When[HS1] discussing China's extraordinary economic achievement after 1978, few studies connect it to the country's experience in the early twentieth century, despite clear similarities in industrial development; for example, firms in both two periods clustered in coastal areas and had a special emphasis on light industries. The dramatic changes in between make it difficult to link these two periods. After all, WWII and the civil war destroyed most of China's industries and drove entrepreneurs to Hong Kong or overseas. During the socialist transition in the 1950s, surviving firms were turned into state-owned enterprises. Most of the firms emerging in the 1970s are new and not originated from the old ones in the 1930s.
Carles Brasó Broggi shows that although firms from the 1930s were taken over by the government, their commercial network[HS3]s survived and contributed to China's industrial expansion since the 1970s. Using well-preserved firm documents, the author describes a trade and technology network that was essential to Chinese firms in the early twentieth century. Through this network, Chinese textile firms were able to acquire inputs—especially machinery and raw cotton—from overseas, and sell their finished products to international buyers. During the war years, this network helped to protect the Chinese firms from invaders. After 1949, although the socialist transition eliminated private firms in mainland China, entrepreneurs who moved to Hong Kong maintained their original network and continued their business, which turned Hong Kong into a new export center of textile products. The connections with international markets resumed after China's opening up in the 1970s. In this phase, international markets again supplied capital and consumed final products. In addition, connections between mainland China and Hong Kong led to the establishment of the first joint-venture firms in mainland China.
By raising this argument, Brasó Broggi also points out that it was the fragmentation of domestic markets, largely caused by domestic chaos, which hindered positive spillovers of China's industrialization in the early twentieth century. As a result, the rise of the transnational network was not only due to the shortage of capital and raw cotton, but the network also served as a substitute for the lack of an integrated domestic market. The fragmented domestic markets also turned China to a dual-economy before WWII, with the coastal regions, and especially the Yangzi Delta, responding in a timely way to the world market with industrialization and growth, while the rest of the country was in poverty.
Brasó Broggi conducts this study by tracing the experience of three representative textile firms in the Yangzi Delta, Dafeng, Lixin, and Dacheng, as well as life experiences of their owners from the early twentieth century to the 1970s. He combines rich archives from multiple sources, including firsthand firm documents, official reports during the socialist transition, and reports on textile markets, to examine the firms’ source of funds, identify their trading partners, and analyze the rationale in their production decisions. Chapters 1 through 3 describe the first development of these firms before WWII and the dual-economy features of the Chinese economy. As new entrants, Chinese firms naturally looked to external sources for textile machinery. The high risk involved in machinery purchases required strong mutual trust between Chinese firms and foreign machinery agents. Fortunately, all three firms developed trust-based relationships with foreign businesses. These relationships also encouraged the Chinese firms to adopt vertical integration, which was more profitable when domestic market prices for intermediate goods were volatile, but in need of continuous investment in machinery and technology. The foreign traders ensured the supply of machinery, engineering advisors, as well as raw cotton for the Chinese firms.
Chapters 4 and 5 describe the Chinese firms’ experiences during WWII and before the Communist Party took over. All three textile firms were in good shape and planning to expand as the Second Sino-Japanese War broke out, so the war in 1937 interrupted the original development plan. However, firms and large shareholders were able to survive in foreign settlements until the Pacific War[HS4] at the end of 1941, largely thanks to the protection of British business partners. During the Pacific War from 1942 to 1945, when Britain declared war with Japan, Chinese entrepreneurs escaped from Shanghai and settled in Hong Kong. [HS6]
Chapters 6 to 8 focus on the entrepreneurs’ experience during the socialist era from 1949 to 1978 and[HS7] China's market reform[HS8] in 1978. Before the Socialist transition, most entrepreneur families were divided into two parts. Some family members moved to Hong Kong and often transferred part of their business there as well, with other members remaining in Mainland China. The Hong Kong firms continued the pre-war business model and flourished, while the mainland firms were gradually turned into state-owned enterprises, prevented by the government to maintain their old business model and develop foreign trade. The situation changed after China's market reforms. Beginning in 1978, the government's new attitude to embrace the market economy encouraged entrepreneurs to resume their original business relationships and foreign connections. This time, entrepreneurs in Mainland China not only reconnected to foreign trading partners, but their family members in Hong Kong as well. The later provided capital in need, both physical and human, to found new modern firms in Mainland China.
This book examines historical roots of China's industrialization since the 1970s. Using rich primary[HS10] historical archives, the author tells fascinating stories about the experiences of three firms over much of the early twentieth century. He also contributes new observations to this topic that emphasize the importance of baseline market conditions and trade networks on economic development in early twentieth-century China. These arguments can be tested or generalized in future studies. For example, did vertical integration reduce risks from a volatile and fragmented domestic market? And to what extent were well-connected transnational trade networks a substitute for domestic markets? Scholars interested in business history and Chinese history would find the book inspiring and engaging.
