The Strategic Implications of China's Economic Regionalism

BEIJING -- Urban legend tells of an American businessman who, visiting a factory in China's Guangdong Province, witnesses working conditions forbidden by Chinese law. When he inquires about them, the factory owner replies sharply, "Laws made in Beijing mean nothing in Guangdong."

Though apocryphal, the story reflects the localism and institutional inconsistency that are core aspects of the modern Chinese economy. Mao Zedong's attempts to bring centralization and uniformity to an economic system of continental proportions resulted in paralysis. In the reform era, previously suppressed network connections have regenerated quickly, resulting in increasing heterogeneity and even fragmentation within the economic system. From a geopolitical perspective, these accelerating trends make regional divergence and federalist sentiment a key framework for strategic analysis of the Chinese political economy moving forward. ...