Special Deals with Chinese Characteristics

Chong-en Bai, Chang-Tai Hsieh, Zheng Song

Chapter in NBER book NBER Macroeconomics Annual 2019, volume 34 (2020), Martin S. Eichenbaum, Erik Hurst, and Jonathan A. Parker, editors (p. 341 - 379)
Conference held April 11-12, 2019
Published in March 2020 by University of Chicago Press
© 2020 by the National Bureau of Economic Research
in Macroeconomics Annual Book Series

Chinese local governments wield their enormous political power and administrative capacity to provide “special deals” for favored private firms. We argue that China’s extraordinary economic growth comes from these special deals. Local political leaders do so because they derive personal benefits, either political or monetary, from providing special deals. Competition between local governments limits the predatory effects of special deals.

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Document Object Identifier (DOI): 10.1086/707189