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Chinese Capitalism in a Global Era

Chinese Capitalism in a Global Era examines the dynamic ways in which mil-
lions of ethnic Chinese in East and Southeast Asian economies organize
their economic activities. It analyses how Chinese capitalism has changed
under conditions of contemporary globalization and anticipates what the
future holds for it.
The book challenges the conventional notion of Chinese capitalism as
‘crony capitalism’, based around kinship networks and untouched by glob-
alization. Yeung argues rather that key actors are capable of taking advant-
age of their participation in globalization processes to significantly
transform the nature and organization of Chinese capitalism in East and
Southeast Asia. He concludes that the system that is emerging is neither
distinctively Chinese nor converging towards the Anglo-American form of
capitalism, but a hybrid of both.
The book is comprehensive in its scope of analysis, interdisciplinary in
its coverage of literature, and well grounded in a wide variety of empirical
evidence that addresses different sectors and economies in Asia. It will be
of interest to students and researchers in the areas of international polit-
ical economy, economics, Asian studies, development studies, organi-
zation and management studies, economic geography and urban studies.

Henry Wai-chung Yeung is Associate Professor at the Department of Geo-

graphy, National University of Singapore. He is a recipient of the Com-
monwealth Fellowship and the Fulbright Foreign Research Award. His
previous publications include Transnational Corporations and Business Net-
works and Entrepreneurship and the Internationalization of Asian Firms.
Routledge Advances in International Political Economy

1 The Future of the Nation-State

Essays on cultural pluralism and political integration
Edited by Sverker Gustavsson and Leif Lewin
Co-publication with Nerenius and Santérus Publisher AB, Sweden

2 Classical Liberalism and International Economic Order

Studies in theory and intellectual history
Razeen Sally

3 Coping with Globalization

Jeffrey Hart and Aseem Prakash

4 Responding to Globalization
Jeffrey Hart and Aseem Prakash

5 Japanese Capitalism in Crisis

A regulationist interpretation
Edited by Robert Boyer and Toshio Yamada

6 Globalization and Social Change

Edited by Johannes Dragsbaek Schmidt and Jacques Hersh

7 Multilateralism and the World Trade Organisation

The architecture and extension of international trade recognition
Rorden Wilkinson

8 Foreign Direct Investment, Democracy and Development

Assessing contours, correlates and concomitants of globalization
Indra de Soysa

9 Rethinking International Organization

Deregulation and global governance
Barbara Emadi-Coffin
10 Technology, Governance and Political Conflict in International
Industries
Tony Porter

11 America’s Trade Policy towards Japan

Demanding results
John Kunkel

12 Chinese Capitalism in a Global Era

Towards hybrid capitalism
Henry Wai-chung Yeung
Chinese Capitalism in a
Global Era
Towards hybrid capitalism

Henry Wai-chung Yeung

First published 2004
by Routledge
11 New Fetter Lane, London EC4P 4EE
Simultaneously published in the USA and Canada
by Routledge
29 West 35th Street, New York, NY 10001
Routledge is an imprint of the Taylor & Francis Group
This edition published in the Taylor & Francis e-Library, 2004.
© 2004 Henry Wai-chung Yeung
All rights reserved. No part of this book may be reprinted or
reproduced or utilized in any form or by any electronic, mechanical,
or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or
retrieval system, without permission in writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
Yeung, Henry Wai-chung.
Chinese capitalism in a global era : towards hybrid capitalism /
Henry Wai-chung Yeung.
p. cm.
Includes bibliographical references and index.
1. Capitalism–China. 2. Chinese–East Asia–Economic conditions.
3. Chinese–Asia, Southeastern–Economic conditions. I. Title.
HC427.92.Y447 2004
330.12⬘2⬘08995105–dc21
2003009849

ISBN 0-203-40046-1 Master e-book ISBN

ISBN 0-203-34083-3 (Adobe eReader Format)

ISBN 0-415-30989-1 (Print Edition)
To Weiyu and Kay,
for their love, fun and company throughout my messy
writing of this book in three different continents
Contents

