The hidden gems of China in the age of globalization An analysis of the degree of internationalization of Chinese second-tier cities and how this relates to their local economic model. Master thesis Economic Geography, University of Utrecht Author: Pieter Horn (5945453) Supervisor: Leo van Grunsven Abstract Since the introduction of the open-door policy in 1978, China is increasingly internationalizing. This internationalization was initially focused on specific cities, especially the so-called first-tier cities. In more recent years also the second-tier cities endeavor to become internationalized and are stimulated by the central government to do so. This thesis aims to develop an accurate instrument to compare the degrees of internationalization of Chinese second-tier cities and to investigate whether the economic model employed by local governments contributes to explaining the differences in the degree of internationalization between Chinese second-tier cities. The instrument developed to measure these differences in degree of internationalization has been based on a wide scope of literature on the internationalization of cities. The analysis of internationalization literature results in a wide definition of internationalization, which goes beyond economic internationalization. A framework to classify economic models of Chinese second-tier cities has been constructed and the cities regarded second- tier cities have been classified according to this framework. Comparing the degree of internationalization and the type of economic model applied by the local governments of the second- tier cities, leads to an indication that the economic model might contribute to explaining the differences in the degree of internationalization between Chinese second-tier cities. It appears that cities with a laissez-faire local government which focuses on stimulating small firms (SFLF) and cities with an interventionist local government which focuses on stimulating large firms (LFIG) are more internationalized than cities with an interventionist local government which focuses on stimulating small firms (SFIG) and cities with a laissez-faire local government which focuses on stimulating large firms (LFLF). 1 Contents 1. Introduction ......................................................................................................................................... 4 1.1 Context .......................................................................................................................................... 4 1.2 Relevance ...................................................................................................................................... 5 1.2.1 Scientific relevance ................................................................................................................. 5 1.2.2 Societal relevance ................................................................................................................... 5 1.3 Research Problem.......................................................................................................................... 5 1.4 Structure of the thesis ................................................................................................................... 6 2. Theoretical Framework ....................................................................................................................... 7 2.1 Internationalization ....................................................................................................................... 7 2.1.1 Measuring internationalization of cities ................................................................................ 7 2.1.2 Different aspects of the internationalization of cities ............................................................ 7 2.2 Local economic models ............................................................................................................... 12 2.2.1 Local economic models ........................................................................................................ 12 2.2.2 Local economic models in China .......................................................................................... 13 2.2.3 The use of Variety of Capitalism in identifying interventionist governments ...................... 16 2.2.4 Local economic models and internationalization................................................................. 17 2.3 Tier system .................................................................................................................................. 21 3. Methodology ..................................................................................................................................... 22 3.1 Measuring internationalization ................................................................................................... 22 3.1.1 City selection ........................................................................................................................ 22 3.1.2 Constructing the instrument ................................................................................................ 23 3.1.3 Data collection ...................................................................................................................... 25 3.2 Local economic models ............................................................................................................... 26 3.2.1 The four quadrants ............................................................................................................... 26 3.2.2 Literature study on the cities ............................................................................................... 26 3.2.3 Connecting local economic models to internationalization ................................................. 26 4. Findings .............................................................................................................................................. 28 4.1 Internationalization ..................................................................................................................... 28 4.1.1 Overall internationalization .................................................................................................. 28 4.1.2 Internationalization per category ......................................................................................... 29 4.2 Tier classification ......................................................................................................................... 31 4.3 Local economic models ............................................................................................................... 32 4.3.1 Chengdu ................................................................................................................................ 32 4.3.2 Shenyang .............................................................................................................................. 34 2 4.3.3 Dalian .................................................................................................................................... 36 4.3.4 Harbin ................................................................................................................................... 36 4.3.5 Changchun ............................................................................................................................ 36 4.3.6 Tianjin ................................................................................................................................... 37 4.3.7 Jinan ...................................................................................................................................... 37 4.3.8 Qingdao ................................................................................................................................ 38 4.3.9 Zhengzhou ............................................................................................................................ 38 4.3.10 Nanjing................................................................................................................................ 38 4.3.11 Suzhou ................................................................................................................................ 39 4.3.12 Hangzhou ............................................................................................................................ 39 4.3.13 Ningbo ................................................................................................................................ 40 4.3.14 Xiamen ................................................................................................................................ 40 4.3.15 Changsha ............................................................................................................................ 41 4.3.16 Wuhan ................................................................................................................................ 41 4.3.17 Chongqing ........................................................................................................................... 42 4.3.18 Xi’an .................................................................................................................................... 42 4.3.19 Kunming .............................................................................................................................. 42 4.3.20 Classification of cities ........................................................................................................