The chinese diaspora and mainland china an emerging economic synergy

THE CHINESE DIASPORA AND MAINLAND CHINA


Also by Constance Lever-Tracy, David Ip and Noel Tracy
ASIAN ENTREPRENEURS IN AUSTRALIA (with Jim Kitay and Irene
Phillips)
Also by Constance Lever-Tracy
A DIVIDED WORKING CLASS: Ethnic Segmentation and Industrial
Conflict in Australia (with Michael Quinlan)
Also by David Ip
ASIAN IMPRESSIONS OF MULTICULTURAL AUSTRALIA (with
Ikuo Kawakami, Karel Duivenvoorden and Lee-Chang Tye)


The Chinese Diaspora
and Mainland China
An Emerging Economic Synergy

Constance Lever-Tracy
Senior Lecturer in Sociology
Flinders University of South Australia
Adelaide

David Ip

Senior Lecturer
Department of Anthropology and Sociology
University of Queensland

and

Noel Tracy
Lecturer in Politics and Political Economy
Flinders University of South Australia
Adelaide

$

&


m

First published in Great Britain 1996 by

MACMILLAN PRESS LTD

Houndmills, Basingstoke, Hampshire RG21 6XS
and London
Companies and representatives
throughout the world
A catalogue record for this book is available
from the British Library.
ISBN 0-333-65334-3

M

First published in the United States of America 1996 by

ST. MARTIN'S PRESS, INC.,

Scholarly and Reference Division,
175 Fifth Avenue,
New York, N.Y. 10010
ISBN 0-312-15949-8

Library of Congress Cataloging-in-Publication Data
Lever-Tracy, Constance.
The Chinese diaspora and mainland China : an emerging economic
synergy / Constance Lever-Tracy, David Ip and Noel Tracy,
p. cm.
Includes bibliographical references and index.
ISBN 0-312-15949-8 (cloth)
1. Investments, Foreign—China. 2. China—Economic policy—19763. Chinese—Foreign countries. I. Ip, David Fu-Keung. II. Tracy,
Noel. III. Title.
HG5783.L48 1996
332.673,0951 —dc20
95-53242
CIP
© Constance Lever-Tracy, David Ip and Noel Tracy 1996
All rights reserved. No reproduction, copy or transmission of
this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied or
transmitted save with written permission or in accordance with
the provisions of the Copyright, Designs and Patents Act 1988,
or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 90 Tottenham Court
Road, London W1P9HE.
Any person who does any unauthorised act in relation to this
publication may be liable to criminal prosecution and civil

claims for damages.
10 9
05 04

8 7 6 5 4
03 02 01 00 99

Printed in Great Britain by
The Ipswich Book Company Ltd
Ipswich, Suffolk

3
2 1
98 97 96


Contents
List of Tables and Figures

vii

Preface

ix

List of Abbreviations

xii

1

Introduction

Part I

1

Resources and Opportunities

2 Chinese Diaspora Capitalism
3 China, Reforms and Opportunities
4 Towards a Synergy
5 Cobwebs across the Divides
Part II

Into China through Transnational Networks

6 Introduction: The Sleepers
7 The Tycoons
8 Networking into China by Smaller Investors
9 Transnational Small and Medium Enterprise
Part III
10
11
12
13
14
15
16

21
41
62
82

99
113
131
159

Impacts and Outcomes

Introduction: Dependency and Development
Diaspora Tycoons and Development in China
Long-Term Perspectives and Local Meshing
Ripples on a Pond
Diaspora Capitalists Come of Age
The Relationship of Labour and Capital
Conclusion

179
197
213
235
249
273
280

Notes

286

Bibliography

311

Index

326

v



List of Tables and Figures
Tables
1.1
2.1

Ethnic Chinese in ASEAN
The largest Chinese owned companies (including state
firms)
3.1 Share of total industrial output of selected provinces by
sector 1985, 1993
3.2 Changes 1985-93 in the share of national gross industrial
output by selected provinces
4.1 Sources of foreign capital in China, cumulative 1979-93
4.2 Number of foreign-invested enterprises and foreign
capital investment in China as at 31 December 1993
(US$bn)

