The Political Economy of Retail Change in Chinese Cities

Abstract

Retailing in China has become an important engine driving the nation's economy. Along with the rapid expansion in scale, the retail industry has also experienced profound structural changes in cities. The transformation of the retail sector in large cities like Beijing and Shanghai is characterized by a realignment of ownership structure, diversification of retail functions, the emergence of new retail formats, the increasing concentration of retail capital and rapid expansion of retail chains, and spatial restructuring and retail suburbanization. The transformation not only reflects the changing supply and demand relations and the interaction between retailing and consumption but also is intrinsically connected to the shift in government policies. We present a political-economy perspective to explain the dramatic retail changes that have occurred in Chinese cities. In particular, we discuss the role of the state in retail transformation and in urban and economic development in general. We argue that the concept of ‘developmental state’ and its alternate variants such as ‘local state corporatism’ and ‘entrepreneurial state’ provide valuable and illuminating insights to the understanding of how the Chinese state (and especially the local states) acts in developing the economy in the reform era. Nevertheless, these notions need to be revisited to better recognize the complex and dynamic nature of the Chinese state. Instead, we propose that the Chinese state is better understood as a ‘fragmented developmental state’, which displays a strong progrowth orientation but which also suffers from a fragmented administrative structure, an inconsistent regulatory system, and market-distorting activities in the transformation from a socialist state to a developmental state of its own kind.