When the state goes transnational: The political economy of China’s engagement with Indonesia

Abstract

Extending the growing literature within international political economy, this article puts forth the notion of transnational state capitalism, taking into account the anaemic growth gripping the global economy since the 2008 economic crisis and China’s massive efforts to export infrastructure following the launch of the Belt and Road Initiative (BRI) in 2013. Focussing on the agencies, practices and outcomes of the Jakarta-Bandung High Speed Rail, one of the largest infrastructure undertakings in Southeast Asia since the BRI’s inception, this article explores how and to what extent state capitalism has shaped the political economy of a rising China in Indonesia. We identify three characteristics of an emerging transnational state capitalism in Southeast Asia: state-centric in its overall direction and operation; simultaneous pursuit of economic-cum-geopolitical interests; and an inability to stem structural weaknesses associated with statist economic directives (which have been further complicated by its intertwining with host state dynamics). Our central argument is that although this project was initially conceived as a business-to-business arrangement, it has increased the appeal of state intervention in a transnational context. The driving forces include Indonesia’s political economy and the Chinese state-owned enterprises’ dual agenda of seeking profits and advancing geopolitical goals. We also argue that the project’s statist nature has brought about some side-effects such as inefficient resource allocation and incumbency bias, thus raising concerns about the vulnerability of state capitalist models. Our findings highlight the importance of conceptualizing the transnational state against the backdrop of a globalizing China, going beyond parochial understandings of this increasingly salient phenomenon.