4.3 Guangdong: distribution of foreign capital at
31 December 1993
4.4 Fujian: direct foreign investment 1979-93
4.5 Fujian: origin of foreign capital at December 1993
5.1 Sources of direct foreign investment in Thailand, 1993
5.2 Economic growth in the Chinese business sphere in real
terms, 1993
5.3 International trade of the Chinese business sphere,
1980-92
5.4 Direction of the trade of the Chinese business sphere,
1980-92 (proportions of total trade)
5.5 Taiwanese direct foreign investment 1985-90
6.1 Origin of ethnic Chinese in Southeast Asia, 1991
(estimate)
6.2 Loans and advances of Hong Kong banks, 1985-92
6.3 Birthplace of persons with Chinese ancestry, Australia
1986
7.1 Recorded direct foreign investment by top 75 diaspora
business families
7.2 Top 75 families investing in China
8.1 Personal characteristics of Hong Kong respondents
8.2 Characteristics of the businesses of Hong Kong
respondents
vn

15
26
53
55
65

67
74
76
76
83
88
88
90
91
103
107
109
115
116
143
144


List of Tables and Figures

Vlll

8.3
8.4
8.5
9.1
9.2
9.3
12.1
12.2

12.3
12.4
12.5
12.6
12.7
13.1
13.2
13.3
13.4
13.5
13.6
14.1
14.2
14.3
14.4

Local connections of foreign investors in the four surveys
Relationship of foreign investors with suppliers and
customers
Survey ventures with ethnic Chinese suppliers and
customers
Ethnic origin of foreign investors
Investors from Hong Kong and Taiwan who speak the
local dialect
Sources of raw materials, equipment and machinery and
destinations of products of all survey enterprises
Total investment in the China venture
Size of enterprises in survey classified by number of workers
Size of the foreign investor classified by capitalisation
(US$m)

Size of investment by size of investors (all survey
areas combined) (US$m)
Type of foreign-invested ventures surveyed
Chinese partners of joint ventures and cooperatives
surveyed
Sources of machinery and equipment in foreign-invested
enterprises surveyed
Proportion of the product exported by surveyed ventures
Enterprises sourcing at least some raw materials,
machinery and equipment or spare parts within China
Proportion of the product sold within China
Location of investments in China (Hong Kong interviews)
Proportions of survey ventures trading with other
provinces
Source provinces of migrant labour - total for four
survey areas
Size of business as a whole on entry into China and at
time of interview - total for four survey areas
Number of workers currently employed by starting date
of venture - total for four survey areas
Sources of additional capital
Proportion of ventures that have a transnational linkage
with at least one partner or one supplier or customer

155
155
155
171
171
173

230
230
230
230
231
232
232
243
243
243
244
246
247
255
256
269
269

Figures
1.1
14.1

McGrew's cobweb
Growth since commencement

9
256


Preface

Our last book was a study of Asian business people living in Australia
and it was this which led us directly to the present work. What overwhelmingly impressed us about the hundred ethnic Chinese entrepreneurs we interviewed during 1989 and 1990 as part of that study,
immigrants from China, Hong Kong, Taiwan and Southeast Asia, was
the quite disproportionate number who had business links back to China
and how often these passed through Hong Kong.
Two of us already had links to Hong Kong, one by birth, the other
by profession, having worked for a major British multinational based
there. We were both, therefore, very aware of the ways in which local
Chinese business had replaced the British Hongs as the major driving
force in the Crown Colony's economy since the mid-1970s, particularly in the growth of export-oriented manufacturing, which was the
basis of Hong Kong's status as a NIC and its increasingly significant
role as an international trader. Visits to China, both before and after
Tiananmen, had also made us aware of the substantial changes already
under way in the southeastern provinces of Guangdong and Fujian,
which, although we were not to know it at the time, would provide
the basis for the momentous changes of the 1990s. Thus the current
project was born in January 1992, coinciding fortuitously with the start
of what has come to be known as the Third Wave of foreign investment
into China, which would dwarf the two previous waves and which would
be dominated by investment from the Chinese diaspora (see Chapter 4).
The project was to be a study of the role of the diaspora Chinese in
the economic and social transformation of Guangdong Province. We
approached it with a certain trepidation, for none of us could claim to
be China experts, but significantly this has proved to be a blessing in
disguise. The new China is so different from the old that new methods
of research are called for. In particular the idea that China's economy
can be studied by analysis of official statistics and government macroeconomic policy has to be abandoned. China's economy and economic
development are now so uneven that generalisations based on central
data and policy are extremely hazardous.
Another problem is that so many of the momentous changes that

have led to the World Bank predicting that China will be the biggest
economy in the world by 2015 are taking place at the level of towns
IX


