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Abstract

This paper enriches the understanding of actually existing state entrepreneurialism (SE) through politics of scale, regulatory flexibility, and financialization. The emphasis on “actually existing” uncovers how political discourses are materialized into variegated policy outcomes and territorial politics. The central-local relations and their reinforcement through scalar politics are essential to state regulation, revealing power dynamics in SE. SE represents a distinct governance capacity with regulatory flexibility expressed through state-orchestrated processes designed to meet multifaceted goals. Financialization is instrumentalized in revamping state intervention with commercial and financial logic. Finally, the state is seen as polymorphous in nature given its active stewardship in growth agendas.

Keywords

state entrepreneurialism politics of scale regulatory flexibility financialization stewardship

I From neoliberalism to state entrepreneurialism (SE)

The transition from Fordism to post-Fordism that began in the late 1970s marked the emergence of neoliberalism, a distinct political-economic ideology that translated market rationality and financial liberalization into a number of structural changes, including “free markets and small states, selective deregulation and targeted reregulation, low taxes and lean administration” (Peck et al., 2018: 3). Neoliberalism has generally been used as an umbrella term that incorporates economic (prioritization of the market), social (individualism), and political (limited role of the state) intentions (Self, 2000). As a market-oriented approach, neoliberalism has deep roots in the “neoclassical theories of economics (aka capitalism) that maximize [s] the role of the private business sector in determining the political and economic priorities of the state” (Wu, 2010: 619).

There are several “interpretative variants” of neoliberalism (Jacobs and Manzi, 2020: 573). Ideologically, neoliberalism represents a hegemonic project that rejects Keynesian demand management and social welfare policies. Neoliberalism was developed in the 1970s in response to economic and social upheavals associated with globalization. Politically and pragmatically, neoliberalism has given rise to a set of influential policy practices for (re)organizing capitalist economy (Dean, 2014; Mirowski and Plehwe, 2015). The political economy interpretation attributes the rise of neoliberalism to a crisis in capitalist accumulation. During the Fordist era (1945–1973), national economies were supported by expanding the mass production of standard goods in multiple industries. The national state became interventionist, subsidizing less productive regions and providing welfare to wage earners in order to maintain certain levels of consumption (Jessop, 1992). However, Fordist capital accumulation created a crisis of overaccumulation and unemployment due to an innovation bottleneck and saturated demand in domestic markets (Jessop, 1992). Neoliberalism was invented as “a suite of economic proposals designed to assist market-based growth” (Jacobs and Manzi, 2020: 574). A regime of accumulation thus became ascendant, characterized by specialization in terms of production, labor, and firms with flexibility, driven by principles of efficiency, rationality, and market competition, as well as a freer distribution of knowledge and authority (Vallas, 1999).

Neoliberalism is also interpreted primarily as an extension of state forms (Peck and Tickell, 2002). In this interpretation, the post-Fordist regime of accumulation is seen as coupled with changing norms of state intervention focused on privatization, competition, efficiency, and imposing austerity (Peck et al., 2018). With the inclusion of both roll-back (i.e., deregulation) and roll-out (i.e., reregulation), state regulation secures legitimacy while distinct local politics is advanced. Deregulation introduces reduced state control over major industries and greater freedom for economic agents (Brenner and Theodore, 2002) whereas reregulation means the prevalence of authoritarian state forms and enforcement mechanisms put in place to safeguard institutions and market functionality (Peck and Tickell, 2002). The philosophy of “regulated deregulation” attempts to reconcile “the ostensible contradiction between liberalization and state control” (Aalbers, 2016: 570) such that economic incentives and competition are combined with efforts from a regulatory authority to enable various economic actors and industries.

Neoliberalism is often discussed as going hand in hand with entrepreneurialism, a term that typically suggests a distinct government mode, especially with a drive towards adopting market principles (Pow and Neo, 2013).¹ Both authoritarian and entrepreneurial governance are two forms of state intervention in urban practices (Eraydin and Taşan-Kok, 2014). Authoritarian governance means top-down state interference. Entrepreneurial governance is pro-market and innovative, in a way that urban spaces are utilized not only for profit but also to transform state-market-society relations with new rules and coalitional politics. Entrepreneurialism integrates principles of efficiency and competition into various regulatory norms and practices thereby leading to new governing tactics of the state (Carmo et al., 2021; Dardot and Laval, 2013). “Competition and the entrepreneurial model” can be integral to the functioning of a government and the mechanisms through which it governs (Dardot and Laval, 2013: 16). The principles of entrepreneurialism inform the coming-into-being of “market-complementing state interventions,” which produce a “lean- or small-state” (Peck et al., 2018: 6).

Entrepreneurialism is constantly evolving such that it takes on new characteristics with some iterations standing in contrast with its prototype (Wu, 2020). First, entrepreneurialism is not always “pro-market.” For example, in Detroit, entrepreneurialism has been found to follow a reversing path (referred to as a de-growth machine), with growth achieved by deviating from pure privatization, deregulation, and dismantling of welfare programs (See: Schindler, 2016). As “another kind of ‘growth machine,’” the de-growth machine includes “equitable down-scaling of production and consumption that increases human well-being and promotes sustainable economic development” (Schneider et al., 2010: 512). Accordingly, entrepreneurial strategies are demonstrably not constrained by a single-minded pursuit of profit. The de-growth machine has been used to save the city in the post-crisis era. For example, large-scale, resource-intensive productive and consumption activities which once accounted for a significant proportion of GDP have been replaced by industries that produce necessary goods and services (e.g., urban agriculture, food processing, and medical technology and services) to meet the basic needs of the public (Schindler, 2016).

Further, it is possible to include citizens and communities—including their aspirations of achieving a more livable world—in entrepreneurial practices. For example, as Vancouver, Canada, prepared for the 2010 Winter Olympics, “vancouverism” was promoted as an entrepreneurial agenda to achieve the city’s international vision of becoming “the Greenest City [advancing] Green Capital initiatives” (McCann, 2013: 5). Overall, vancouverism markets a unique governance style that combines economic opportunities and investment with a concern for the natural environment and community-oriented placemaking to both visitors and locals. For example, under the direction of vancouverism, Vancouverites engaged in making an appealing place, including “public spaces, small parks and pedestrian-friendly streetscapes and facades to minimize the impact of a high density population” (McCann, 2013: 12).

