The China model withering? Institutional roots of China’s local developmentalism

Abstract

China’s new development wave since the mid-1990s is distinguishable by its strong urbanism. Urban governments, particularly at municipal and county levels, rushed to build industrial parks. Urban landscape was also fundamentally transformed by their massive investments in infrastructures – both residential and commercial properties. How to explain local governments’ continuing drive for development? Why has this particular policy combination gained traction among local officials? We approach these questions by making a simple assumption about local governments as revenue maximisers. Their desires for more revenues are constrained by two institutional changes. Vertically, the central government recentralised the fiscal system, leaving local governments in fiscal shortages. Liberalisation and regional competition in the late 1990s further exacerbated their revenue imperative. The land regime provided the final institutional link that enabled local officials to leverage urban infrastructure and real estate for industrial expansion. This study can shed some light on the ongoing debate about China’s development model in the urban literature.

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