X

Preface

and villages that are outside the national planning mechanism and therefore to a large extent beyond central government control. Unfortunately,
old habits die hard and old methods continue to dominate much research effort. We began at the bottom, tracing investments from Hong
Kong into the Pearl River Delta and investments in the towns and
villages there back into the diaspora. As we have expanded the research beyond the Pearl River Delta further into Guangdong and beyond into Fujian and Jiangsu, we have pursued that strategy of working
upwards and outwards. Our conclusion, which will be argued throughout the book, is that the linkages established between diaspora capital
and entrepreneurship and the booming economies of the towns and
villages of the coastal provinces along China's east coast are the key
to China's economic miracle and the continuing success of the economic reform process in China.
This book is, therefore, a study of the crucial role of Chinese diaspora
capitalism in China's economic transformation and economic reform
process. It is not intended to be either a study of the economic reform
process per se or of the Chinese economy in the 1990s. Within this
limited framework we have concentrated on the role of the entrepreneurs,
the capitalists. We have done this because there can be little doubt of
their critical role in the transformations taking place before our eyes.
Furthermore the activities of this capitalist class in China are only
part of a much broader picture in which diaspora Chinese capitalism
is emerging as the most dynamic force throughout the whole region.
Who would have predicted ten years ago that the Chinese diaspora
would have emerged as the principal foreign investors in China under
the open door policy and that they would out-invest Japan and the

United States combined by a factor of four? Who also would have
been so foolhardy as to predict that these same players would at the
same time replace Japan as the major foreign investors throughout
Southeast Asia by the 1990s? Ten years ago, most commentators were
predicting an imminent Japanese hegemony in East Asia. History, however, is a great leveller, which continually surprises us all. This work
is therefore also a contribution towards explaining this historical change
of great magnitude in East Asia.
We can perhaps be chided for what we have omitted. Where there
are industrial capitalists there must be workers and we have only been
able to deal fleetingly with the new working class being formed in
China under the pressure of perhaps the most rapid industrialisation in
history. In this respect we can only excuse ourselves by pointing out
that this would need to be a major study in its own right and that the


Preface

XI

recent origin of the phenomenon might make this premature. The new
working class is made up of peasants leaving agricultural areas and
migrating to the coastal provinces. Little is known about them, much
less their hopes and dreams.
The impact of the massive changes taking place in coastal China on
the environment is also a major omission, worthy of a study in its
own right and with a different expertise. We would, however, note
that there is a growing awareness of the problem in China. Some action is already being taken, although by no means enough, and not all
the worst examples of environmental degradation spring from recent
developments. Many of the worst examples we have encountered date
back to the previous era of economic self-sufficiency.

While the responsibility for this book, and therefore any errors or
misjudgements it contains, is our own, we must acknowledge that without
assistance throughout the entire period it would never have reached
fruition. Firstly and above all, we must thank Dr Thomas Chan and
his staff at the China Business Centre (CBC) at Hong Kong Polytechnic University. Without his advice and admonitions, his ability to open
doors for us wherever and whenever we asked in China, and the
infrastructural support CBC was always able and willing to provide,
the project would never have attained either its depth or scope. Particular thanks must also go to Zhu Wenhui at CBC for his meticulous
attention to the surveys conducted in Guangdong and Fujian and for
the help and assistance he gave during fieldwork trips. Secondly, thanks
must go to Professor David Goodman and the Asia Research Centre at
Murdoch University in Perth who gave us the initial research grant in
1992 which got the project under way. Dr Peter Burns at Adelaide
University helped us secure further research funds in 1993 and 1994,
when it looked as if the project might come to a premature conclusion
through lack of finance. Ah Yuen at CBC wrote the computer programs and processed the initial data from the surveys, while Zang Xiaowei
at Flinders University transformed it into a sophisticated analysis. The
value of Zang's critical comments on early drafts must also be acknowledged as they often forced us to revise our thinking. Lastly, thanks
must go to the literally hundreds of people, business people, government officials and scholars who gave their time and provided much of
the colour and substance in the following pages.
Flinders University, Adelaide

NOEL TRACY


List of Abbreviations
ASEAN
CBS
CEDA
CP

ECBS
FIE
GATT
GNP
HK
INGO
KMT
LCD
MNC
MOFERT
MOFTEC
NATO
NCHKG
NIC
NIDL
OEM
PNG
SECBS
SEZ
TVE

Association of South-East Asian Nations
Chinese Business Sphere
Committee for Economic Development of Australia
Charoen Pokphand
East China Business Sphere
Foreign Invested Enterprises
General Agreement on Tariffs and Trade
Gross national product
Hong Kong

