3. The Evolution of Government–MNC Relations in China: The Case of the Automotive Sector

This chapter examines the evolution of government–multinational corporation (MNC) relations in China’s automotive industry from the mid-1990s to the mid-2000s, and the ensuing changes in government–MNC relations that emerged henceforth in the automotive sector. The central argument is that, in China, the automotive industry witnessed dramatic changes in the governance pattern of government–MNCs relations that enabled more full use of the capital, technology and know-how of the leading foreign MNCs for the modernization of this sector. In turn, leading foreign automotive MNCs responded to these regulatory changes, and the rapid growth of China’s domestic auto market by making some of the largest ever investments in China. From a comparative perspective, the capital invested, and transfers of technology and know-how by the MNCs to China enabled Chinese domestic automotive corporations to absorb leading-edge global practices and technology more rapidly than in other large developing countries such as India.