Fragmented Labor Regime: FDI, Labor Regulation, and Workers’ Protests in China

Abstract

Abstract How does the influx of foreign direct investment (FDI) affect labor protests in China? Building on the framework of fragmented authoritarianism, I argue that the regional competition to attract foreign investment causes labor protests in China due to its deregulatory effects on labor regulation. Each actor, including the central and local governments, foreign investors, and workers, has different cost–benefit considerations, which provide an explanation for the link between foreign investment and labor protests. By theorizing each actor's preferences, this article explains how FDI induces labor deregulation and workers’ protests in China. Analyzing China's prefecture-level city data from 2012 to 2018, I find that the influx of FDI is positively associated with labor protests. The result remains robust to alternative model specifications and instrumental variable estimation. I also provide empirical evidence for the deregulatory effect of FDI on labor standards with an analysis at the firm level using the World Bank Enterprise Survey. These findings deepen our understanding of how FDI shapes labor regulation and induces workers’ protests in the context of China.