Concessionary governance: The shifting local statecraft in Nanjing’s innovation-driven urban redevelopment

State entrepreneurialism in China’s urban redevelopment

Since the 1970s, neoliberal transitions and market-dominant regimes of social organization have started to prevail across the globe (Brenner and Theodore, 2002; He and Wu, 2009). The post-Fordist regime of accumulation was oriented toward privatization, competition, efficiency, and the imposition of austerity (Peck et al., 2018). The state-market relations, as a result, were fundamentally restructured in pursuit of a growth-oriented environment (Harvey, 1989; Smith, 2002). Harvey (1989) characterized neoliberal strategies in spatial production as urban entrepreneurialism, which highlights public–private partnerships for investment and economic development with the speculative construction and sale of urban space (Brenner and Theodore, 2002; Jessop, 1998; Smith, 2002). As neoliberalism prevails, urban entrepreneurialism has been applied to understanding the urbanization processes across different global contexts (Buckingham, 2017; Lim, 2014).

Urban entrepreneurialism has gained popularity in understanding China’s post-reform urban governance in the context of a series of neoliberal reforms after the pivoting gaige kaifang (reform and opening up) in 1978. Urban development imperatives were guided from the center, while the local governments have been compelled and empowered to implement them (Teo, 2023). Later in the post-2000s era, China joined the World Trade Organization, gradually established the world-factory model, and mastered infrastructure-led development (Deng, 2023). On top of that, land finance, together with the fiscal stimulus rescue package of 4 trillion CNY amidst the Global Financial Crisis in 2008, enabled local governments to extract debt-based revenue from the financialization of land and form coalitions with private developers driven by profitable capital accumulation (He and Wu, 2005, 2009; Lin et al., 2015). As a result, proactive large-scale speculative urban development accommodating for and extracting from housing, innovation, education, and healthcare sectors has proliferated across China’s post-socialist cities (Luo and Shen, 2022; Nie, 2023, 2024; Shen, 2022; Zhang, 2015; Zhu et al., 2023, 2024).

Entrepreneurialism in China, however, is not necessarily tethered to neoliberal or even capitalist logics. As Wu et al. (2024) argue, China’s statecraft operates within a non-capitalist system in which the pursuit of profit is not an intrinsic objective of the state. Rather, market mechanisms are subordinated to state dominance through sponsorship and supervision. In this configuration, market forces function less as autonomous agents of accumulation and more as instruments situated within a parasitic relationship to the state apparatus (Wu, 2020). Entrepreneurialism, then, should not be conflated with pro-market rationality. It may serve to advance extra-market interests by leveraging state institutional capacities and policy influence (Sun et al., 2024: 133). In contrast to the retreat of the state observed in Western neoliberal contexts, China’s experience reveals an overriding and persistent role of the state (Xie et al., 2020), one in which state authority and market logic are deeply entangled (He and Wu, 2009; Wu, 2003; Zhou et al., 2019).

This dominating state control over capital in authoritarian governance and party-statecraft has been conceptualized as “state entrepreneurialism” (Wu et al., 2024: 787). Departing from a depiction of governance as merely growth-driven, state entrepreneurialism emphasizes what Wu et al. (2022) term a “beyond growth machines politics” rationality. The entrepreneurial state does not aspire to establish a self-disciplined market governed by logics of individualization and consumer choice (Wu, 2018, 2020). Instead, it remains strategically oriented toward fulfilling extra-economic objectives by actively deploying and mobilizing both market and social actors (Wu et al., 2024, 2025). Through constructing and managing a market-like environment, the state recalibrates its interventions to advance diverse economic, political, and social aims (Wu, 2020; Wu et al., 2024).

Local governments have been portrayed as central actors within this formulation of state entrepreneurialism (Teo, 2023; Wu, 2018, 2020, 2024), performing a mediating role by advancing political and social development goals, often descending from central mandates, through pragmatic growth-oriented agendas. Recent scholarship has illustrated the proactive role of local states in leveraging property value appreciation and coordinating large-scale demolition in urban redevelopment, particularly to manage the aftermath of global financial crises and to reclaim authority over urban villages and shantytowns (Dai et al., 2023; He et al., 2020; Lai et al., 2025; Liu and Wong, 2018; Wu, 2016). These strategies are frequently enabled by pluralistic governance techniques that selectively incorporate non-state actors (Jin and Zhao, 2022; Peck et al., 2018: 4; Sun et al., 2024).