It is also the case that entrepreneurialism can function in ways that do not include competition. Entrepreneurialism can be used to advance extra market interests by leveraging policy influence. For example, the global network of mayors known as C40 is working to tackle the climate crisis on a collective basis. The global linkages that make up the network help overcome the constraints of mono-municipality or the nation state. Cities can gain influence at and benefit from the geopolitical scale by developing formal ties with key global actors. In addition to collaboration on addressing climate issues, the C40 mayors use the network to promote their cities as business-friendly places in order to gain investment (Acuto, 2013). Through C40, entrepreneurial policymaking ideas and practices are disseminated by and exchanged among worldwide governmental officials, urban planners, consultants, and researchers (Lauermann, 2014). In this vein, entrepreneurial actors make use of city networks as an effective avenue for diplomacy (Acuto, 2013). By aligning with international actors, mayors/city leaders pursue their interests beyond “the shadow of their central governments” (Acuto, 2013: 491).

Entrepreneurialism can also be instrumentalized in building new identities for cities. For example, in Lódz, Poland, the Poznanski/Rosa Luxemburg factory complex was redeveloped on an entirely privatized basis by a French real estate developer (See: Young and Kaczmarek, 2008). The site was transformed into a European-style shopping and leisure complex that emphasized the factories’ trading and business history. The redevelopment evinced a westernized architectural style that rejected the city’s socialist past as part of Eastern Europe. The project, thus, became a symbolic capital for a post-socialist city seeking to construct a new (western) “Europeanized” identity (Young and Kaczmarek, 2008; Verdery, 1999) through embracing modern international and capitalized development regimes (Stenning, 2018; Hamilton et al., 2005).

Although entrepreneurialism always has the purpose of blending and coordinating public and private interests, it is shaped by political, economic, and social systems and the values associated with them (Pierre, 1999). In the global south, entrepreneurialism is operationalized through “a dense web of interconnections between governments, state-led enterprises, and private businesses” (Xie et al., 2020: 5) and, therefore, expresses the “overriding role of the state and the way in which it relates to other actors (e.g., state-owned enterprises and citizens)” (Xie et al., 2020: 6). In the context of China’s rural development, for example, local state corporatism emerged by involving state and local enterprises in driving entrepreneurialism through rural industrialization (Oi, 1992; Öniş, 1991). The township government oversaw and coordinated enterprises “as if it were a diversified business corporation” (Oi, 1992: 101). In cities, state-business coalitions are formed to drive the city as a growth machine, through speculation, competition, branding, and place-promotion (Logan and Molotch, 2007). Having created a market-like environment, the state then gradually adjusts itself to fulfill a range of related objectives, including growth, political mobilization, and legitimacy building (Wu, 2020, 2023a). Thus, the state, “with its hegemonic position, pro-growth orientation and market operation, is metaphorically an entrepreneur developing the local economy” (Liu and Yau, 2020: 269). In other words, entrepreneurialism is a distinct characteristic of the state that could potentially enable it to function as a market agency (Wu, 2020).

Defined as “the profit-seeking, risk-taking activities of individual state bureaux as they set up businesses in the emergent Chinese market economy,” the term state entrepreneurialism (SE) first appeared in a 1996 study of the Chinese city of Tianjin (Duckett, 1996: 190). SE emerged from a context created by the central government’s determination to streamline administration by cutting staff deemed unnecessary in the progress towards market reform. As market reform has liberalized fixed price control and central allocation for most consumer goods, SE has become a restructuring strategy whereby state bureaux relinquish their traditional work (under the planned economy) to instead focus on setting up trading and real estate development companies. The profits could be used for purposes such as funding salary increases, refurbishing offices, and updating equipment (Duckett, 1996, 2001). Duckett even states that SE illuminates and facilitates the “utility-maximizing behaviour of individual officials” (Duckett, 1996: 193).

Overall, the study challenged the conventional understanding of the Chinese state as conservative in nature with officials who characteristically resist changes that may threaten their bureaucratic routines and power. Instead, Duckett portrayed the local state as taking advantage of entrepreneurship to facilitate bureau restructuring for new opportunities and, therefore, as adaptable to marketization. Similar observations were reported by Yılmaz and Aktas (2021) regarding the role of the Turkish state in promoting medical tourism since 2013. The role of the state has transformed from being a facilitator of privatized healthcare to a business operator of medical tourism, through engaging public–private partnerships and establishing an ad hoc public institution for developing a long-term promotion strategy.

Based on an investigation into how the German, US, and Chinese states have pushed and directed green transformation and launched green technologies, Mazzucato (2015) argued that in SE, the state goes far beyond nudging, which instead directly pushes the market to achieve new policy targets. As business sectors were reluctant to invest in new technologies given the risks and uncertainties, the initial push came from the state through extensive funding and policy support, which served as the leading entrepreneurial impetus. Strongly characterized by risk-taking in terms of developing new sectors critical to national economies, SE, therefore, relies on an entrepreneurial state to attract and optimize business opportunities with significant up-front investment providing clear market signals to business sectors. As Mazzucato (2015: 135) puts it, the state “not only ‘crowds in’ business investment but also ‘dynamizes it in’, creating the vision, the mission and the plan.”

Wu (2023b) viewed SE as a governance tool deployed with the purpose of gaining both economic prosperity and social security (e.g., collective consumption, social cohesion). As an example, China’s economic reform and opening up brought with it fiscal and administrative decentralization, which, in turn, pushed cities to the frontier of development. Local governments were incentivized to compete for foreign investment such that they engaged in real estate development and created iconic landscapes in an effort to attract investment. The result was uneven development (and its associated intra-regional disparities), uncoordinated competition, repetitive infrastructure construction (e.g., zone fever), and environmental degradation (Xu, 2008). Local jurisdictional fragmentation intensified the “politics of distribution” characterized by fierce competition among local governments for material and non-material resources distributed by the state (Li and Jonas, 2022). To address these consequences, the state played a proactive role in allocating, utilizing, and organizing land and other resources as well as repackaging them under a set of socioeconomic programs at local, regional, and national scales.