International non-governmental organisations
Kuomintang
Liquid crystal display
Multinational Corporation
Ministry of Foreign Economic Relations and Trade
Ministry of Foreign Trade and Economic Cooperation
North Atlantic Treaty Organisation
New China Hong Kong Group
Newly Industrialising Country
New International Division of Labour
Original Equipment Manufacturers
Papua New Guinea
South East China Business Sphere
Special Economic Zone
Township and Village Enterprise

xn


1 Introduction
24 June 1994, Friday, Xiamen, Fujian Province
I have been asked by my hosts, the Economics Department at Xiamen
University, what I would like to do tomorrow as there are no appointments. I mention that I would like to go to Quanzhou, a port city
about lOOkms north of here. Quanzhou has fascinated me since reading Marco Polo many years ago. Quanzhou was Marco Polo's Zaitan,
which he considered the greatest port in the world in the 13th Century, filled with Arab and Malay merchants come to trade with China.
It and its surrounding region were also a major source in later years
of the Hokkien migrations to Southeast Asia. There are, therefore, two
reasons to visit: the first historical, as some of the old quarters are
said to survive, including a 13th Century mosque; the second a hunch
about likely destinations for foreign capital under China's 'open door'

policy. My hosts agree but are not enthused and we later mention my
plans to leading officials of the SEZ. They are equally incredulous:
'Why do you want to go there? There's nothing there.'
25 June Saturday
We leave Xiamen before 7am for Quanzhou and the journey takes
three and a quarter hours on inadequate roads. On the way we discuss
what we might expect to find in terms of economic development. My
hosts and a colleague from Beijing think very little and guess there
might be 500 foreign-invested companies there at most.
10.30am. We arrive in Quanzhou and go to the offices of the Overseas Chinese Investment Service, a 'private organisation' with official
links. Already my hosts and Chinese colleague are aware things are
not as they anticipated. 'It looks like Guangdong': indeed it does, with
its skyscraper office blocks and modern service industries. The manager quickly informs us that there are more than 4500 foreign-invested
companies in the Quanzhou region, most of them in the surrounding
towns and villages (there were 2526 in the Xiamen SEZ) and the number
is increasing all the time. All but a handful are Overseas Chinese investments. We visit three before lunch. All are small (50 to 100 workers);
one making sport shoes, another luggage and specialist aluminium camera
cases, a third garments. All are producing essentially for export markets: 'Our goods are not sold in the rest of China. We are too isolated,
1


2

Introduction

transport routes are bad and exporting is easier', one manager tells us.
After lunch we visit historic Quanzhou, now several kilometres away
from the modern city, which has moved upriver, then back to Xiamen
late in the evening.
/ July, Friday, Hong Kong

Two new arrivals in the small guest house in which I am staying introduce themselves. They are US citizens, one a Chinese American, a
Hakka, a refugee from the Vietnam conflict. They have just returned
from a visit to their factory and warehouse in Eastern Guangdong, in
a village on the Han River, north of Chaozhou. The business produces
large porcelain garden pots. The non-Chinese American does most of
the talking. He has been in the garden business for many years. The
possibility of producing in China only arose because of his chance
meeting with the Chinese-American. The latter had never visited China
but his father, now deceased, had maintained links with the ancestral
Hakka village and these had provided the basis for the business venture. Travelling to the village, after his father had paved the way, they
had been able to establish a joint-venture with a local porcelain factory. It now employed 600 people and had upgraded the kiln technology by introducing, as a new partner, another Chinese-American from
Vietnam with advanced technical expertise. The American confided
that only the personal links of his Chinese-American partner had made
the venture possible. He now had customers in Europe and Australia
as well as North America.
(Extracts from Noel Tracy's field notes, June-July 1994)
A
What we found in Quanzhou is only a particularly dramatic example
of what could be found in small cities, towns and rural localities throughout much of southern China and, more recently, in many parts of the
eastern seaboard as well - explosive, export oriented industrial growth
in which foreign investment is playing a key part. But these developments and these investors produce in the observer a confusing conceptual disorientation - they breach all prior stereotypes and expectations.
The absences are perhaps the most striking at first. Here is foreign
capital in substantial amounts, but no sign of Western or Japanese
multinational corporations. Here is rapid development but little evidence of a strong state or of central initiatives or even of detailed