A unifying theme across this body of research is the persistent centrality of local states, demonstrated through their control over private capital, command over social actors, and mobilization of resources via policy intervention (He and Wu, 2005; Wu, 2016; Wu et al., 2022). Yet recent global and domestic transformations have introduced significant discontinuities. These include, as Wu et al. (2025) highlighted, reduced profits from land-based accumulation, intensifying geopolitical tensions, and economic deceleration. Local governments, consequently, face pressure to fulfill their development duties and political obligations. These conditions necessitate a critical revisiting of state entrepreneurialism, especially regarding the shifting local statecraft when post-pandemic austerity may have eroded the fiscal and institutional capacities that once underpinned the state’s ability to mobilize and command.

Post-pandemic realities and the shifting local statecraft

The Central Economic Work Conference in 2013 introduced Xi Jinping’s political agenda of the “New Normal” (xin chang tai), which called for a shift from high-speed growth to “people-centered development,” emphasizing urban livelihoods and livability (Wu, 2013). In pursuit of this objective, the central government strengthened its control over local governments to align their development objectives with the central government’s agendas (Wu et al., 2022, 2025). Land-based accumulation was increasingly constrained to control real estate speculation and mitigate systemic financial risks (Li, 2022). New policies have been implemented to regulate housing prices and ensure the supply of affordable housing for low-income residents. In response to these shifting mandates, local governments turned to urban redevelopment as new investment channels to sustain accumulation (Li, 2022; Wang et al., 2024a). In 2019, urban redevelopment was formally written into the Fourteenth Five-Year Plan and the nation’s 2035 long-term goals.

Urban redevelopment campaigns have been superimposed by the Chinese state’s innovation pursuits, which are embedded in geopolitical tensions beyond pure economic reasons. On the one hand, the COVID-19 pandemic and China’s stringent lockdown policies imperiled its economy and stimulated an innovation campaign aimed at economic recovery (Fu et al., 2020). On the other hand, the Sino-US conflict further precipitates the strategic role of innovation. Trump’s declaration that the USA should secure victory in the 5G race and the subsequent 2019 ban on Huawei by the US government heralded a technological Cold War between the USA and China (Wang and Sun, 2021). In response, the Chinese government has prioritized technological self-reliance and innovation activities in high-tech sectors such as semiconductors and biotechnology, and implemented supportive policies designed to stimulate entrepreneurial ventures and foster innovation activities (Nie and Liu, 2024).

At the intersection of urban redevelopment campaigns and the pursuit of technological independence is the emergent urban typology of innovation-driven urban redevelopment. Innovation-driven urban redevelopment exemplifies state entrepreneurialism, in which the new typology is designed to connect economic, political, and social objectives beyond the traditional growth machine paradigms (Li, 2022; Wu et al., 2022). Yet, given that state entrepreneurialism evolves through conjunctural crises and adaptive recalibration (Wu, 2024), the political and economic dislocations of the post-pandemic moment necessitate a reassessment of how local statecraft is exercised under the realities of austerity.

First, while state entrepreneurialism is analytically grounded in the state’s capacity to mobilize market and social forces, this capacity is never monolithic. Indeed, the party-state may retain centrality, but the state is not a “fully constituted, internally coherent, organizationally pure and operationally closed system.” Rather, as Jessop and Sum (2006: 97) argue, it is an open and contested terrain, or a “relative unity” shaped through ongoing struggles among diverse institutional actors and social forces. In the Chinese context, this fragmentation is especially pronounced within its multi-level administrative hierarchy. The state is fractured across territorial scales (Jin and Zhao, 2022), and different levels of government possess divergent capacities and variegated forms of institutional leverage. While Wu et al. (2025) articulate a post-pandemic transition toward a “managerial statecraft” characterized by the deployment of state capital, recentralized spatial planning, and co-governance modalities, such a meta-narrative may risk obscuring a deeper, historically embedded structural condition: local states in China have historically operated within the interstices of expansive central mandates and constrained local realities (Zhou, 2022).