Similarly, Eraydin and Taşan-Kok (2014) observed the changing role of the Turkish state towards entrepreneurial urban governance and policymaking since 2001. SE combines both authoritarian and entrepreneurial aspirations of governance, which becomes a “means to reconcile the pursuit of competitiveness with the provision of collective goods in an effort to ensure social cohesion while pacifying the opponents of competition” (Eraydin and Taşan-Kok, 2014: 115). While sponsoring entrepreneurial activities, clear interventions are revealed by which social responses and dissent could be controlled.

Political considerations are significant behind SE given that the magnitude of growth constitutes a key performance indicator (KPI) set by the central government (Wu, 2018; Cartier, 2015; Chien and Woodworth, 2018; He et al., 2018). The Chinese government maintains control over the appointment of local officials and frequently reshuffles them by assigning them to different places based on performance evaluation (Wu, 2017). This system creates a “promotion tournament” among local officials, who take on strong entrepreneurial characteristics in order to seize opportunities to move up in the bureaucracy (Chien and Gordon, 2008; Wu, 2017). On this basis, entrepreneurial strategies strongly incentivize local state officials to accumulate political capitals and pursue career advancement (Guo, 2020).

Beyond China and some Eurasian countries in the global south, SE has been discussed recently in liberal market economies, such as the United States and UK. In the United States, massive U.S. government investment in private enterprises since 2008 has created the problems of mismanagement, with strong political interference in corporate governance. Besides, the financial crisis triggered the crisis of funding social welfare programs. Against this background, Templin (2009) discussed SE for the U.S. government as a means of post-crisis governance for maintaining state-led investment while improving social programs. SE is market-driven, aiming at wealth maximization with restrictions on exercising coercive regulatory action. Moreover, SE does not emphasize the replacement of market but the establishment of rules to ensure the state acts as a politically insulated and prudent investor. In the UK, state-executed financialization of public housing was observed since 2010. Local councils established real estate financial vehicles, bypassing a number of financial and regulatory constraints for fundraising to build homes and liquidate properties (Beswick and Penny, 2018).

In sum, SE originates from entrepreneurialism with a strong emphasis on an interventionist approach of governance to achieve market functionality and business opportunities. By taking a proactive role (i.e., “planning centrality”), the state deploys “market instruments” to achieve multifaceted goals (Wu, 2018). Further, the term “reform” has often been used to justify entrepreneurial efforts. Simultaneously, the state is able to align its own vision with numerous distinct entrepreneurial targets (Duckett, 2001; Lauermann, 2018; Zhou et al., 2019). Instead of fully adopting the entrepreneurial toolkit, the state is both innovative and strategic in terms of the tools it focuses on. It is necessary for the state to guarantee that changes introduced with the goal of achieving economic liberalization and deregulation are consistent and compatible (e.g., through adjustments in taxation and income redistribution) and that the society is not unduly impacted (e.g., through adjustments in welfare policies) (Hudson, 2001). The state then follows market logic on the one hand and implements measures to maintain a coherent social security system on the other (Wu, 2023b).

II Actually existing SE

Conceptualizing SE promotes an in-depth understanding of entrepreneurialism, its origin, directions, and trajectory. However, the literature to date pays little attention to furthering the field’s understanding of SE in advancing the theorization of the state, particularly in the context of the global south. Most definitions of the modern state derive from Max Weber’s description of the state as “a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory” (Brenner et al., 2003a: 1–2). This definition constructs the state as an intact territoriality with an authoritative power claiming the right to govern it. However, the concepts of SE suggest that the state is more than a self-insulated entity. For example, efforts to achieve growth are not performed solely by formal political institutions but by networks between the state and other institutions through which a given political objective is aimed at.

In anthropological terms, the state can be seen as both an abstract construct and a material force (Mitchell and Steinmetz, 1999). On the one hand, the state represents the totality of a dominating ideology underpinned by the regulatory and administrative bureaucracy (Wu, 2020). On the other, various goals and practices behind SE suggest that the state should be understood as a contingent development of “state capacity” and “state work” rather than as a static self-insulated totality (Breathnach, 2010; Moisio et al., 2020). The state’s effects are crystalized through institutions, regulations, state apparatus, state capacities, state resources, and specific modes of political calculation (Jessop et al., 2014). The constitution and transformation of the state results in a spatial and political form of social organization, whereby state power operates through and manifests in various state-orchestrated projects and strategies (Brenner et al., 2003b).

Mitchell queried the boundary of “state domain.” The modern political orders are not achieved solely by formal political institutions. It is the networks between the state and other institutions (e.g., economy, society, and community) by which a specific political objective is achieved. The line between the state and its “other” should be “drawn internally, within the network of institutional mechanisms through which a social and political order is maintained” (Mitchell, 2006:170). That is, the state does not stand at the apex of society or market but works closely with these actors through different types of relations (control or collaboration, etc.), through which political orders are formed and the role of the state embodied.

Following this, the regulation school analyzes the state with reference to the capitalist regime of accumulation, the economic practices (Lipietz, 1988).² In this account, accumulation can be hampered by changing habits and social norms (which affect consumer markets and citizen welfare), innovation incapability (which affects added values), and inappropriate scale and types of production (which affect decisions over the industries selected for expansion). As such, “extra-economic” management of the populace and spaces is necessary (Jessop, 1997). State legislatures, therefore, put in place strategies and political practices with the purpose of establishing a regulatory environment conducive to resolving internal crises and satisfying accumulation goals (Tickell and Peck, 1992). SE reflects a unique and capable state at play—one that supports accumulation, maintains growth, and promotes compatibility between economic development, political stability, and social harmony (Lipietz and Patterson, 1985).

Given this overall theoretical context and the profound political and practical impact of SE, we argue that by carefully examining SE in differentiated social, economic, and institutional contexts, we can identify different governance paradigms, inter-scalar dynamics, as well as the tools and practices employed by the state. The understanding uncovers how the state equips itself with the necessary capacities, resources, and power to achieve different goals and what are the rationales behind the entrepreneurial drive. Finally, we can achieve a fully realized conceptualization of the state. To achieve this, we are interested in examining what we refer to as “actually existing” SE. That is, instead of conceiving SE as a set of prescribed programs to be installed in various localities, we envision it as differentiated in relation to context.