Introduction

3

knowledge by the government of what is happening. An alliance of
the state and foreign multinationals, so often presented as the key to
successful economic development in third world countries, clearly cannot
fit where both are peripheral to what is happening.
Instead we have unfamiliar agents of change and a different kind of
alliance, based on a novel emerging synergy. The foreign capital and
expertise come from a new kind of global economic actor - ethnic
Chinese family businesses (mainly of small and medium size) from
around the world, from Hong Kong, Taiwan, Southeast Asia and even
from America and Australia. The indigenous dynamic comes from below, mainly from local governments and semi-governmental bodies,
acting on a small scale, beneath and outside (and sometimes contrary
to) any central plan. Nor are these novelties of peripheral significance.
Their alliance has played a crucial role in transforming China, in barely
a decade, into one of the great exporting nations of the world, thus
providing the means for sustained high rates of economic growth and
massive social transformations in the world's most populous country.
The Chinese living outside mainland China and the authority of its
government,1 who are the main focus of this book, have been important minority traders around the South China Sea since before the 12th
century, like the Phoenicians in antiquity or the Jews and Lombards in
Europe in the Middle Ages or the Greeks and Indians in colonial and
post colonial Africa. They played a role as intermediaries and subcontractors for Western and later for Japanese capitalism in East and Southeast Asia and Indochina in the 19th and 20th centuries, but only since
the 1970s have they emerged as a significant and distinctive current in
global capitalism in their own right. They have benefited from and
contributed crucially to the growing prosperity and integration of the
region in the last quarter century. But it has been the opening of China
to foreign capital (essentially since 1985) that has boosted them to the
ranks of one of the major capitalist forces in the region, with an increasing impact on a world scale. The timing is no accident, for the
processes of globalisation in the last couple of decades have opened
up vast new opportunities for transnational diasporas, which Tololyan
calls 'the exemplary communities of the transnational moment'. 2

B
The record of multinational corporations' successes, in spreading capitalist development around the world, is poor. In Latin America they


4

Introduction

have had a close alliance with national governments and the support
of US power. Yet despite enormous investments and considerable economic growth, they have polarised the populations, condemning large
numbers to marginality and deepening poverty, as their traditional livelihoods have been undermined and not replaced. The resulting societies
have been unstable, subject to recurring revolts and debt crises.3 In
Africa, in the aftermath of colonialism, they have been unable to create the conditions for the crystallisation of stable nation states, and
they have largely turned their backs on it. In East Asia the multinationals have played little role in the successful industrialisation of
South Korea, Taiwan and Hong Kong (although more in Singapore).4
It is, however, their ineffectual response to the opening up of communist and ex-communist regimes that provides the full measure of
their historical failure. When the attempts at autarkic state development, outside the world market, ground to a halt, new frontiers opened
up to world capitalism, but its leaders have been unwilling or unable
to seize the opportunities. In the case of the ex-Soviet Union and much
of Eastern Europe, it might perhaps be argued that the difficulties have
been insuperable. In China, however, spectacular growth has been occurring for a decade and substantial foreign investment has contributed to it. Commentators have been debating whether America, Europe
or Japan would be the front runners into China, but the multinationals,
both Western and Japanese are no more than also rans, well behind
other, unpredicted players.
By the end of 1993 there were 167 000 foreign invested firms operating in China with a total foreign direct investment of $69bn (here
and henceforth $ signifies US$). If we add to this the reinvested profits
attributable to this investment, the foreign contribution rises to $150bn.
Yet less than a fifth of this had been contributed by Western and Japanese companies combined.5 In the province of Guangdong, the vanguard of growth, the figure is smaller. Even these proportions overestimate
the role of developed countries' multinational companies, since they

include smaller firms as well, particularly from ethnic Chinese investors in America and Australia. Huge bureaucratised corporations, it
may be argued, seek reliable conditions in which to produce for known
mass markets, and a predictable political and legal environment. They
have become wary of and unsuited to situations of rapid change, competition, risk and uncertainty and have thus let pass and decay or forfeited to others these new possibilities for the expansion of capitalism.
If this judgement is correct, it raises some new questions about the
future hegemony of today's multinationals in the global economy. The


Introduction

5

views of Pirenne and Schumpeter might have relevance here, effectively that old dogs don't learn new tricks, that capitalism is a discontinuous system in which each new era calls forth a new body of men
and women, quite different from their predecessors, and that organisation and entrepreneurship are antithetical. There is little dispute that
the changes in the world economy and polity and in the dominant
cultures, in the last quarter of the 20th century, have been momentous.
There is more dispute as to whether they have handed the world over
to the untrammelled power of multinational corporations or whether
they have disrupted and disorganised them, opening opportunities for
newcomers.
One kind of major change involves processes of globalisation, including the enormous advances in cheap and rapid communications
and personal mobility, the rapid growth in the flows of people, goods,
money and information around the world, the spread of deregulation,
the opening of the frontiers of previously largely autarkic Communist
regimes, the relative loss of economic control by national governments
and the increasing world-wide interlinkage of industrial production and
management through direct foreign investment.
In the period between 1914 and 1948 international migration, trade
and investment had shrunk substantially as a proportion of population
and of economic activity. Most economic activity and patterns of capitalist ownership were encapsulated within nation states. This changed