Second, in post-pandemic times, local statecraft is contextualized to financial resources and political leverage. Although the state entrepreneurialism literature discussed China’s post-pandemic statecraft in various territorial contexts (Sun et al., 2024; Wang et al., 2025; Wu, 2024; Wu et al., 2024, 2025), the authors unanimously build on an uninterrupted local state centrality. This may risk overlooking the effects of post-COVID-19 austerity, which has significantly diminished local state capacity. For example, real estate developer giants such as Evergrande, which have been the “statesmen” in China’s urban development, ran into liquidity and debt crises driven by a reduction of domestic consumption power and restrictions on land financialization (Wang, 2021). A practical challenge faced by local states is the contraction of the real estate market and the resulting shortfall in revenue previously derived from land sales (Rogoff and Yang, 2024).

While Wu et al. (2025) reaffirm that China’s post-pandemic statecraft has retained centrality by absorbing and redirecting emergent market and social logics, an alternative reading is also plausible. For instance, local state financialization has been deemed essential for practicing state entrepreneurialism (Sun et al., 2024; Wu et al., 2024, 2025). However, when market instruments wither and fiscal tools erode, the local state’s ability to mobilize becomes compromised. Sun et al. (2024), in their analysis of the actually existing state entrepreneurialism, foregrounded the politics of deregulatory flexibility. Yet local governments are increasingly deprived of institutional leverage under post-pandemic austerity, and a distinction between deregulatory maneuvers and concessions is warranted. In this context, local states are increasingly forced to operate through negotiated, provisional, and sometimes concessional strategies to pursue their political and economic objectives. These emergent practices do not necessarily signify the end of state entrepreneurialism, but rather its mutation under constraint — a shift from hegemonic orchestration to contingent governance in a period marked by institutional fatigue and economic precarity.

Concession to non-state actors’ self-governing autonomy

Since the conception phase of Silicon Alley development, the Nanjing municipal government has striven to prioritize innovation and entrepreneurship and prevent speculative rent seeking such as “middleman landlordship” (Sun, 2019). ⁴ Under this strategic vision, the XSAA was established in 2021. It was initiated and led by the Xuanwu District Science and Technology Bureau (XDSTB), a state agency of the Nanjing local government. The XSAA consists of 14 operators (yunying zhuti), most of which are private firms that operate and manage specific projects. In 2019, all 14 operators proactively reached out to the XDSTB to join the XSAA because they saw opportunities to consolidate each company’s resources for a larger market benefit and to mitigate policy and market uncertainties. ⁵ The XSAA operates within a four-tier structure that includes the government, the alliance itself, the operators, and the tenant companies.

The municipal and district governments supervise innovation outcomes by providing key guidelines. A company is designated as “innovative” when categorized into technology-based enterprises, newly certified high-tech enterprises, gazelle companies, or unicorn companies. ⁶ Based on that, the operators typically target innovation of firms in software and information services, cultural and creative industries, and financial services (Interviews 02, 03, 09, and 10). The XSAA can apply for funding from the district-level government, while the operators can apply for grants from the municipal government (Interview 01). Overall, Xuanwu Silicon Alley has experienced significant growth in its innovation capacity. ⁷ However, this growth may be heavily driven by government investment, raising questions about the sustainability of funding and the spontaneity of non-state actors (Xuanwu District Science and Technology Bureau, 2023).

Between XDSTB and XSAA, the former adopted an “indirect management” over the latter to stimulate non-state actors. Initially, during the first two years after the XSAA was established, operators and tenant companies primarily joined through self-motivated applications. Given that the XSAA was initially a relatively informal organization, the review process was fairly easy (Interview 01). Over time, the XSAA transitioned to a more proactive strategy, actively identifying and recruiting operators and tenant companies that meet its objectives and standards (Interview 01). Meanwhile, the government became less involved with the operators, only evaluating and approving their business and operational strategies (Interview 04). In addition, the alliance elected one chair and two vice-chairs through a voting process involving all members, entrusting them to coordinate activities among the alliance members to foster collective progress. This organization grants the XSAA considerable autonomy in self-governance.