List of figures x
List of tables xi
Preface xiv

1 Hybrid capitalism: demystifying Chinese capitalism 1

2 The dynamics of Chinese capitalism: globalization and

actor-networks 46

3 The internationalization of Chinese capitalism 83

4 Transnational entrepreneurship 115

5 Transformations in social organization 156

6 Changing corporate governance and strategic

management 188

7 The future of Chinese capitalism 229

Appendix 256
Notes 261
References 267
Index 292
Figures

1.1 Map of Asia 2

1.2 The hybridization of Chinese capitalism in a global era 38
4.1 Historical evolution of family ownership in Eu Yan Sang,
1879–2003 139
4.2 After-tax profits of Eu Yan Sang Holdings Ltd, 1973–93 144
4.3 A dynamic model of Chinese family firms 154
5.1 Li Ka-shing and the Cheung Kong Group before
reorganization on 10 March 1997 164
5.2 Li Ka-shing and the Cheung Kong Group as at
15 March 2003 165
5.3 A financial report on the Cheung Kong Group’s proposed
reorganization, 10 January 1997 167
5.4 Moody’s credit rating of New World Development’s
convertible bonds, March 1998 171
5.5 Kwek Leng Beng and the Hong Leong Group of
companies, 2001 178
6.1 Intra-firm control among ethnic Chinese transnational
corporations from Hong Kong and Singapore 210
6.2 Intra-firm integration among ethnic Chinese
transnational corporations from Hong Kong and
Singapore 211
6.3 Intra-firm coordination among ethnic Chinese
transnational corporations from Hong Kong and
Singapore 212
Tables

1.1 Distribution of ethnic Chinese outside mainland China in

1963, 1985 and 1997 12
1.2 Ethnic Chinese in East and Southeast Asia, 1995 13
1.3 Financial statistics of the 500 largest public companies in
East and Southeast Asia controlled by ethnic Chinese,
1994 13
1.4 Family ownership of publicly listed firms and GDP in
East and Southeast Asian economies, 1996 14
1.5 Leading Chinese firms among the top 50 transnational
corporations from emerging economies ranked by
foreign assets, 1995 and 2000 18
1.6 Major ethnic Chinese and their transnational
corporations from East and Southeast Asia, 1997, 2000
and 2003 20
1.7 Multi-disciplinary research into Chinese capitalism 22
2.1 Institutional and ideological structures of selected
Asian economies with a significant presence of ethnic
Chinese 56–62
3.1 National contexts of Chinese business firms from
Southeast Asia before the 1997–8 Asian economic crisis 92–93
3.2 Market concentration and globalization of Taiwan’s
IT hardware firms, 1998 and 1999 95
3.3 Sources of foreign capital in China, 1979–93 103
3.4 Listed members of the Charoen Pokphand Group from
Thailand, 1994 105
3.5 Operating contexts and internationalization strategies of
leading Chinese firms from East and Southeast Asia 108–109
4.1 Historical geography of Chinese family firms from
Singapore 123
4.2 A typology of prior connections of Chinese family firms
from Hong Kong and Singapore 125
4.3 Major problems faced and solutions by transnational
entrepreneurs from Singapore by host regions 127
xii Tables
4.4 A three-generation model of the Chinese family firm 133
4.5 A genealogy of four generations of family members in
Eu Yan Sang 141
4.6 Subsidiaries of Eu Yan Sang Holdings Ltd, 1973 143
4.7 Subsidiaries of Eu Yan Sang International Ltd, 2002 153
5.1 Corporate financial statistics of large ethnic Chinese
conglomerates from Asia, 1993 159
5.2 Global capital flows to emerging economies, 1977–99 162
5.3 The nature of banks in selected Asian and developed
economies, 1994–5 162
5.4 Performance of selected publicly listed companies in
Singapore, 1997 and 1998 182
5.5 Profits before taxation of Kwek Leng Beng’s property
development and hotel operations, 1997–2001 183
6.1 Mechanisms of family control of public companies in East
and Southeast Asian economies, 1996 189
6.2 Industrial sector of Chinese family firms listed on the
Singapore Stock Exchange, 1996 193
6.3 Distribution of family shareholdings among Chinese
family firms listed on the Singapore Stock Exchange,
1996, 1998 and 2001 194
6.4 Chinese family firms listed on the Singapore Stock
Exchange and their principal banks, 1996, 1998 and
2001 197
6.5 Correlation between percentages of family shareholding
and the number of Singapore banks as principal banks
of Chinese family firms listed on the Singapore Stock
Exchange, 1996, 1998 and 2001 198
6.6 Country of origin of principal banks of Chinese family
firms listed on the Singapore Stock Exchange, 1996, 1998
and 2001 199
6.7 Regional origins of principal banks and their citations by
Chinese family firms listed on the Singapore Stock
Exchange, 1996, 1998 and 2001 200
6.8 Chinese family firms listed on the Singapore Stock
Exchange and their auditors, 1996, 1998 and 2001 205
6.9 Characteristics of ethnic Chinese transnational
corporations from Hong Kong and Singapore 209
6.10 Ownership percentages of ethnic Chinese transnational
corporations from Hong Kong and Singapore 214–215
6.11 Different ways of establishing international operations by
ethnic Chinese transnational corporations from Hong
Kong and Singapore 217
6.12 Control strategies of ethnic Chinese transnational
corporations from Hong Kong and Singapore 219
 Tables xiii
6.13 Channels of marketing and sourcing among Southeast
Asian operations of ethnic Chinese transnational
corporations from Hong Kong and Singapore 220
6.14 Sources of technology and expertise among international
operations of ethnic Chinese transnational corporations
from Hong Kong and Singapore 222–223
6.15 Sources of finance among international operations of
ethnic Chinese transnational corporations from Hong
Kong and Singapore 226–227
7.1 Exchange rates per US dollar and real GDP growth rates
of Asian economies, 1991–2001 235
7.2 Profit and loss among Chinese family firms listed on the
Singapore Stock Exchange, 1996, 1998 and 2001 237
7.3 Correlation between percentages of family shareholding
and profits after tax of Chinese family firms listed on the
Singapore Stock Exchange, 1996, 1998 and 2001 238
7.4 Correlation between the use of principal banks and
profits after tax of Chinese family firms listed on the
Singapore Stock Exchange, 1996, 1998 and 2001 239
7.5 Relationships between change of auditor and profits after
tax of Chinese family firms listed on the Singapore Stock
Exchange, 1996, 1998 and 2001 241
Preface

