Financial Globalization, Local Debt Markets and New State Financial Activism in Middle‐income Countries

Since the global financial crisis of 2008–09, there has been a renewed interest in the role of the state in processes of financial development and globalization. This article explores new forms of state economic activity via the development of debt capital markets in Southeast Asia, specifically Indonesia and Malaysia. It suggests that the expanding profile of various state‐controlled entities in local capital markets constitutes a new form of state financial activism responsive to (upper) middle‐class consumption preferences such as modern infrastructure, urban housing and low‐risk investments. This activism highlights state agency and complicates the propositions of the emergent literature on state capitalism and financial de‐risking that focuses on increasingly close alignment of the interests of states and international portfolio investors. Accordingly, the authors caution against unilinear conceptions of the state in which activism is primarily geared towards accommodating the preferences of international investors. The article posits that states are actively trying to establish new market logics for the benefit of their domestic middle classes via the development of domestic capital markets, and that the emergent role of middle‐income country (upper) middle classes as financial consumers reconfigures processes of state‐managed financialization.