two major dynamics behind these processes are discussed in detail: (1) institutional reform, which has resulted in a mixed regulation mechanism composed of both market competition and legacies of the past command economy, and which has also allowed more freedom in the decisionmaking of indigenous auto firms, and (2) globalization of production in terms of a huge inflow of foreign direct investment (FDI), mainly in the form of joint ventures. As a result, a new geography of the industry has emerged, with clear features of decentralization of production and a shift of production toward the coastal region. The paper concludes that the gradual institutional reform in China has led to a ‘path-dependent’ development of its auto industry and that auto-producing FDI has been deeply embedded in the Chinese institutional environment. This involvement in China's auto production can be aptly described as ‘embedded globalization.’