Special Deals with Chinese Characteristics

Chong-En Bai, Chang-Tai Hsieh, Zheng Michael Song

NBER Working Paper No. 25839
Issued in May 2019
NBER Program(s):Development Economics, Economic Fluctuations and Growth, International Finance and Macroeconomics, International Trade and Investment, Political Economy

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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w25839

Published: Special Deals with Chinese Characteristics, Chong-en Bai, Chang-Tai Hsieh, Zheng Song. in NBER Macroeconomics Annual 2019, volume 34, Eichenbaum, Hurst, and Parker. 2020