Institutional Adaptability in China: Local Developmental Models Under Changing Economic Conditions

Distinct patterns of regional development have emerged in China’s political economy since the initiation of economic reforms in late 1970s. In particular, the localities of Suzhou, Wenzhou, and Dongguan each achieved dramatic economic growth during the first three decades of reform, earning them national reputations as developmental “models” for other cities in China to recognize and emulate. However, the local states of Suzhou, Wenzhou, and Dongguan responded differentially to changing conditions in the broader domestic and global economy; and the global financial crisis at the end of the 2000s affected the three localities with varying levels of severity. This article thus seeks to explain why previously well-performing developmental models diverged in their performance and capacity to recover from a major economic shock. Drawing on national economic census data, in-depth field interviews, and relevant secondary literature, we argue that variation in the institutional adaptability of Suzhou, Wenzhou, and Dongguan throughout the course of their developmental experiences had a defining effect on how these cities fared during the financial crisis. The process-tracing case studies reveal that a locality’s ability to adjust to changing market conditions may be conditioned by structural endowments, but ultimately hinges on agent-centric factors, including motivated and capable local leadership, openness to new policy ideas, and state capacity for policy implementation. Ultimately, our analysis makes the broader observation that in a dynamic environment, factors that promote economic success at one point can become barriers later on. Hence, exploring a region’s institutional adaptability and identifying the factors that facilitate or impede such adaptability in local economic governance provides a more nuanced means for understanding a locality’s evolving developmental patterns and performance—during normal times, as well as more challenging periods.