The Challenge of the Global Business Revolution

Since the late 1970s, China has pursued an industrial policy which has the explicit objective of creating large firms that can challenge the global giant corporations of the advanced economies. China faces a special challenge which did not confront other countries that successfully built globally powerful large firms through industrial policy: China is attempting to catch-up at the level of the large firm in the midst of the most profound revolution in business systems that the world has ever seen. This revolution presents a fundamental challenge not only for China’s industrial policy, but for industrial policy in developing countries as a whole. The challenge is made especially severe by the fact that in November 1999 China and the USA agreed the terms under which China would enter the WTO. These terms amounted to a voluntary dismantling by China of all the key features of industrial policy that almost all the successful ‘latecomer’ countries had used to support large indigenous firms. Through the Agreement, China has agreed to place its indigenous large firms on the ‘global level playing field’, in direct competition with the world’s most powerful corporations. As we shall see in this chapter, the global business revolution has produced an unprecedented concentration of business power in large corporations headquartered in the high-income countries. It is a highly significant paradox that the influence of mainstream neo-classical ideas which emphasize small firms and competitive markets, has increased radically within Chinese policy making circles in precisely the epoch of unprecedented concentration of global business power.