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Localizing Global Finance illustrates that private equity has become a more significant component of China's economy based on a pattern of new domestic elites importing and implementing a largely Western financial model.



1. Introduction

The introduction outlines the rise of “new” finance in the global economy, the significance of private equity funds in China and other emerging markets, and two indicators to measure localized global finance (change in Western business models and market share gained by local and international private equity firms). Then, the findings and the significance of this analysis are briefly reviewed.
Justin Robertson

2. A Middle Ground between Global and Local Levels of Analysis

One of the primary contributions of the monograph is presenting middle grounds in the study of the political economy of emerging markets. Chapter 2 begins this process theoretically by opening up space between analyses based almost entirely on domestic factors and analyses, at the other end, which are overly global/international in nature. The work of Cerny, Ravenhill, Rosenau, Sassen and Soederberg is drawn upon. The role of bilateral activists in environmental politics is introduced as a comparison point. The chapter argues that the focal point of analysis should shift from public to private actors, while still emphasizing global influences in the domestic political economy.
Justin Robertson

3. Global Finance and Localization: Four Possible Outcomes

This chapter establishes a framework to evaluate patterns of localization. On the basis of whether Western financial models are modified significantly and whether local or foreign actors drive change, there are four different localization outcomes: full, modified, replica and absent forms of localization. Some of the key literature underpinning these different outcomes is introduced. In particular, a resistant domestic political economy framework is shown to be incomplete in explaining “new” finance in Chinese political economy. The chapter points to replica localization as a more persuasive model of the Chinese private equity industry.
Justin Robertson

4. Where to Study Domestic Actors and New Finance

Princelings and returnees are important new actors in Chinese finance and they are, more often than not, allies rather than rivals. This chapter advances three propositions on how to study princelings and returnees as elite actors, generally, and in the specific case of Chinese private equity: princelings need to be examined in the business sector as well as in politics; returnees need to be examined in more sensitive economic fields than technology; and interconnections between princelings and returnees need to be uncovered.
Justin Robertson

5. Replica Localization and Private Equity in China

Chapters 5 and 6 are the primary empirical chapters. Data that are more aggregate in nature are presented in Chapter 5. This material illustrates that domestic firms have outpaced foreign firms in China’s private equity market and that a significant number of elements of Western private equity are now practiced in China. Both capital raised for Chinese private equity and the investments made by domestic and foreign private equity funds are evaluated. The chapter begins with a short history of the private equity industry in China.
Justin Robertson

6. Elite Formations and Cases of Success and Failure

Chapter 6 turns to case studies. Contrasts are made between cases of successful replica localization featuring princeling-returnee coalitions (Boyu Capital, CITIC Private Equity Funds Management and New Horizon Capital) and less successful instances of replica localization that are returnee-centric (Mount Kellett Capital, Primavera Capital, Primus Holdings, RRJ Capital and most US private equity firms). Data are presented on the investment teams of princeling-based private equity funds, which reveal that returnees are heavily represented. Fully localized Chinese private equity firms that offer a different model are also presented but the analysis in this chapter casts doubt on the larger importance of such enterprises and notes that these firms operate on a much smaller scale than replica firms.
Justin Robertson

7. Revisiting the Literature and the Significance of the Findings

Chapter 7 turns to the significance of the empirical findings on China’s private equity industry by reviewing some of the key recent works on the political economy of finance in China. Scholarship by Breslin, Collins, Gottwald, Heilmann, Hess and Lardy is critically assessed. The conclusion is that models that are open to changes in China’s political economy, especially Heilman’s framework, are best suited to studying developments in new finance in China.
Justin Robertson

8. Conclusion

Global business models are replicated in new settings when a set of local elites brings together deep ties to the global economy and political capital in the domestic political economy. This central argument is restated in the final chapter with a discussion on the significance of Western financial models coexisting with relationship-based business. Possible future scenarios are raised that include a backlash against relationship-based business/princelings and the possible replacement of returnees by locally trained elites. These scenarios are considered to be unlikely in the short-medium term. Finally, the next step in the broader research agenda are laid out: assessing whether or not other new financial forms match replica localization in China and other national settings. Preliminary evidence on investment banking offers support for the replica localization model.
Justin Robertson


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