The recent book Rent-seeking Developmental State in China: Taishang, Guangdong Model and Global Capitalism by Wu Jieh-min has joined the debate on the rise of China and its implications for the global economy. Differentiating itself from the approaches that attribute China's growth to either capitalism from above or capitalism from below, Wu's book contributes to the increasing emphasis on growth impetus from foreign firms (the capitalism from outside thesis). The book highlights the role of Taishang –Taiwanese businessmen and capitalists – in connecting China to the global economy by setting up production in China and contributing to its export-led growth.

Wu first reviews claims and analyses of how and why export-oriented industrialization is important in understanding China's rise. As an epitome of the open-door policy, the Guangdong model is an appropriate prototype for understanding China's development. This model, using various export processing zones with a particular type of FDI through Taishang, turned Guangdong into a world factory shop and connected China to global capitalism. Wu then introduces two key mechanisms of the Guangdong model: institutionalized rent-seeking and differential citizenship.

Instead of debating whether rent-seeking harms growth, Wu asks how rent-seeking and growth can co-exist. His answer is that institutionalized rent-seeking (jigou hua xunzu) is a key mechanism of growth in the Guangdong model. Wu demonstrates how rent-seeking in Guangdong was framed through various types of service fees, was agreed among different government units and between the local government and the Taishang, and was institutionalized through contracts (pp. 61, 165). Wu illustrates the dynamics through a detailed ethnographic account of the actual workings of rent collection by the local government from Taishang. Contrary to the unregulated rent that plagued developing countries, rent collection reached an institutional equilibrium that did not harm growth because export-led industrialization put a cap on the maximum rent that could be collected. The export price (market price) was set by the foreign buyers, and unjustifiably high rent would harm the competitiveness of firms. Wu meticulously illustrates how rent calculation was tied to export activities. For example, rent was based on the number of employees, which his informant called a head tax (see pp. 151–167). The local government mitigated the uncertainty for the Taishang by providing services in exchange for fees. In turn, this kind of fiscal extraction at the local level strengthened the local state's capacities (and to some extent those of the central state). In this way, the extra budgetary revenue solved the local state's financial problems in the context of China's decentralization in the 1990s.

The other mechanism of the Guangdong model is the particular Chinese mode of labour exploitation for which Wu coins the term “differential citizenship” (gongmin shenfen chaxu, see chapter five). The exploitation of labour was institutionalized by the state at different levels that excluded migrant workers and inland farmers from the social and citizenship rights enjoyed by urban citizens. Through the institutional design of the hukou system and the rural–urban dualism differentiating migrant peasant workers (mingong) from urban state-employed workers (zhigong), rural migrants were not entitled to the same rights as urban residents. Because migrant workers, who comprised much of the labour force in Guangdong's export processing factories, received lower wages than those with residency, foreign capitalists, such as the Taishang, could legitimately exploit them, extract their value surplus and maintain cost competitiveness in the export market. At the same time, both the central and the local governments were part of the growth alliance that extracted the economic surplus from the migrant workers directly and indirectly in the form of various kinds of rent collection. For instance, migrants paid fees to local officials to maintain their rights to stay and work.

Wu's book raises questions about China's development model and its limits, reflected in his discussion of China's industrial upgrading. Wu motivates the upgrading question by examining the impacts of the local linkages between Taishang and local regimes (including local governments and labour). The analysis includes Taishang's relocating production inland from coastal areas and the rise of local Chinese suppliers and entrepreneurship in Guangdong in response to the government's new industrial upgrading policies (i.e. tenglong huanniao policies). However, I feel here that Wu is somewhat ambivalent about his findings. In some places he seems to imply that the middlemen (the Taishang) would be bypassed with the rise of local suppliers entering the global value chains, and that this would be an inevitable result of the embeddedness of foreign capitalists in the local regime. In other places, he seems sceptical about the rise of the Red supply chains, that is, the ability of local Chinese entrepreneurs to assert themselves in the global value chains, especially in the ICT sector (pp. 294, 319 ff).

Wu implicitly suggests that local embeddedness would inevitably generate positive spill-over effects or local entrepreneurship. Instead of this linear hypothesis, I would argue that the rise of local suppliers can be better explained by the changes in the institutional matrix that Wu describes. The rise of the local firms has to do with the alliances between Taishang and local governance reaching their limits as institutional incentives shifted to local firms. Whether or not the new alliances will succeed depends on the reconfiguration of the institutional setups. Yet, there are reasons to be sceptical, given the current international climate and the fact that the prior FDI might not have sufficiently supplied the skills needed for China's upgrading.

This book provides a thick description from over two decades of detailed fieldwork observing China's great transformation. Wu does this through a variety of sources, including a life history of a Taiwanese company in China from its rise to fall, interviews with migrant labourers, and government statistics that establish the relevance of the Guangdong model. This mixed-methods approach and the rich data connect the micro foundation with the meso-level theory with which the author engages. The result is a book full of insights that will provoke debates on various fronts. It is a must read for those interested in China and East Asian development.