slowly after the war but faster in the last decades. Global trade only
regained its 1914 proportions in the 1980s. Under GATT a series of
tariff reduction rounds on manufactured goods had taken place, lowering the average from 40 per cent in 1947 to five per cent in 1994.
Imports which formed on average less than nine per cent of the GNP
of industrial countries between 1959 and 1972, had risen to over 15
per cent between 1972 and 1987.6 Trade by and between the countries
of East and Southeast Asia grew much faster than the world average
in the 1980s and 1990s.
The outcome of such penetration of trade into domestic economies,
it is often argued, has been to increase competition and uncertainty,
break up previously secure local mass markets and reduce the control
of both states and large producers within each national economy. The
wave of deregulation of exchange rates, capital movements, interest
rates and so on in the 1980s (often simply due to the fashion for certain economic dogmas) has contributed further to this growing economic permeability of national borders and to a displacement of state
regulation by free markets.


6

Introduction

Modern technology and deregulation have led to a global financial
system, a single world market for money and credit as well as for
stocks and futures, especially since the Big Bang of 1986. The stocks
and flows of assets internationally now exceed by many times their
levels before 1970.7 This internationalisation of banking, disorganises
national finance capital (the bonding of banks and industry within a
particular country). Both finance and industry have now become internationalised but into separate circuits and with different rhythms.8
In the first postwar decades US dominance of the world economy
was unchallenged. In the first wave of direct foreign investment (DFI)

by multinational corporations, in the 1960s, US firms established their
production around the world but primarily in Europe and Latin America. By the 1970s, however, Europe and by the 1980s Japan had become significant rivals to the US as a world economic power, creating
a multicentred and competitive world economic system. In the second
wave of DFI in the 1980s European firms established themselves in
America and Japanese firms in Europe, America and also (to a lesser
extent) in Asia.
While some argue that globalisation, deregulation and the growing
permeability of national boundaries have reduced the capacity of nation
states to control the multinationals and thus have given the latter a
free hand,9 others point to the development of a fundamentally unpredictable environment world-wide and to the multiplying pressures of
competition and uncertainty. Lash and Urry refer to this situation as
Disorganised Capitalism, in which both governments and corporations
have both lost the ability to organise the national economy or to control the impact of global factors.10 The collapse of Baring Brothers in
February 1995, due to the activities of one trader on the international
derivatives market, is a striking illustration of this new vulnerability. It is a world in which the uncontrollable choices of individual
actors can have unpredictable consequences. Yet planning and organisation were the hallmarks of the great corporations, and predictability
was a prerequisite for the Fordist mass production on which many of
them rose to power.
Developments in microelectronics and in consumer demand in the
last couple of decades have also created a less exclusively comfortable environment for the multinationals. The first has reduced the costs
of the most advanced forms of production and made possible a combination of high tech and flexibility, thus shattering the unchallengeable
domination of bigness and of mass production. The second has seen a
diversification of tastes and a proliferation of specialised markets. Neither


Introduction

1

of these are well served by bureaucratic formalism or by minute division of labour and deskilled workers and clerks. The general malaise

of big corporations has been manifest now for many years in a proliferation and succession of fashionable management nostrums and consultants' recipes for their rejuvenation, stressing flexibility, devolution
and team responsibility, networking, creativity, reskilling and so on.
Within developed countries it is clear that some tentative challengers
to corporate hegemony have appeared. Small businesses, in decline,
and universally stereotyped as dependent, backward and low skilled
until the 1970s, began to increase in number again. Some of these, at
least, have been highly successful and innovative self starters, using
and developing the latest technology and designing for the newest niche
markets. Silicon Valley and the Third Italy have become terms to conjure with, denoting mutually supportive communities of such firms.11
Few, however, have thought of these small firms as actual or potential
actors on a global stage or as nascent rivals to the international operations of the multinationals.