In line with Peck et al. (2018: 4), we view SE as consisting of “partial, polycentric, and plural” forms of state-orchestrated processes by which different socioeconomic goals are achieved through customized state tools and actions. Actually existing SE, therefore, means taking into account “inherited social and institutional landscapes, and […] an array of situated political struggles and strategic maneuvers” (Peck et al., 2018: 5). SE is not so much a utopian ideology as it is contextually specific instances of state capacities and practices resulting from complex and contested interactions between “inherited national and local landscapes” (Brenner and Theodore, 2002: 368). There is no ideal or universal language of market reform and state restructuring. Instead, actual implementation and maintenance of SE is “path-dependent, pragmatic, and contextual” (Peck et al., 2018: 5). Moreover, “actually existing” highlights a processual perspective, examining the pathways from political agendas/discourses to materialized policy outcomes and actual politics.

In the sections that follow, we construct actually existing SE from three lenses, viz., politics of scale, regulatory flexibility, and financialization. We argue that politics of scale works behind planning centrality to achieve governance coherence with certain regulatory capacities. Besides, actually existing SE reveals a process that gradually internalizes financial logic and practices in the state’s own agencies (i.e., from empowering the market to nurturing the state’s own financial operators). Accordingly, the boundary between the state and non-state domain blurs in economic development. All these findings and arguments help us to work out a more nuanced theorization of the state.

1 Politics of scale

SE relies on “politics of scale” to achieve social, economic, and political outcomes. Smith (1992: 73) argued that “social life operates in and constructs some sort of nested hierarchical space rather than a mosaic.” The emphasis on a “nested hierarchy” points to the structure of the power relationships that underly intertwined social forces. The nested hierarchy is determined by “the nexus of power and the social actors carrying it” in terms of who will and who won’t have access to or control over “resources or other components of the environment” (Swyngedouw and Heynen, 2003: 911). While social interactions are organized through a nested hierarchy, they include not only co-operation and empowerment but also competition and subordination (Swyngedouw, 1997). The nested hierarchy is, therefore, a de facto reflection of the political configuration driven by gradients of power (Swyngedouw and Heynen, 2003).

Given that scale is socially produced, it does not have a pre-given boundary (e.g., there is no one-size-fits-all definition of “local” across scenarios). The boundary of scale and the nested hierarchy are determined internally by social interactions and power relations. According to MacKinnon (2011), scale is an important dimension of political activity. That is, through political calculations, technocratic practices, and institutional thickness, scales are classified and arranged “as natural, normal and legitimate as possible” by political actors (González, 2006: 838). As such, an analysis from the politics of scale emphasizes how disparate spaces are brought into “a homogenous geographical imaginary” (MacLeavy and Harrison, 2010: 1039) and how political actors orchestrate a “multilayered bundle of interrelated neoliberal political strategies” in order to achieve the multifaceted goals (Golubchikov, 2010: 627). Central to this concept is “how the political decision making levels themselves are produced and which power relations are involved” (Görg, 2007: 958). Related to this, “scalar jump” is a term used to describe political-economic actors at one scale establish contact with actors from other scales in order to find new allies for cooperation, expand their “spatial reach of influence,” and mobilize collective action (Bayirbağ, 2010: 368). Articulating scalar politics in SE reflects distinct state capacities that utilize de- and re-territorialization in accomplishing different political and economic tasks.

1.1 Scalar jump

He et al. (2018) observed that SE unfolds through a progressive approach in small inland cities from policy germination (imitating “best practices” from other places through a process of trial and error) to amplification and diffusion. In this context, amplification of entrepreneurialism is associated with and can only be achieved through a process of scalar jumping—that is, through an upgraded administrative status. For example, SE was initially industry-based which was advanced through the restructuring of state-owned enterprises (SOEs). Some initial progress accumulated “small wins” that pushed administrative upgrades: county-level cities originally administered by prefecture-level cities instead came under the direct purview of the provincial government. Consequently, a set of city-based place promotion strategies were heavily promoted to attract multinational companies and global capital. Finally, stories about successful entrepreneurial efforts were intensively reported by the state media, which presented the city as role models for similar cities to emulate. Direction from the national state meant the city had access to more political resources than before together with direct links to top-level state agencies. The national state afforded greater recognition to the local state, which provided a basis for planning and implementing ambitious entrepreneurial policies.

By moving up in the multiscalar administrative system, the local state can consolidate its capacities for advancing entrepreneurial strategy and achieve a range of ambitious goals. A higher-level administrative position extends the scope of entrepreneurialism from “hardcore” and internal capabilities (such as industrial development and restructuring) to “soft” and external influences. Scalar jumping within the administrative hierarchy provides the local state with more direct connections with national and regional actors and resources, as well as directional control thereby amplifying entrepreneurialism with strong determination.

1.2 Stratifying and rescaling regulatory capacities

In the development of mega urban projects, a “politics of scale” comes into play in relation to deploying multiscalar and transcalar governance. Through a case study of the development of a mega project in Shanghai, that is, Lingang, a new area that was planned by annexing four towns in the Pudong district, Shen et al. (2020) concluded that multi-scalar governance can be an effective structure through which various regulatory tasks are performed by state agencies (or state-owned corporations) at various levels of the hierarchy. Through multiscalar governance, state actors or their delegates can act as market players, regulators, and social service managers. Market logic and economic benefits, particularly the monetary and in-kind benefits from industrial and new town development, are important mechanisms in incentivizing and stabilizing the multi-scalar structure. For example, at the top level, municipal- and district government-owned corporations were found to be responsible for infrastructure development and land assemblage. They could form joint ventures with other developers under market rules. A management committee at the middle level was responsible for making economic decisions and approving investment projects. Township governments at the bottom level were responsible for social management, acting as brokers between state agencies and villagers facing relocation. By providing social services, the township government could profit from a developed area within its jurisdiction with the cost of the development borne by state-owned corporations.

