Restructuring the export-oriented industrialization in the Pearl River Delta, China: Institutional evolution and emerging tension

The rise of the Pearl River Delta (PRD) as a promising workshop of the “world factory” in China has attributed to the export-oriented industrialization driven by foreign direct investment, particularly Overseas Chinese investment from Hong Kong and Taiwan initiated in the late 1970s. The export-oriented industrialization has embedded in the flexible institutions favourable for foreign investors and local authorities, via the salient entry mode, i.e. processing with supplied materials (lailiaojiagong). Since the mid-2000s, the export-oriented industrialization has undergone dramatic restructuring to cope with the changing business environment at global, national and regional and firm levels. Drawing upon the evolutionary and institutional perspectives in geographical political economy approach, this study argues that the prevailed institutions conducive for the export-oriented processing have evolved into institutional inertia and territorial embeddedness as obstacles for the on-going restructuring, particularly the market reorientation from export to domestic sale. Moreover, difficulties of restructuring through the state-designated relocation have been heightened by the resistance from below and emerging state-firm tension. The institutional evolution of the export-oriented industrialization in the PRD has enriched the literature on industrial restructuring in the context of dynamic global–local interactions, but also provided fundamental implications for formulating well-coordinated restructuring strategies among various institutions and concerned actors.

► The study examines the transformation of the export-oriented industrialization in the Pearl River Delta (PRD) through comprehensive investigation of the institutional evolution and emerging tension in the changing business environment since the 2000s.
► The flexible institutions prevailed in the 1980s and 1990s have evolved into institutional inertia and territorial embeddedness as obstacles for the on-going restructuring, particularly the market reorientation from export to domestic sale.
► Difficulties of restructuring through the state-designed relocation have been heightened by the resistance from below and emerging state-firm tension.