C
The protagonists that have swept the board in the race against the
multinationals into China are Chinese diaspora capitalists: loosely
interlinked family firms, often of small and medium size, scattered
throughout the region and the world, owned by people with diverse
national loyalties but also with elements of a common history, culture
and identity. The social sciences have until recently found it hard to
conceptualise such an entity in the context of the modern world.
The discipline of Politics is concerned with what takes place under
the aegis of a nation state, and that of International Relations with the
relationships between states. Sociology was founded in the late 19th
and early 20th century in a period of ascendant nationalism; the societies it takes as its subject matter are generally presumed to be
coterminous with national boundaries.12 Statistics are nearly always
collected and studies carried out within national boundaries, or as a
comparison between national societies and, in the absence of any conception of transnational social structures, these may never obtrude on
the researchers' vision. For economists the problem is different. World
markets rather than nation states are their element, but their actors are
by definition individual persons or firms not groups, whether structured locally or transnationally.

8

Introduction

Multinational companies might seem to present problems for nation
centred approaches, but this is resolved by presuming them (not always correctly) to be based within a single country from which they
spearhead its economic activities within, or its dominance over others.
The sociological study of ethnicity and migration has also managed to
avoid a transnational dimension. Its initial concern was with the assimilation of outsiders into what were conceived as unitary national
societies. It has since shifted to a focus on the enrichment and on the
forms of conflict and inequality that a diversity of building blocks can
bring to a complex multicultural society. Occasionally there has been
an acknowledgement of continuing links to the countries of origin of
migrants but there is scarcely ever a focus on connections between
immigrants in one country and others from the same place of origin
who have gone to other destinations. The term diaspora to express, as
a whole, the scattered groups and their interrelationships has had little
place in the sociology of modern society, nor is there any other term
that serves the same purpose.13
Even those concerned to overcome these barriers often find it hard
to do. Wallerstein's World System was seemingly constituted out of
the coming together to trade of pre-existing nation states, which became located within core, peripheral or semi peripheral zones, and
which may move, only as complete entities, between the zones. Robertson
sets up a four cornered global field which includes national societies,
a world system of societies, individual selves and humankind, a schema
wherein there is little conceptual room for subgroups with transnational
connections.14
The first step in clarifying what we are concerned with might be to

adopt McGrew's sharp distinction between interstate or international
and transnational relations (see diagram of McGrew's Cobweb - Figure 1.1). The first involve temporary or permanent relations between
government bodies as well as the organisations they establish together,
such as the United Nations and its agencies, international treaties, GATT,
the European Union, alliances such as NATO or ASEAN, trading blocs,
procedures for co-operation between police forces and so on.15
Our interest is, however, in transnational relations, the multiplying
cobweb of connections across national boundaries between organisations, groups and individuals located in civil society rather than in the
state, and which sometimes set up their own transnational bodies. The
list of transnational organisations is enormous and growing, including
such international non-government organisations (INGOs) as Greenpeace,
Amnesty International, Medecins Sans Frontieres and Oxfam as well
as transnational associations of various professions, sports, political,


9

Introduction

:

International organisation

O

Transnational organisation
Government
Society

Figure 1.1 McGrew's cobweb

Source: McGrew (1992a) p. 13, with permission.
cultural and religious groups, mafias and drug smuggling networks,
revolutionary and terrorist groups, trade unions, business organisations,
alumni associations of schools and universities that attract foreign students
and so on. We could include here also those multinational corporations that are indeed transnational in their ownership and decision making
structures.16
This leads us to the more complex and unpredictable question of
what we might call sleepers, currently unconnected groups scattered
around the world whose shared present or past experiences have the
potential to motivate transnational cooperation, if circumstances and
communications concur. The UN-declared Year of Indigenous Peoples


10

Introduction

brought together a transnational conference of representatives of indigenous people around the world, turning what had previously been
merely a category into a collective presence. When the media publicised the claims for compensation of Korean comfort women, forced
into prostitution by occupying Japanese troops, long-buried shared memories induced some Australian women to speak up, travel to Korea
and join their campaign. Class actions for compensation for faulty breast
implants have straddled the world.
Such irruptions of the past into the present in novel transnational
combinations cannot ever be reliably predicted. If we are not to be
taken wholly by surprise by the awakening of such sleepers we must
at least be sensitised to the way history has left structures and fault
lines in global society quite different from the boundaries of today's
nation states - migration chains, the boundaries of old empires, old
wars and old trade routes, transnational linguistic and religious
commonalities and economic cultures and so on. Yet the outcomes

