Blood, Thicker than Water: Interpersonal Relations and Taiwanese Investment in Southern China

Transnational capitals have not been as footloose as theorists of a new international division of labor have proposed. Taiwanese direct investment in southern China represents a case where transnational capital flows are shaped by cultural and institutional conditions. The effectiveness of Taiwanese direct investment in southern China is achieved through the interpersonal networks established between Taiwanese investors and local Chinese officials. Such networks, in turn, are based on two major conditions. First, the newly gained economic autonomy of local governments in southern China, as well as the Chinese bureaucratic tradition of flexible interpretation and implementation of laws. Such an institutional context provided the space for the local state in China to bypass the scrutiny of the central state and to link up with the world economy directly through overseas Chinese capitals. Second, cultural and linguistic affinity between the Taiwanese investors and local Chinese officials have provided the tools for establishing interpersonal networks between Taiwanese investors and Chinese local officials through the principle of gift exchange.