In addition to the multiple scales, there is a corporatist means of decision-making with representatives of stratified state actors (municipality, district, and township) and state-owned corporations. One example is the set-up of the management committee. The committee was able to involve and mobilize transcalar state agencies for certain processes, such as project coordination and collective decision-making. Transcalar governance means more than keeping relationships with external agencies but a process by which external dimensions (such as non-state actors and state agencies that do not belong to the same administrative hierarchy) are internalized (Majoor and Salet 2008). Consequently, a network of power relationships is formed that transcend scales and sectors, creating a new form of local responsiveness to policymaking.

The crisscross deployment of multiscalar and transcalar governance means that in SE it is possible to engender sufficient organizational flexibility to effect inter-governmental coordination and achieve various growth goals. The case shows that politics of scale responds actively to organizational complexity and place-based constraints due to the presence of multiple state actors. Through stratifying the regulatory tasks and capacities at different levels, a process of scalar (re)configuration was activated, by which “hierarchical state forms were complemented by emerging horizontal and networked forms of governance, and original administrative levels and boundaries were relatively blurred” (Shen et al., 2020: 1652).

1.3 From nation building to transnational influence

In the decades following China’s economic reform, the inward growth model relying on exports to and foreign direct investment (FDI) from developed economies, as well as investment in heavy machinery, faced a downturn and bottleneck. Involving countries in Asia, Europe, and Africa, the Belt and Road Initiative (BRI) proposed by the Chinese government in 2013 represents a transcontinental policy and investment program in response to this situation. The BRI is characterized by growth and economic development at the national and transnational levels, covering “policy dialogue, infrastructure connectivity, unimpeded trade, financial support and people-to-people exchange” (Huang, 2016: 315). This initiative, therefore, has strong entrepreneurial characteristics in terms of its orientation to outward growth opportunities, particularly in the areas of infrastructure development and investment in less-developed countries. Its emergence reflects the crisis-defusing function of SE in the search for new development opportunities.

Although SE is, indeed, an economic scheme, it is far more than that: The BRI is oriented outward towards engaging international interest and acquiring international influence (like China-US relations) and inward towards a nation-building undertaken to unite ethnic groups within a single state territory (Wei et al., 2022). Economically, the size of China’s economy far outweighs the extent of the country’s role in international economic governance. The vast underdeveloped region, between Western European and East Asian economies, creates massive markets for investment and export (Huang, 2016). Cooperating with those economies, the Chinese state is taking steps to consolidate its role in global production networks in order to gain more influence in the trade and global market. It has also been argued that the BRI carried the purpose of countering the influence of the U.S. (in trade and economics) in the Asia-Pacific region (Huang, 2016). In the meantime, the BRI has a strong diplomatic function. Its outward investment made through loans, economic assistance, and infrastructure development supports China’s relationships with neighboring countries (Huang, 2016; Liu and Dunford, 2016; Tiezzi, 2014).

The politics of scale crystalized in the BRI is the national state’s capabilities to leverage economic opportunities and diplomatic ties for solving internal crisis. In this vein, SE serves multifaceted goals, particularly in terms of regional coordination and national security. For example, the BRI aims to transform the lagging inland western region of China, which is part of the BRI, into the forefront of outward-oriented economies (Zhang and He, 2021). A series of infrastructure investment, industrial development, and administrative adjustments were proposed for western China as they are now recognized as an important gateway for new investment opportunities and inter-state cooperations. On this basis, the BRI has the potential to tackle the deep-seated problem of uneven development in China after two decades of the “going-west” policy, through investment as well as efforts to improve living conditions, social welfare, and cultural development in western China. Solidarity and nation building could also be achieved. The western part of China is home to many ethnic groups, including Uyghurs and Tibetans. The ethnic issue has been a challenge for national security given the presence of separatists and dissidents in the border countries. As BRI establishes diplomatic ties and political cooperation with countries that border and share close ethnic links with western China, these countries could become less likely to harbor separatists and dissidents thereby safeguarding Chinese territory from separatist attacks (Abazov, 2006).

2 Regulatory flexibility

Given that a purely top-down governance mode doesn’t always achieve optimum policy outcomes, state-market interactions in terms of SE are mobilized by several kinds of regulatory practices with distinctive rules (Sun, 2015; Hudson, 2001; Howell, 2006). Regulatory flexibility, therefore, signifies an adjusted means of state intervention in which top-down models of control and development give way in part to diverse forms likely to promote agility and innovation, including, for example, deregulation and partnerships with the non-state sector (Zhang, et al., 2023).

In Scott (2004)’s view, regulatory flexibility comes into being as the norms, control mechanisms, controllers, and controlees become more varied. The norms of governing change from absolute reliance on state law and centrality to the use of “soft law” expressed through means such as guidance, circulars, and consensus such that control mechanisms no longer emanate entirely from a strict hierarchy. Other bases of control include market empowerment and community mobilization, each of which is integral to regulatory capacity (Lefebvre, 1991). Further, the controllers, that is, those with the legitimacy to govern, become diverse such that they can include both state and non-state agents. Similarly, the targets of control, that is, the controlees, could expand beyond business as the sole target of state intervention (Scott, 2004) to encompass additional socioeconomic prisms in line with the multifaceted goals inhering in SE.

2.1 The crisscross deployment of private governance and grid governance

With the replacement of welfare-based housing, the Chinese housing reform, which began in 1998, introduced a diversified housing supply system. In addition to state-supported affordable housing as the main form of housing supply, a new housing finance system was established to provide developers and individuals with loans and mortgages in the urban housing market (Wu et al., 2020). Barely preceding the housing reform, the 1994 tax reform shrank the total amount of fiscal income shared with local states. That is, while the amount of centrally collected revenue increased, responsibility for delivering public goods and services was decentralized to the local states. In response, local states promoted commercial housing development as an important source of revenue such that commercial housing projects burgeoned, creating middle-class gated neighborhoods in the cities (Pow, 2009). Accompanying this new housing commodification was “private governance” observed at the grassroots level, which means that neighborhood services became largely commodified, through private organizations, especially property management companies (Lu et al., 2019). To facilitate private governance, local states retreated from direct involvement in providing services. Private governance also became essential efforts to attract private capital, as it affords market actors flexibility in producing aesthetic landscapes and customized consumer goods when designing housing projects.

