Changing Lanes in China: Foreign Direct Investment, Local Governments, and Auto Sector Development. By Eric Thun. New York: Cambridge University Press, 2006. xiii, 326 pp. $78.00 (cloth); $29.99 (paper).

In the aftermath of the East Asian financial crisis of 1997–98, it would have been easy to join the new orthodoxy proclaiming that “the state” in the Asian region had played a negative role in guiding industrial modernization, leading to “crony capitalism” in state–business relations. Criticism of the Asian developmental state became the new conventional wisdom, as the state was no longer seen as the source of Asian dynamism but rather the main cause of the meltdown. Eric Thun's well-researched and strongly argued study of China's automotive development, focusing on the time span of the early 1980s until the late 1990s, addresses this issue at several levels. First, it challenges the postcrisis orthodoxy, focusing on the constructive role of the local developmental state and local networks of firms in driving China's automotive modernization from the mid-1980s onward. Second, it examines how two decades of reform, development, and foreign investment have prepared state-owned Chinese auto firms for the challenge of global integration. Third, it sheds light on future challenges for China's auto industry, examining how deepening integration and recent shifts in the global automotive industry have exposed inherent weaknesses in even the most advanced Chinese automotive corporations.Clearly written and well organized, Thun's study is indispensable reading for those interested in the keys to the success of industrial development inside China and in China's future development prospects in the automotive sector, and it stands to be one of the most important books on the political economy of China's industrial development in recent years. Its findings are mainly drawn from an impressive data set that Thun accumulated through 187 structured but open-ended interviews with a broad range of key participant-observers over an eight-year period across five municipalities and at the central level. The primary sources were then supplemented with information from statistical yearbooks, planning documents, newspaper reports, academic journals, and commercial sources.The book begins by outlining the broader national context for the local developmental efforts, analyzing the role played by the central government in auto sector development. The second part highlights the key variables examined in each of the case studies, specifically bureaucratic structures as they relate to investment and interfirm relations, and chronicles the details of each case of the local case studies: Shanghai, Beijing, Guangzhou, Changchun, and Wuhan. The primary goal is to understand how differences in outcomes correlate to different institutional patterns. The secondary objective is to account for differences in the choice of developmental strategy that correlate to local historical and political factors that precondition each municipality's approach to auto sector development. An important insight in the book is that the initial institutional characteristics that were set in place at the outset of the auto modernization drive within a particular municipal locale—specifically the institutional nexus between the local Chinese automotive enterprises, the local state, and the foreign automakers—set the local automotive industry on a specific development path and shaped longer-term outcomes in each locale.Thun develops a typology of three patterns of institutional arrangements in the Chinese auto sector—the laissez-faire local states of Beijing and Guangzhou, the firm-dominated localities of Changchun and Wuhan, and the local developmental state of Shanghai municipality—and suggests how these varying forms of local state–local firm relations essentially determine developmental success or lack thereof. The book ends by discussing how recent changes in the global automotive industry, especially deepening integration, have created new challenges for Chinese firms to further upgrade technology and improve corporate governance. Institutional structures that proved useful for Shanghai during the early stage of modernization, for example, have become impediments to further growth and international competitiveness in the second stage.Thun is clear to stipulate that the Chinese nation-state is pressured from above by changes related to globalization and from below by decentralization dynamics involving local states seeking new opportunities for development. The latter trend is explored in depth and forms the core of the book. However, the study is less consistent in integrating the role of global or international factors as causal factors. Variation in international factors, such as how different automotive multinationals intervened in varying ways in each of the municipal case studies, and how their interventions also played a key role in determining outcomes, is left unexamined in the most important parts of the discussion, the case studies in chapters 3 to 6. The relationship between international and domestic factors is brought into focus in the final three chapters, when the author discusses the challenges of deeper global integration for the local Chinese firms.Despite the inconsistency, Thun's study is an excellent work of political science and comparative political economy that offers important and groundbreaking findings and coherent analysis. It is exceptional in terms of depth and breadth of empirical research. The book is a must-read for the broader audience that wants to understand how political and economic institutional arrangements affect the ability of a developing country to promote the growth of supply networks around a core foreign-invested project. Perhaps most important, it focuses attention on the pressing need to examine how globalization and the shifting needs of capital and technology-intensive industrial sectors necessitate a more nuanced role for the state in development, a role that has been crucial in China's industrial modernization during the reform period, and once again places issues of political economy and industrial development at the center of Chinese politics.

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