I want to start with a religious confession to reflect on my own positional-

ity in the course of producing this book. Some ten years ago, I began my
research and writing on Chinese capitalism as a half-baked ‘culturalist’
who quite believed in the intrinsic importance of guanxi or social relation-
ships in explaining the economic organization of Chinese capitalism. I saw
these cultural traits as shaping the behaviour and activities of ethnic
Chinese firms, whether they are large or small, in manufacturing or
service industries, and operating primarily locally and nationally or inter-
nationally. Ever since then, Chinese capitalism and its business organi-
zations have been simultaneously fascinating and frustrating to me. I find
the subject matter very fascinating simply because it is both close to my
heart as an ethnic Chinese born in mainland China and to ‘home’ as a
citizen in one predominantly ethnic Chinese economy (Singapore) and a
permanent resident in another under the authority of the People’s
Republic of China (Hong Kong SAR). However, I feel increasingly frus-
trated to read more and more popular writings on Chinese capitalism
(many wrongly called ‘overseas Chinese business’) that are nothing more
than ethnic stereotypes or, worst, racist caricatures. The popularity and
prominence of such triumphant characterization of Chinese capitalism as
‘bamboo networks’, ‘guanxi capitalism’ or ‘Confucian capitalism’ has con-
tributed to an essentialist idea that all ethnic Chinese in East and South-
east Asia share similar Confucian worldviews bounded within their
traditional social and cultural values. Chinese capitalism has therefore
been seen as static and self-contained in peculiar social and political con-
texts in East and Southeast Asia. Prompted by these readings, I often
wonder whether I am indeed an ‘overseas Chinese’ – overseas to where
and what? Am I a believer in Confucianism? I am probably as ‘confucied’
(or confused?) as you are. Do I know and practise guanxi as all Chinese
are allegedly expected to do? So the story and its mischief goes on and on
in these essentialist writings. You will find my critical opinions on some of
these works in this book.
Is there then something wrong with my research and thinking? After
some introspection, I doubt it. During the course of this decade-long
 Preface xv
research into Chinese capitalism, what has apparently changed in me is
not the subject of my intellectual pursuit, but rather my thinking and rea-
soning about it. Perhaps this change has something to do with growing
age and maturity in my intellectual capacity. But more significantly, I
believe this change in my beliefs about Chinese capitalism is positively cor-
related with the dramatic pace at which globalization tendencies have
transformed the world economy and the dynamic integration of Chinese
capitalism into these tendencies. My fatherly mentor, friend and collabo-
rator, Peter Dicken, calls the change ‘global shift’. I believe there is a con-
comitant shift in the nature and economic organization of Chinese
capitalism in association with this global shift of economic activities.
And it is this story of change and transformation in Chinese capitalism
that I really want to unfold in this book. Going back to my confession, I
ask for forgiveness and would like to claim that I am no longer interested
in being a ‘culturalist’ who explains Chinese capitalism primarily in rela-
tion to cultural norms and practices. Indeed, a lot more has recently been
said about how Chinese capitalism and its core feature, the Chinese family
firm/business, have been so institutionalized through Chinese culture
that nothing will really change it. All these studies have primarily focused
on identifying and explaining the dominant features of Chinese capital-
ism and show how they are different from a variety of capitalisms else-
where. This accumulation of culturalist and institutionalist interpretations
of Chinese capitalism is fine in so far as they contribute to the first wave of
intellectual enquiry into the changing nature and organization of Chinese
capitalism. After all, we have to start with something before any rethinking
and further development may be possible.
However, as I shall argue in this book, a second wave of research on
Chinese capitalism must go beyond its almost permanent characterization
and fixation in time and space. Instead, we must begin to examine how
such core attributes of Chinese capitalism may change and evolve and the
underlying processes that account for the changes. This more dynamic
approach is necessary because Chinese capitalism is not a kind of cultural
artefact that is forever cast in stone (like those you see in museums of