In theory, the rise of private governance is associated with self-governance, meaning that residents manage neighborhood affairs by themselves, emphasizing self-rule, collective benefits, and shareholder democracy (Basile, 2022). Although the local government introduces market mechanisms in the housing provision and acknowledges private governance, the state retains overall control at the local level through guidance and penetration, viz., a softer manner. For example, service charges levied by property management companies are set by governments, which limit the types of services provided to residents such that homeowners cannot freely choose. Moreover, grid governance is introduced for neighborhood management: local state achieves grassroots mobilization and social harmony (conflict mediation) through creating a horizontal governance network consisting of the state agent (particularly members of residents committees), resident volunteers, residents groups, homeowners associations, and property management companies (Tang, 2020).

The grid represents a basic governance unit at the grassroots level, which is placed in a nested scheme that includes the municipal government, the district government, street offices (jiedao), and residential communities (shequ).³ Residential communities are further divided into several grids based on administrative and geographical boundaries, with each grid assigned government personnel from the district, a street office, and a residents committee (juweihui).⁴ In grid governance, state agents (usually staff of the residents committee) maintain close relationships with active residents and volunteers to manage neighborhood affairs and solve problems (such as conflicts and complaints). For example, when a conflict arises in a grid, residents committee staff mobilize representatives from the resident volunteers, the homeowners association, and the property management company to form an ad hoc committee. With residents and volunteers acting as “tools of communication,” the committee becomes “a platform for deliberation and offers a potential space for the participation of multiple interest groups who are usually ignored in formal institutional settings” (Tang, 2020: 54). In this way, state agents do not act as the sole mediator in disputes. In fact, residents are mobilized to understand the problem and work with different stakeholders. As such, grid governance demonstrates its flexibility by incorporating diverse actors and empowering them in the maintenance of neighborhood stability and harmony.

As a regulatory strategy, grid governance enjoys a high level of public support through active residents and volunteers at the most local level of Chinese society, which also consolidates the authority of the state agent (particularly the residents committee) and its penetration at the grassroots level. By no means as autonomous a mode as co-governance, regulatory flexibility is, however, embodied when the state comes to deal with neighborhood matters with citizens. In this way, regulatory flexibility is a tool of reinforcing the state’s role. While SE brings privatization and commodification to urban housing and urbanization, the state instrumentalizes the grid with the goal of “embed [ding] its grassroots agencies into neighborhood governance … to enhance the state presence in building clientelist ties with homeowner” (Cai and He, 2022: 540).

2.2 The invention and acknowledgment of non-statutory planning

The intertwining of established state practice and entrepreneurialism requires a great variety of governmental technologies, or technologies of power, among which spatial planning stands out and enables the imposition of a specific knowledge or scientific understanding on geographical space (Gregory, 1994). The contents of spatial planning shed light on “the underlying economic, (geo)political and social rationalities” of the state’s spatial transformation, which “[opens] new spaces of governance and [produces] new governable spaces” (Luukkonen, 2020: 415). Consequently, planning can influence the regulation and transformation of space in ways that accommodate both governmental objectives and entrepreneurial interests (Wu, 2015; Sun and Chan, 2017).

The co-existence of a master plan and a strategic plan for many Chinese cities reflects how localized SE is nurtured in the face of restrictions from the national state. Statutory and restrictive in nature, a master plan (or the newly established territorial spatial planning) in China is designed to control the use of land and other resources with a view to optimizing land use in cities. It emphasizes regulation and control by stipulating the size of the city and the scale of construction permitted (Wu and Zhang, 2007). The nature and contents of a master plan are not about fulfilling the local state’s ambitions for growth. Instead, a master plan reemphasizes an “order of formality” (Wu, 2015: 204) through which the central government restores a spatial order and imposes some constraints on local state discretion. In the eyes of local state officials, master plans lack flexibility and the time taken to gain approval from the central government is lengthy, counted in years rather than months. Thus, the development agendas included in master plans cannot fully articulate the local state’s aspirations for growth and competitiveness, which tends to undermine efforts to fully release local development potential. In order to address this shortcoming, local states introduced the non-statutory “strategic plan,” in which their vision and ambitions are spelled out through a unified package integrating strategic positioning, spatial planning, and marketing (Wu and Zhang, 2007).

For the local state, a strategic plan is developed to bypass the scrutiny of the central government. In fact, this kind of plan is unshackled from regulatory constraints from the top—it does not need approval from the central government. Implementation of a strategic plan can also have an effect on its master plan. For example, when the implementation of new strategies produces positive outcomes, the local state has reason to revise its master plan (Wu and Zhang, 2007). In dealing with constraints from upper-level authorities, the local state has the ability to adapt and integrate its visions and practices into the formulation of a strategic plan. This demonstrates that regulatory flexibility is involved to support entrepreneurial tactics, and the implementation outcomes could potentially inform and reshape state intervention at a higher level.

3 Financialization: internalizing financial logic as state capacities

Financialization refers to the “increasing dominance of financial actors, markets, practices, measurements, and narratives, at various scales, resulting in a structural transformation of economies, firms (including financial institutions), states, and households” (Aalbers, 2017: 3). In China, financial actors do not function in their own right. Instead, the central state uses financial logic and financial approaches to boost urban and regional development by nurturing its own agencies (such as local state agencies or SOEs) into financial players. Consequently, financial logic becomes internalized in the state’s own system such that the state becomes more autonomous in leveraging economic functions and so less reliant on private actors (Wu et al., 2022). On this basis, financialization for urban and regional development is the most thoroughgoing manifestation of SE.

The co-evolution in terms of state practice and financialization has produced a unique state–finance symbiosis that fuels a multiplicity of development projects (Aalbers, 2022). For decades, the Chinese financial system was bank-based inasmuch as it was dominated by state banks and subject to strict regulation by the central government. Apart from bank loans, limited financial tools are available. State financialization practices burgeoned after 1993. During the 1993 Third Plenum, the socialist market economy was proposed, which would be achieved through reforms of SOEs (such as separating government functions from enterprise management) as well as development of a mixed economy and an open modern market system. Accordingly, SOEs were urged to adopt a modern enterprise management system and create their own corporation strategies for profit. The state transformed its role from “[one of] ‘asset management’ to [one of] ‘capital management’, that is, to a kind of arms-length wealth management” (Naughton, 2019: 49). Thus, the state evinced an entrepreneurial focus and pursued financial operations targeting greater productivity and returns.

