New book by MIT Sloan director addresses China’s economic rise

Country’s growth not a threat to the West

CAMBRIDGE, Mass., July 19, 2010 — From small startups to large corporations, it’s increasingly common for businesses in industrialized countries to have at least part of their production operations based in China. While many see the rise of China’s economic power as a threat to the West, MIT Sloan Acting Director of the MIT-China Program, Prof. Edward Steinfeld, argues that China’s embrace of Western-style capitalism has unleashed unprecedented global opportunities for innovation.

In his new book, Playing Our Game: Why China’s Rise Doesn’t Threaten the West, Steinfeld writes, “The global division of labor that China has fostered is the very same one that has permitted the world’s wealthiest nations, particularly the U.S., to surge forward in technological innovation and commercial creativity. Chinese specialization in manufacturing assembly has facilitated not only U.S., but also Western European and Japanese specialization in something far more difficult to replicate: knowledge creation and invention.”

Steinfeld explains that in the early 1990s, China experienced a societal crisis in which the government found it could no longer preserve socialism. Making radical changes, leaders quickly embraced the global economy, grasping at opportunities to link China to globalized production. “China permitted in a very big way foreign producers to come in and buy, build or restructure factories and jumpstart the economy by having Chinese workers make pieces of products within global supply chains,” he says.

Those foreign-owned export-driven businesses became tremendously important in China’s rise. Moreover, their growth has shaped the trajectory for domestic institutional and political change within China. “China today is growing not by writing its own rules, but instead by internalizing the rules of the advanced industrial West. It has grown not by conjuring up its own unique political-economic institutions, but instead by increasingly harmonizing with our own. In essence, China today—a country at the peak of its modernization revolution—is doing something it historically never really did before. It is playing our game,” writes Steinfeld.

Playing our game means playing by Western rules, he notes. To do this, the government had to transform the basic institutions of governance and social control in China in order to allow foreigners to do basic things such as hiring and firing workers, control wages, and easily move goods in and out of the country. Over time, those transformations spread through other sectors and required Chinese leaders to embrace even more global players.

By participating in this multinational division of labor, businesses worldwide are more likely to find solutions to common problems such as climate change and economic downturns. Steinfeld explains, “It’s destructive to try to shut down these production systems out of fear that China is stealing our technology. Doing so would result in shutting ourselves off from important avenues for innovation. To the extent that we absent ourselves from these markets in China, we will absent ourselves from important opportunities to develop new technologies.”

He adds that this growth in China is part of a global industrial revolution. “Intellectually speaking, if you get China right, you get the global industrial revolution right. It is in that revolution, through its unique modes of global production and innovation, that we are most likely to find solutions to our most pressing problems. Thus, it’s especially important to understand China’s role in all this and the changes it has made internally to accommodate these processes.”

Playing Our Game: Why China’s Rise Doesn’t Threaten the West, published by Oxford University Press, will be available in August, 2010.

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