history). Rather, Chinese capitalism is lived as a peculiar set of spatial-
temporal outcomes, though highly institutionalized, of immense struggles
and contestation by social actors through their discursive strategies and
material practices. Taking such an actor-oriented approach, I think it is
time to move on with our intellectual agenda to examine Chinese capital-
ism in a global era (the title of this book). This move, however, should not
be about throwing ‘culture’ (the baby) out with the popular writings on
the ‘overseas Chinese business’ (the bathwater). It is instead about seeing
culture as a set of practices that change with circumstances and contexts
and about paying more attention to social actors in enabling this change
and transformation.
As such, I urge readers to think of Chinese capitalism not as iron-cast
xvi Preface
blocks of structures and systems that defy change and transformations. By
reinterpreting and retheorizing its dynamics in a global era, I believe
Chinese capitalism is increasingly becoming a form of hybrid capitalism
that reflects both the influence of globalization tendencies on nationally
or supra-nationally organized economic systems and the impact of signific-
ant participation of key actors from those economic systems in globaliza-
tion tendencies. As a form of hybrid capitalism, Chinese capitalism
embodies the interpenetration of culturally and institutionally specific
dynamics at the local and regional scales, and the growing influence of
flows of people, capital, technology and knowledge on the global scale.
In undertaking such a major project as writing this book, I am truly
indebted to numerous organizations and individuals. To begin, the idea
of writing this book quite literally woke me up one early morning during
my stay in a Geneva hotel in late May 2001. I was participating in an expert
workshop on the World Investment Report 2001 sponsored by the United
Nations Conference on Trade and Development (UNCTAD). Since then I
have never looked back and this book ends up as the product of that
morning dream. Thanks to UNCTAD for the kind invitation that indi-
rectly made this book possible.
Many individuals must be acknowledged here for contributing, in one
way or another, to the completion of this book. To begin, this book is
about the social actors in Chinese capitalism whose collective effort makes
the system work (and change). While I do not wish to name specific indi-
viduals for their help, I must thank all those hundreds of interviewees and
informants throughout East and Southeast Asia who generously shared
their wisdom and views on Chinese capitalism with me over the past
decade. I hope this book has not in any way misrepresented their inge-
nious initiatives to create a better future for themselves and their families.
Among many individuals, I must thank specifically Kris Olds, my long-
time friend and research collaborator. Our joint research into Chinese
capitalism over the past six or so years has underpinned many of the key
ideas in this book. So although I credit him for the good ideas, if any, pre-
sented in this book, I must relieve him from any responsibility for errors
and inadequacies. His kind permission for me to use materials from our
joint publications is much appreciated. I am also very grateful to two of my
former students, Chi-Zhi Tan and Tse-Min Soh, whose work has con-
tributed to some of the empirical evidence presented in this book. More-
over, I must thank my editor at Routledge, Heidi Bagtazo, and the two
anonymous Routledge reviewers who offered very encouraging and con-
structive comments on my book proposal that no doubt have shaped its
final content and trajectory. I apologize if I have failed to take all their
comments into account.
At my academic home in Singapore, the National University of Singa-
pore (NUS) thoughtfully granted me sabbatical leave (June 2002–June
2003) during which much of the writing was done. NUS also funded much
 Preface xvii
of my research on Chinese capitalism (RP960045 and RP970013), and
Wan Menghao and Elen Sia provided wonderful research assistance. My
gratitude must also be extended to two sponsoring organizations and two
host institutions that made my sabbatical possible and fruitful. The Associ-
ation of Commonwealth Universities (UK) and the Department of State
and Council for International Exchange of Scholars (USA) kindly
awarded me a Commonwealth Fellowship (June–December 2002) and a
Fulbright Foreign Researcher Award (January–April 2003), respectively.
The geography departments at the University of Manchester, UK, and the
University of Washington in Seattle, USA, were fantastic hosts for produc-
tive intellectual work. I thank J.W. Harrington, Chair of Geography at the
University of Washington, for offering some resources to produce the
