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Local governments play an important role in China’s economy, and many studies credit local governments with a beneficial role in promoting growth over the past decades, especially in manufacturing. The extensive literature on Chinese innovation is relatively silent, however, on the impact of Chinese local governments on industrial upgrading. This chapter’s empirical focus is local government influence on the ecosystem for innovation in clean energy manufacturing industries, specifically solar cells (PVs) and electric vehicles (EVs). While innovation in the clean energy sector has been a key theme of the government’s response to environmental degradation and climate change, clean energy manufacturing is perhaps foremost an industrial policy. Moreover, subnational governments remain core actors through their dual role as promoters of local development and conduits of central policy initiatives. Sometimes central and local goals align favorably for firm innovation, and sometimes they conflict. In the sectors studied, local government efforts to promote upgrading has occurred in niche areas, notably in the low-speed electric vehicle sector. Yet local government efforts often have been wasteful –promoting excessive market entry and questionable incentive schemes –falling short of goals for upgrading.
China sometimes plays a leadership role in addressing global challenges, but at other times it free rides or even spoils efforts at cooperation. When will rising powers like China help to build and maintain international regimes that sustain cooperation on important issues, and when will they play less constructive roles? This study argues that the strategic setting of a particular issue area has a strong influence on whether and how a rising power will contribute to global governance. Two strategic variables are especially important: the balance of outside options the rising power and established powers face, and whether contributions by the rising power are viewed as indispensable to regime success. Case studies of China's approach to security in Central Asia, nuclear proliferation, global financial governance, and climate change illustrate the logic of the theory, which has implications for contemporary issues such as China's growing role in development finance.