State financialization is fledged when accelerated urbanization gives rise to increased demand for financing large-scale land development and infrastructure since the 1980s (Pan et al., 2021). At first, the central state relied heavily on bank loans. However, this financial mode was still subject to the lending quota. Recognizing that conventional fiscal operations through budgeting were insufficient to meet demand, the central state developed and introduced a number of financial vehicles to address funding and borrowing needs (Wu et al., 2022). This includes the Urban Development and Investment Corporations (UDICs, or Chengtou) created by local states and oriented to corporate finance (Feng et al., 2022b). The function of UDICs goes beyond the performance of financial operations; ultimately, they perform developmental and managerial functions for development projects (Wu et al., 2022; Wu and Zhang, 2022). Imprinted with entrepreneurial strategies, UDICs deployed a range of financial vehicles, such as mortgage loans (using land as collateral), corporate bonds, and securitization. The introduction of securitization marked a change in bank-based finance whereby it became “capital markets–based” (Jiang and Waley, 2022: 1273). Specifically, real estate, infrastructure, and land are liquidized into securities, which are then transformed into various financial products and traded in capital markets via complex and speculative dealings (He et al., 2020; Jiang and Waley, 2022). In light of this process, SE, despite remaining state-orchestrated, takes on a more speculative nature. The evolution of these financial vehicles reflects increased tolerance on the part of the state for expanding financial operations given its need for a high level of capital and short-term yields.

However, a movement towards de-financialization began in 2014 when the central government decided to separate Chengtou from the local state apparatus and remove Chengtou’s financial function (Feng et al., 2022b). As an alternative, local government bonds (LGBs) were introduced by the central government to finance municipal and provincial projects. With a quota set annually by the Ministry of Finance, LGBs were issued by the provincial government based on a careful selection of applications from municipalities (Li et al., 2022b, 2023). In this vein, financialization is operated through a multi-scalar structure of state control, undergoing strict surveillance and screening by the central and provincial governments. Apparently, LGBs with strong regulatory features help to minimize the risks in the financialization process. However, the process of de-financialization from the central government is at odds with local state's interests, which creates complexities and “inconsistency within the Chinese state” in terms of different financial logics, preferences, and practices (Feng et al., 2022a: 1268). The centralized procedures also make financialization a statecraft that can perform economic functions with predictable risks. Accordingly, the financial sector overall is brought under state regulation.

III Conclusion: from actually existing SE to the theorization of the state

We are drawing inspiration from Wu and Zhang (2022) who explored the strategic intervention of the state in China’s neighborhood, urban, and regional governance to prompt market development and societal changes. State intervention penetrates market and community in their everyday practices, creating different institutional and policy responses to mitigate the crisis in capital accumulation and social reproduction (Wu and Zhang, 2022). In the present paper, we aim to advance the conceptualization of the state by examining SE. The latter acts as important mechanisms behind various types of governance. SE is a mode of regulation with new governing capacities that blend entrepreneurial with authoritarian rules. We move from conceptualizing SE to examining its pathways towards materialization, that is, actually existing SE, by which we contribute to the scholarship of state and governance with evidence particularly from the global south countries.

The development pathways, particularly in Asian countries, suggest that neither a statism nor a free-market approach can entirely fulfill the interests of capital, politics, and society (Duckett, 1996, 2001). Actually existing SE and its polycentric crystallizations suggest that entrepreneurialism could be compatible with state authoritarianism in achieving multifaceted growth goals, which reflects the proactive and interventionist nature of the state in driving prosperity and social development (Wu, 2020). SE highlights the state’s ability to govern the market closely rather than from a distance. Through SE, financial logic and market tools are internalized and practiced by various state agencies such that they become capable of taking on a market role.

Invoking actually existing SE is in line with the recognition of real-world entrepreneurial programs and contingent state governance in various contexts. Specially, the polycentric and plural embodiments of SE result from “an array of situated political struggles and strategic maneuvers” that involve state, market, and society at large (Peck et al., 2018: 5). From the discussions, actually existing SE illustrates that there are multiple dimensions of statehood. The multiplicity of state roles and practices reflects “a deeper and more complex reality of fragmented, multiscalar and ‘polymorphous’ styles of governance” in face of swift institutional and economic transitions (Peck and Zhang, 2013: 361). Specifically, seemingly contradictory features, such as autonomy, predation, clientelism, and entrepreneurialism, can manifest in a dialectical co-existence, creating a “polymorphous” state in East Asian and Chinese contexts (Howell, 2006).

This review paper furthers the understanding of polymorphous state by presenting three important observations: First, SE reflects a proactive state’s role which acts through (or leverages) the market to achieve economic growth and other policy targets. This determinative and sometimes paternalistic state role promotes “planning centrality” in the deployment of various market instruments (Wu, 2018). However, the use of planning centrality does not indicate that the state functions as a uniform or aggregate entity. Instead, complex central-local relations and their reinforced politics of scale should be highlighted. “Politics of scale” emphasizes a structure of nested hierarchy, in contrast to a mosaic, to organize social relations. Scalar politics is also a reflection of the power gradient by which mundane state practices penetrate at different geographical scales and intertwine with different non-state actors. The evidence collected for the present paper suggests that politics of scale is critical to the realization and amplification of entrepreneurial strategies, particularly for local states governing small-sized cities. Bold entrepreneurial directions need political resources from higher levels of the administrative hierarchy. Scalar jumping is needed, by advancing up the administrative hierarchy and accumulating political resources to achieve various entrepreneurial goals (White and Wade, 1988). In the financing of mega projects, politics of scale is instrumental in creating a hierarchical division of responsibilities among local state actors through multiscalar and transcalar governance. Specifically, multiscalar governance effectuates stratified regulatory capacities, whereas transcalar governance creates a corporatist problem-solving structure with the goal of improving collective decision-making and transcending the mono-scale based policy responsiveness. The politics of scale in the context of BRI implies that when SE is directed towards global investment and infrastructure development, it also tackles internal crises by addressing uneven development within the national territory to support egalitarianism and social security. Thus, politics of scale outlines and defines objectives that must be accomplished, touching on “roles of different levels of governments and their concerned interests” (Li et al., 2022a: 851).