final manuscript for publication. During my stay in these two places, I
received very helpful inputs and ideas from various friends and colleagues,
in particular Peter Dicken, Neil Coe, Martin Hess in Manchester, and
Gary Hamilton, Katharyne Mitchell, Matthew Sparke and Kam Wing Chan
in Seattle.
While on sabbatical, I presented the core arguments of this book in
various seminars and colloquiums at the University of Manchester (UK),
the University of Washington, Seattle (USA), the University of California,
Davis (USA), Ohio State University, Colombus (USA), the University of
Wisconsin, Madison (USA), the University of California, Los Angeles
(USA), and the University of British Columbia, Vancouver (Canada).
Some of these trips were made possible by the generous invitation and
support of the following individuals and their institutions: Robert Feenstra
(UC Davis), Gerry Pratt (UBC), Larry Brown (OSU), Kris Olds (UW-
Madison) and Cindy Fan and Thomas Gillespie (UCLA). I would like to
thank the seminar participants for their critical and insightful comments,
in particular David Bachman, Trevor Barnes, Bill Beyers, Michael Brad-
ford, Larry Brown, Noel Castree, Kam Wing Chan, Kevin Cox, David Edg-
ington, Nancy Ettlinger, Robert Feenstra, Jim Glassman, Gary Hamilton,
J.W. Harrington, Cole Harris, Dan Hiebert, David Ley, Edward Malecki,
Becky Mansfield, Morton O’Kelly, Paul Robbins, Fiona Smith, Matt
Sparke, Kevin Ward and Susan Whitings.
As it stands, parts of the book are based on theoretical and empirical
materials I have earlier published in various refereed journals and book
chapters. I have nevertheless made a determined effort to integrate these
materials and rewritten most of them to present a coherent and, hope-
fully, compelling stream of arguments and evidence. The availability of
book-length space also allows for a more theoretically grounded discus-
sion of Chinese capitalism that goes well beyond the sum of all published
articles. So I strongly encourage you to read this book from cover to
cover in order to get a full sense of what I have argued and illustrated.
I acknowledge the following publishers and copyright holders for gener-
ously granting me permissions to use my earlier work for this book:
xviii Preface
© Blackwell Publishing, UK (International Journal of Urban and Regional
Research, 1999, Vol. 23, No. 1, pp. 103–27), © Center for International
Business Education, University of Michigan Business School, US ( Journal
of Asian Business, 2000, Vol. 16, No. 1, pp. 95–123), © Palgrave Macmillan
Publishers, UK (Yeung, Henry Wai-chung and Olds, Kris, ‘Globalizing
Chinese firms’, in Globalization of Chinese Firms, 2000, Macmillan, pp. 1–28;
Yeung, Henry Wai-chung, ‘The dynamics of the globalization of Chinese
firms’, in Globalization of Chinese Firms, 2000, Macmillan, pp. 75–104),
© Pion, UK (Environment and Planning A, 2000, Vol. 32, No. 2, pp. 191–200
and Environment and Planning D: Society and Space, 1999, Vol. 17, No. 5, pp.
535–55), © Sage Publications, UK, and © ISA: International Sociological
Association, Spain (International Sociology, 2000, Vol. 15, No. 2, pp.
269–90), © Taylor & Francis, UK (Yeung, Henry Wai-chung, ‘Managing
traditional Chinese family firms across borders’, in Rethinking Chinese
Transnational Enterprises: Cultural Affinity and Business Strategies, 2001,
Curzon, pp. 184–207; Yeung, Henry Wai-chung, ‘Transnational entrepre-
neurship and Chinese business networks’, in Chinese Entrepreneurship and
Asian Business Networks, 2002, Curzon, pp. 184–216), © Taylor & Francis
Journals, UK (Economy and Society, 1999, Vol. 28, No. 1, pp. 1–29 and
Review of International Political Economy, 2000, Vol. 7, No. 3, pp. 399–433),
© The Family Firm Institute, USA (Family Business Review, 2000, Vol. 13,
No. 1, pp. 55–70). Where possible in the book, I have made explicit refer-
ences to these earlier publications. Every effort has been made to trace
copyright holders, but in a few cases this has not been possible. Any
omissions brought to the publisher’s attention will be remedied in future
editions.
Last but certainly never least, my wife Weiyu and daughter Kay have
been patiently watching the progress of this book project from its incep-
tion to its completion. It is indeed pretty hard to write and live in three
different cities, particularly when there is so much to do in Manchester
and in Seattle. Their physical presence throughout the entire writing
process has certainly kept me in good spirits and on track. As a compensa-
tion for their many forgone trips to the beautiful English landscape and
the serene American wilderness, I can only offer this book.
Henry Yeung
Singapore, Manchester and Seattle
1 Hybrid capitalism
Demystifying Chinese capitalism