Non-state business organizations such as XSAA are not new in China. For example, Ji (2018) found that business associations can pursue their own goals through collective action despite disapproval by the local government. To “intervene more effectively” (Interviews 01 and 06), XDSTB, representing the Nanjing local government, initially planned to extend its control through XSAA to the non-state actors since a consensus between XDSTB and XSAA was made at the very beginning that the government is “the actual steersman of the alliance.” XDSTB also provides financial support for XSAA’s daily operations (Interview 01). In return, XSAA delivers XDSTB with outcomes aligned with the requirements from the municipal level, such as a certain number of activities focusing on innovation-related events (Interview 01).

However, despite this state sponsorship, we argue that the “indirect management” through XSAA denotes a retreating state that is different from pluralistic governance techniques that facilitate state centrality in the theory of state entrepreneurialism (Sun et al., 2024: 139). It is de facto a response to pragmatic constraints that the local state is unable to cope with. First, most of the projects in Xuanwu Silicon Alley are not directly owned or managed by the district government. Rather, they operate within convoluted ownership structures involving real estate developers, private companies, and state-owned enterprises that are not owned by local governments (Interview 01). This complexity is characterized by self-organization with an informal collaborative network among stakeholders (Interviews 01 and 02). Due to deficiencies of formal institutions such as intermediary state financing platforms or development corporations (Li et al., 2024; Nie, 2023; Shen, 2022; Zhu et al., 2024), the intricate ownership structures and informal organization created a “policy vacuum.” This undermines traditional forms of local statecraft, making it challenging for XDSTB to “assert direct authority over project management and decision-making processes” (Xie et al., 2020).

Second, XDSTB faces resource shortages across various domains. With only three personnel, XDSTB struggles to fulfill its administrative obligations besides supervising the daily operations of Xuanwu Silicon Alley projects (Interviews 01 and 04). In response, the local government shifted to a “limited yet essential supervision” (Interview 01) and even transferred its governance authority to the XSAA. For example, XDSTB authorized the XSAA to facilitate collaboration with external government entities on behalf of the Xuanwu District Government (Interview 04). The XSAA engaged in extensive informal communication with the Changning District in Shanghai for several months (Interview 01). The endeavor eventually yielded signed formal agreements that aim to facilitate in-person meetings and collaborative activities between the Changning District government and XSAA members in “fostering an innovation ecosystem” in the Yangtze River Delta through urban redevelopment initiatives (Li, 2023).

Furthermore, in 2024, due to the financial impact of the pandemic, the municipal government and XDSTB have significantly reduced their financial support to XSAA, while the district government has withdrawn its financial support (Interviews 12 and 13). This lack of state money support disincentivized some market actors regarding the future of both Silicon Alley and XSAA. Meanwhile, the pandemic led to severe financial losses for Silicon Alley projects. To navigate through these difficult times, the XSAA engaged with other district government agencies beyond XDSTB for support to ensure its survival, including the Development and Reform Commission that assists existing companies’ digital transformation (shuzihua zhuanxing) and overseas expansion (kuajing chuhai). The XSAA also explored a grid system (wangge zhidu), where grids are divided by streets and each grid is assigned a grid manager (wanggeyuan) responsible for expedited company services and resource coordination (Interview 13).

Concessions to pro-market business actions

The state also made provisional concessions to non-state actors’ pro-market actions. Specifically, the state “allows by omission” consumption-driven private companies to locate in Xuanwu Silicon Alley projects, which intuitively defies the state’s purpose of cultivating innovation and technology. This is because the operators need consumption activities to ensure cash flows and to pay for the rent, particularly during the challenging times of the COVID-19 crisis and economic austerity. A local government official reflected that “survival was prioritized over technological innovation, with plans to address innovation concerns later” (Interview 04), especially given the COVID-19 pandemic’s challenging circumstances. XDSTB also recognizes the necessity of incorporating consumption sectors within Silicon Alley projects to allow industrial diversity:

A single project cannot be completely dedicated to the same industry. It requires moderate complementary elements, such as commerce (present but not overly abundant), as solely focusing on one industry poses systemic risks, especially during extreme periods like the pandemic. (Interview 04)

Therefore, XDSTB faces the challenges of maintaining a balance between fostering innovation and managing consumption within the Silicon Alley ecosystem.

