Rising Tides? The Role of Return Migration and the Developmental State in China's IT Industrial Upgrading

Since the late 1990s, there has been an increasing trend of return migration to China’s IT sector. Previous literature documented an association between industrial development and return migration in the 1970s in South Korea, the 1980s in Taiwan, and the 1990s in mainland China. This dissertation examines return migration motivations, developmental state’s policies, and migrants’ industrial experiences upon return through in-depth interviews and policy analysis from the late 1990s at national and regional levels, uncovering the role of return migrants and the developmental state in driving industrial development.

Over the past three decades, China’s policies at both the national and regional levels have evolved from explorative and ambiguous to a clear focus on new-generation information technology and its sub-sectors such as semiconductors, Internet of Things, 5G, and artificial intelligence. Since the 2010s, particularly with an intensified emphasis on domestic innovation driven by the central government, industrial development goals have become clearer in advancing functional and inter-chain upgrading. This emphasis has spurred regulatory directives on talent recruitment to transition from broad guidelines to encompassing overseas Chinese students and professionals specializing in emerging strategic technologies, and eventually targeting distinguished scientists, more senior-level technology professionals, entrepreneurs, and technology service talent. Institutional infrastructures to facilitate technology innovation and industrial upgrading have similarly advanced from being exploratory to determined and innovative. The developmental state in China has been instrumental in upholding the principle of state guidance and market operation, enhancing financial infrastructure, establishing institutional intermediaries, promoting cross-institutional and cross-regional collaboration, recruiting overseas talent, and fostering an innovative culture. This multi-faceted involvement positions the state as a director, investor, entrepreneur, facilitator, and implementer, driving domestic industrial upgrading and advancing China in the global tech sector.

By returning to China, return migrants are able to reap benefits of high salaries, career advancement, entrepreneurship opportunities, policy recruitment incentives, and family support. However, there are discrepancies between return migrants’ expectations of the domestic industry and their actual experiences with domestic industrial constraints. These discrepancies stem from the institutional misalignment between developmental objectives of industrial policies and industrial practices and norms on the ground. The variation in return migrants’ experiences of discrepancies is determined by their affiliations with different segments of a value chain, specifically, design and development, production, and commercialization. Return migrants who are involved with the segment of design and development encounter difficulties due to the lagging policy impacts in technology innovation, with the scarcity of highly skilled domestic engineers being the primary aspect of their experienced discrepancy. Those affiliated with the production segment of the value chain encounter discrepancies due to the catching-up policy impacts in technology industrialization, with technology immaturity representing the most substantial obstacle. Meanwhile, return migrants who are associated with the segment of commercialization encounter challenges due to the struggling policy impacts in developing the domestic market, where their primary obstacle lies in integrating domestic supply chains. The developmental state is more influential in promoting the segment of production, where policy impacts are effective in this segment but unproductive in others. Consequently, return migrants affiliated with the value chain segment of production possess greater opportunities and enhanced agency when navigating institutional landscapes and overcoming challenges stemming from institutional misalignments and voids.

IT return migration to China and China’s experience in innovation offers valuable insights into scholarly discussions on the association between return migration and industrial development in East Asia, as well as contributes to the broader scholarship on migration transnationalism, state-led innovation, value chain upgrading, and institutional transformation. The developmental state in China demonstrates strength in facilitating process upgrading, yet reveals relative weakness in supporting product, functional, and inter-chain upgrading. Upgrading in this context necessitates more intricate and foundational changes in institutional infrastructures. While existing scholarship highlights the pivotal role of return migrants in facilitating domestic industrial upgrading, this dissertation argues that their impact is constrained. It acknowledges the spillover effect of tacit knowledge brought back by return migrants into the domestic industry. However, for return migrants to effectively disseminate tacit knowledge acquired abroad on a large scale and challenge the domestic industrial status quo, even with regulatory support, it takes consideration time for the entire industrial ecosystem to adjust to new norms and practices.