Unpacking Chinese capitalism

For several centuries, tens of millions of ethnic Chinese people in East
and Southeast Asia have engaged in a distinctive form of economic organi-
zation through which an informal array of Chinese entrepreneurs, traders,
financiers and their closely-knit networks of family members and friends
came to dominate the economic sphere of the very host economies they
later considered ‘home’.1 While deeply rooted in the cultural norms and
social values of the traditional Chinese society in mainland China, this
form of economic organization has evolved and adapted to dramatically
different institutional contexts and political-economic conditions in the
host Asian economies. In this book, I use the term ‘Chinese capitalism’ as
a heuristic device to describe this historically and geographically specific
form of economic organization that refers to the social organization and
political economy of the so-called ‘overseas Chinese’2 living outside main-
land China, particularly in East and Southeast Asia (i.e. Hong Kong,
Macau, Taiwan, Singapore, Indonesia, Malaysia, the Philippines, Thailand
and Vietnam; see Figure 1.1).3 Chinese capitalism is a dominant mode of
economic organization in East and Southeast Asia because of not only its
economic significance in the host economies, but also its complex and yet
intricate social organization and authority systems. The sheer diversity and
prowess of economic activities controlled and coordinated by these ethnic
Chinese have enabled some of them to become the very foundations of
the Asian economies in which they primarily reside and operate. For
example, Hong Kong-based Li Ka-shing, whose empire controlled about
16 per cent of Hong Kong’s stock exchange index in 1998 (up from 12.7
per cent in 1988 reported in Redding, 1990: Table 7.4), caused the index
to fall by 1.6 per cent on 23 December 1998 with his remarks about the
unfriendly business environment in Hong Kong (The Straits Times, 23 and
24 December 1998). In another example, Wee Cho Yaw, the second-gen-
eration banker from Singapore and his family-controlled United Overseas
Bank succeeded in taking over the fourth-largest Singapore bank (Over-
seas Union Bank, OUB) on 26 October 2001. After the acquisition, the
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