To reconcile the tensions between innovation and consumption and to ensure the survival of the projects in Xuanwu Silicon Alley, XDSTB made concessions to operators recruiting consumption-driven businesses in Xuanwu Silicon Alley, understanding that survival imperatives sometimes necessitate prioritizing commerce over technological innovation (see Figure 2). The operators follow two main principles regarding the proportion of commercial activities. First, commercial facilities were intentionally kept to a minimum to ensure they did not deviate from the primary purpose of technological innovation. Second, the extent of commercial activity is determined discretionarily by the operators, allowing them to adjust based on changing circumstances and priorities. For example, during the pandemic, a higher proportion of commercial activities was observed to ensure the operators’ survival, while in the post-pandemic period, the focus has been gradually shifting back toward technological innovation (Interview 04). Operators also value the government’s balancing act in accommodating commercial imperatives while nurturing innovation (Interview 06).

OPEN IN VIEWER

Figure 2.

The coexistence of an innovation company (left) and a commercial gym (right).

Meanwhile, XDSTB remains cautious about the risks of rent seeking in over-commercialization (Interview 05). According to Interview 05, a viable example of shifts prompted by the economic impact of the COVID-19 pandemic is a high-tech industrial park that has gradually deviated into a night economy hub, with a predominant emphasis on the food and beverage sector. In response, XDSTB leverages XSAA to address the innovation–consumption dilemma. XSAA, as a business organization that possesses business owner networks, market information, and close ties with government agencies, is perceived as very attractive to other redevelopment projects in Xuanwu. XDSTB, at the same time, sets admission criteria for candidates joining XSAA and baseline performance requirements for those which have joined based on innovation indicators, such as the number of innovation-related outputs (Interviews 04 and 12). This allows XDSTB to cultivate an environment conducive to innovation while safeguarding against excessive commercialization.

In addition, compared to cities like Beijing, Shanghai, and Hefei, Nanjing has a relatively weaker basic research capacity, while the city’s efforts are primarily concentrated on applied innovation (Interview 07). The city’s industrial planning and regional economic sectoral development are also dependent on traditional manufacturing sectors such as steel, petrochemicals, and automobiles, except for the burgeoning high-tech electronics industry (Ni and Yang, 2024). This restrains the number of innovation-based firms, especially R&D firms, that could settle in Xuanwu Silicon Alley (Interviews 07 and 08). To provide more incentives for cultivating an innovation ecosystem, the Nanjing municipal government has gradually deregulated land use for pro-market purposes, which has been a key institutional resource of the state in fostering and shaping urban development (Lai et al., 2025; Lin et al., 2015).

Historically, Nanjing’s municipal industrial land use policy imposed severe restrictions on converting industrial land to other purposes, especially commercial ventures (Interviews 02 and 06). In April 2023, the Nanjing municipal government permitted the conversion of industrial land for R&D purposes or office development (Nanjing Municipal People’s Government, 2023), aiming to foster innovation and economic diversification (Interview 06). Specifically, redevelopment projects can include commercial land uses on industrial land, as long as the uses are below a certain proportion, and thus not in direct conflict with the land use regulation (Interview 06). Furthermore, facilities such as parking lots can be converted to accommodate small-scale commercial activities, and additional floors are allowed to be added in buildings like large single-story industrial factories to increase available space (Interview 06). Under the “New Normal” politics, when land-based accumulation is sanctioned to control real estate speculation (Li, 2022; Wu, 2013), the deregulation of land use in Xuanwu Silicon Alley provides incentives for the market actors to participate in innovation-related businesses.