Sometimes one ends up reviewing the book one read rather than the one that was written. Lin Zhang’s The Labor of Reinvention: Entrepreneurship in the New Chinese Digital Economy is more sociology than tech, more labor theory than business. But it is also a granular, grass-roots, bottom-up view of the past couple of decades of the development of China’s digital landscape. As such, she provides color and detail to the developments that have been covered in a far more generalized and ad hoc way as business stories.

The book’s three sections include the story of start-ups in Zhongguancun, “China’s Silicon Valley”, the development of rural e-commerce and so-called “Taobao villages” and a discussion on daigou, overseas buyers of goods for direct sale to Chinese buyers. While much of this will be broadly familiar to anyone with even a passing interest in the recent development of Chinese business and economy, Zhang provides both a chronological overview as well as many (well-told) individual stories. Zhang’s concern is the effect that these developments have on such social indicators as employment, equality, class and gender disparities as well as how they interrelate with (quite changeable) government policy.
One of Zhang’s objectives is to show how the digital economy has played out in China differently than in the United States, which “illuminates path dependency in the trajectories of China’s recent experiments in radical social and economic transformation” as she puts it. This she does, but what is striking is the extent to which the laws of economics and business end up applying as much in China as elsewhere. The success of incubators and co-working spaces in Zhongguancun pushed up property prices, which then ruined the business model. The success at attracting venture capital and government support ends up privileging entrepreneurs with connections.
Rural e-commerce developed as a sort of digital successor to the early “Town and Village Enterprises”: Zhang has a fascinating study of one village (which she somewhat enigmatically refers to as W) that specialized in objects hand-woven from local rushes. Barriers to going online were very low, especially once e-commerce giant Taobao introduced programs to promote and facilitate it. Small, family handicraft operations could thus reach a national market via what she calls “platformized family production”, and some did, providing relative prosperity and, for some, economic opportunities unavailable in the more competitive cities. The government took notice. The inevitable happened: as more small firms entered, competition rose and margins fell, especially when one firm would copy and undersell the company next door.
When W entrepreneurs have new designs, they are reluctant to invest capital and resources into R&D, for fear that imitators will steal their intellectual property and their profits.
It’s not so much that the model wasn’t scalable: it’s that when it scaled, it was no longer the same model.
The American tech industry has seen similar cycles: each new facility allows the entry of small companies and individuals until economies of scale, commoditization, automation and rationalization kick in.
The arc that Zhang draws for daigou—Chinese, usually women, who buy goods (mostly luxury goods in her telling) retail overseas for Chinese consumers—is, in its details, a particularly unique phenomenon. Nevertheless, in some of its particulars in the Internet-based version of the business model—the need for personal branding and to stay constantly online, the more or less unregulated space in which the business operates—it resembles the “influencers” prevalent in the West (and of course in China as well).
Zhang mentions, but does not discuss in as much as detail as other aspects of the phenomenon, the particular conditions that allow this business to take root and thrive. Daigou is a sort of regulatory arbitrage: China has relatively high import duties on luxury goods but relatively lax custom enforcement on shipments that aren’t explicitly commercial, so even someone buying retail overseas can undersell the local Chinese price. These high duties also mean that product selection in China can be limited; the Chinese market additionally has the problem of counterfeit goods. This, then, is a business with inverse economies of scale. It is also one at the mercy of Government regulation and enforcement thereof.
This massive informal sector represents a significant drain on government tax revenues. In an effort to bring the daigou trade under control, the state has tightened customs inspections, cut taxes on imported luxury products, and even prosecuted a few resellers.
Regulatory arbitrage via the Internet is not, of course, unique to China: it underpins the development of much of the gig economy. Unlike AirBnB and Uber, individual daigou operators don’t have the clout to push back.
Zhang also in her sights the current fetishization of “entrepreneurialism”:
Elevation of, investment in, and enthusiasm for the individualized entrepreneur as a heroic driver of economic development and faith in the frictionless economization of individual differences as a way to energize capitalism are the chief ingredients of what I call entrepreneurialism.
This is the sort of thing that calls gig workers “entrepreneurs” rather than “employees”.
At the current historical moment, the line between “entrepreneur” and “labor” is blurred, as self-employment becomes increasingly common and workers—like entrepreneurs—are expected to be self-reliant, flexible risk-takers.
In Zhang’s telling, China appears to have been somewhat less cynical about this: rural e-commerce indeed provided some routes to prosperity that would not have been available otherwise. And the various programmes to encourage tech start-ups generated some successful companies, an increase in venture funding, etc. as well as drawing back Chinese who had lived and trained overseas. But in general, Zhang concludes, the benefits could be limited and transient, while leading to some unforeseen (but perhaps not unforeseeable) consequences. She makes liberal use of the words “paradox”, “contradictions” and “conflicts”, as well as noting that the results were often “winner-take-all”. China, it seems, is not immune to what another study would have called “network effects”.
One strength of the book is Zhang’s ability to suss out and tell a good story (a reflection perhaps that her day job centers on communication and media studies). One of these is tale of Garage Café, a co-working space where “wantrepreneurs” could gather, chat, test ideas, maybe meet investors. It was, as such places were elsewhere, very successful for a while—and widely copied. Meng is one such entrepreneur, who arrived at Zhongguancun somewhat long in the tooth and without the sort of connections enjoyed by those who had studied or worked overseas, and who after several false starts, set up an online system for contracting construction machinery and operators. It was successful for a while, but was copied and outcompeted. Meanwhile, the founder of Garage Café quit when the shareholders decided to prioritize profit, which (predictably) involved an explicitly real-estate component of the business.
But Zheng puts a specific spin on all this, one of “reinvention” of individuals, businesses, sector, gender norms, state government, etc. She counsels against projected Western models on to China:
To aggregate a white middle-class Silicon Valley start-up founder, a Black immigrant Uber driver in London, and a Chinese peasant craftswoman into the category of “tech entrepreneur” is to elide their vastly different class, ethnic, national, racial, and geographic backgrounds and thereby conceal, rather than confront or ameliorate, the structural inequalities that define their disparate access to resources.
Whether one reads The Labor of Reinvention as the socio-political study Zheng seems to have intended or instead one which shows the laws of business and economic of gravity ultimately apply in China as they do anywhere else—it is a very good book, and which will surely deepen either groups of readers’ understanding of China’s digital development.
Zheng doesn’t quite bring the book up to the present day, but while Chinese businesses and entrepreneurs are likely facing the necessity for another bout of “reinvention”, she has provided the tools and background to understand and contextualize the changes that, if past is prologue, are surely inevitable.
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