ABSTRACT
The government–business relationship has been intensely studied from different perspectives, for instance, political economy, political science, sociology, and business studies. In this research, the interaction between businesses and government has mainly been interpreted within the discipline of political economy. Government–business relations became an important issue because the competi-tive advantages of business groups exist in two markets, the economic and the political. 1 The exchange relationships between these two markets is always intertwined with the power balance between capital holders and government: capital holders seek to maximise profits and favour strong property rights, low taxation, and favourable regulation; governments seek to maximise growth or share in this process, and this means that government needs to reach some compromises with the private sector. 2 In other words, in this dynamic situation of the government– business relationship, both sides seek to find a balance of their mutual interests. Graham K. Wilson argues that government may utilise its leverage, for instance intervening through the financial sector to make fiscal policy more acceptable to business people in order to promote economic development. 3 However, in different countries the development process results in different patterns of government–business relationship. It is important for the scholars who work in this area to address their research countries’ culture and society. For instance, although Evans and Amsden acknowledge that capital mobility is an important influence on the government–business relationship, they still focus more on the role of the state, partly because capital mobility is not a significant issue in their research countries. 4 Therefore, the next section in this chapter introduces the characteristics of Taiwanese investment in China. Based on this special setting and the Chinese political economic system, this chapter goes on to argue that the existing theoretical framework has a lacuna, which makes it unable to explain Taiwanese businesses’ interaction with the Chinese government. Section 1.2 introduces different theoretical approaches in relation to the government–business relationship. Section 1.3 discusses the definition of the Chinese state and explains why the existing literature on government–business relations is not sufficient to explain the interaction between the Chinese government and Taiwanese businesses, which is the reason that this research, in Section 1.4, asserts that the rational choice of both the central and local Chinese governments is a decisive element in their interaction with Taiwanese businesses.