can never be read off directly from a knowledge of such old structures
and fault lines. The existence of such sleepers offers choices to social
actors that are wider than those provided by current social structures
(although, as always, such choices will also produce unintended consequences). People, in making their own history, are constrained by
the structures that past choices have erected, but the diversity of sleeping
structures and cultures does offer the potential for real alternatives in
the present situation.
Ethnic identity has proved itself to be an awakening sleeper amongst
minorities within nation states who had been thought, and thought themselves, well assimilated. The same can be true of ethnic diasporas,
however tenuous their links have become, when globalising opportunities provide the incentive and modern communications provide the
means to re-establish contact. Appadurai expresses well the transnational
dimension of ethnicity:
Primordia . . . have been globalised. That is sentiments that can ignite intimacy into a political sentiment and turn locality into a staging ground for identity have become spread over vast and irregular
spaces, as groups move yet stay linked to each other through sophisticated media capabilities . . . ethnicity, once a genie contained
in the bottle of some sort of locality (however large) has now become a global force, forever slipping through the cracks between
states and borders.17


Introduction

11

D
It was our contention that the processes of globalisation, which multiply competition and unpredictability, have not been comfortable for
the established, bureaucratic multinational corporations. Their historic
failure to expand capitalism into the old autarkic Communist states
was a measure of their timidity and incompetence in the new world
situation. On the other hand, as we will seek to demonstrate in this
book, this new world situation may offer novel opportunities for a
diaspora capitalism that has an established trading and business competence and activateable transnational networks. Today's technology

and globalising economy can develop and enhance these resources and
thus empower such a diaspora to become an effective challenger on
the global stage, and in future that will be the only stage that really
matters.
The law of combined and uneven development suggested that any
contender for capitalist power status would have to begin its industrialisation using the same levels of technology as the existing powers
with which it wished to compete. We can apply the same reasoning to
its transnational capacity. Capitalism is increasingly globalised and its
main players are multinational corporations. In this situation any wouldbe competitor must start at the same global level and be able to start
operating transnationally very quickly.
Diaspora capitalists start with a transnational network and therefore
have overcome obstacles to transnational operations before they start,
and cannot be frozen out of global marketing channels by existing
powerful corporations or their state backers. They are accustomed to
insecurity and to operating in unfamiliar environments, relying on family
management of transnationally networked small and medium firms, on
personal trust and reputation and on strategies of flexible diversification, rather than on bureaucratic structures, law and state support or
on the advantages of scale and mass production.
Many of the disorienting experiences of globalisation have long been
familiar to the cultures of diasporas. In its modern form, however,
globalisation provides them with new resources for overcoming them.
Through migration and remigration and long separations from family
and friends they have always had to learn to foster relations with absent others, to live in locales thoroughly penetrated by distant influences, to accept what Giddens calls 'dis embedding', the lifting out of
social relations from local contexts of interaction and their restructuring across indefinite spans of time-space.18 Now, however, through the


12

Introduction

telephone, the fax machine and cheap air fares they can re-embed them
and reconstitute a real and effective face to face community out of
their scattered fragments around the globe, and one that can be called
upon instantly for information and resources. As a minority in other
people's territories, living in the cosmopolises of every age, they have
always had to defend their identity against the danger Hannah Arendt
saw in 'a global present without a common past [which may] threaten
to render all traditions and all particular past histories irrelevant'.19
But now they can recover their particular histories, make pilgrimage
to their place of origin, and to ethnic and religious shrines, organise
international reunions for extended families or for old classmates and
receive books and journals and videos from world centres of their languages and cultures.
The most sweeping claims for the central importance and aptitude
of certain diasporas (especially Jews, Indians and Chinese) for the circumstances of the last years of the 20th century is made by Joel Kotkin.
He calls them global tribes, and defines them by their combination of
ethnic identity, geographical dispersion (with a global network) and
open mindedness (with a belief in scientific progress). In other words
they combine what liberals had wrongly thought intrinsically separate
- ethnic identity and cosmopolitan adaptability. He predicts that in the
new era, with the end of the Cold War and the reduced power of
nation states, such cosmopolitan groups will flourish.20
Trading diasporas have been common through most of human history with the Jews as perhaps the best known example. Whether many
of today's diasporas have the potential that Kotkin assigns to them is
perhaps doubtful. The Chinese, as he describes them and as they will
be found in this book, fit his model well, but whether they can be
taken as the paradigm for others is yet to be seen. Playing a successful global role today does not just depend on having the attributes he
describes but also on the resources of the group, on the opportunities
available to it and on timing.
E
Kotkin's seemingly incongruous combination of ethnic identity with

cosmopolitan adaptability is not the only paradox to characterise the
Chinese diaspora. China has for over two thousand years been a great
power in the east yet it has nearly always seen itself as a land based
empire, indifferent or actively hostile to the traders and emigrants who