Second, in the pragmatic lens, planning centrality does not simply equal command and control. Regulatory flexibility is a salient feature of polymorphous statehood. The state retreats from direct control and allows non-state agencies the legitimacy to develop. The co-existence of private governance and grid governance at the grassroots level suggests that SE has inherited partially the characteristic of “state capitalism,” whereby the state critically leaves room for private capital accumulation yet takes control of key factors in relation to social stability and co-governance (instead of autonomous governance) at the bottom level of society (Horesh and Lim, 2017). The development and use of the strategic plan form evidence that in the face of restrictions and requirements imposed by the central government, the local state has developed and implemented non-statutory regulatory tools that have proven successful in promoting entrepreneurial strategies. In this case, regulatory flexibility gives rise to a distinct local statehood that is responsive to political and regulatory constraints from the top with SE revealing a characteristic of political elitism (Wu and Zhang, 2007). That is, through exercising regulatory flexibility, a small group of local state entrepreneurs have created pragmatic solutions to fulfill their own entrepreneurial ambitions. This also reflects that in response to planning centrality, actually existing SE demonstrates elasticity in terms of the selection and deployment of distinct regulatory norms and tools.

Third, as a full-fledged manifestation of SE, financialization suggests that polymorphous statehood is far from developmentalism, considering the state’s direct engagement in the financialization process. The state’s interest in promoting financialization, given limited fiscal capacity in a crisis-induced international environment, is reflected in the availability of different financial vehicles (such as loans, bonds, and securities) (Wu et al., 2022). The proactive nature of the state towards financialization distinguishes its movement from pure developmentalism. The reason is developmental state usually reflects a strong commitment to economic development through measures taken to create an “enabling environment for independent economic enterprises” (Howell, 2006: 280). A clear boundary between the state and the economic sectors is a distinct feature of developmentalism. However, in SE, the state does not work with the market at arm’s length by any means. Rather, the state “itself becomes an economic player, engaging in production, creating new enterprises, procuring finance and competing for business” by transforming various state agencies into financial operators (Howell, 2006: 280). The state internalizes financial logic as its own governing capacities. In sum, the state is no longer limited to providing strategic oversight of the private sector. Instead, state-led financialization reimagines SE as a means of “commercialized interventionism” (Beswick and Penny, 2018: 612).

However, in the face of excessive local debt and risks of bankruptcy, the central government introduced de-financialization by using LGBs as a substitute for various financial vehicles offered by the local state. This means that financialization is de facto statecraft subject to planning centrality. On the one hand, the state exerts control of financialization by creating financial instruments and imposing constraints on financial toolkits, products, and processes (Aalbers, 2020; Feng et al., 2022a; He et al., 2020; Pan et al., 2021; Petry, 2020; Wang, 2015). In other words, the state immerses itself in the market by transforming state agencies into financial operators. On the other hand, the state exerts control through financialization by aiming at unique economic, political, and social goals behind various financing practices and outcomes (Aalbers, 2020; Pan et al., 2021; Zhang and Wu, 2022). In other words, achieving market efficiency and perfection is sometimes afforded less weight than fulfilling regulatory targets such as legitimacy building and social stability.

As a strategic agency with entrepreneurial, managerial, and developmental functions, polymorphous state is established in various manifestations of SE. Why polymorphous? Evidently, it is not a reflection of ineffective state regulation but the presence of “active stewardship” expressed through state intervention, particularly in East Asian and Chinese contexts (He et al., 2022). The state takes strong commitment to problem-solving through a clear leadership in “managing relationships among diverse interests and moving them in the desired direction through a cohesive ensemble of policy tools” (He et al., 2022: 928). More concretely, the state rows on its part through continuously developing new (market) tools and capacities within its agencies. In other words, the presence of polymorphous state in SE reflects the pragmatic nature of the state’s regulatory approach favoring functionality (i.e., problem-solving) and mutuality (i.e., the territory, market, and society that make up the state) in order to achieve targets for accumulation and societal progression (Taylor, 2023).

Footnotes

Acknowledgements

We are grateful for the very constructive comments provided by the anonymous referees and Professor Alexandra Hughes, the editor.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The work described in this paper was fully supported by two grants from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. PolyU 25609920; HKU 17614720).

ORCID iD

Yi Sun

Notes

Author biographies

Yi Sun is currently an Associate Professor and Associate Head at the Department of Building and Real Estate, the Hong Kong Polytechnic University. With a background in urban planning, his research focuses on urban studies, the political economy of urban and regional development, and the role of the state. He is also interested in researching age-friendly built environments, particularly the impact of multiscalar environmental factors on the psychological experiences and well-being of older people.

Jia Ling is a PhD candidate at the Department of Building and Real Estate, the Hong Kong Polytechnic University. With a background in human geography, her research interests include urban (re)development, governance, and state entrepreneurialism. She is currently conducting PhD research on land development in the Qianhai Pilot Development Zone of Shenzhen, China. Her work aims to identify distinct state capacities and strategies for implementing new development modes and practices thereby contributing to the theorization of the state in the global south countries.

Shenjing He is a Professor of Urban Studies at the Department of Urban Planning and Design, the University of Hong Kong (HKU). Her research interests include urban governance, urban redevelopment, rural-urban interface, low-income housing, health and city, climate gentrification. She is the founding director of Social Infrastructure for Equity and Wellbeing (SIEW) Lab and Executive Deputy Director of Urban System Institute at HKU.

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Actually existing state entrepreneurialism: From conceptualization to materialization

Abstract

Keywords

I From neoliberalism to state entrepreneurialism (SE)

II Actually existing SE

1 Politics of scale

1.1 Scalar jump

1.2 Stratifying and rescaling regulatory capacities

1.3 From nation building to transnational influence

2 Regulatory flexibility

2.1 The crisscross deployment of private governance and grid governance

2.2 The invention and acknowledgment of non-statutory planning

3 Financialization: internalizing financial logic as state capacities

III Conclusion: from actually existing SE to the theorization of the state

Footnotes

Acknowledgements

Declaration of conflicting interests

Funding

ORCID iD

Notes

Author biographies

References