Between plan and market: The role of the local sector in post-mao China

Abstract

The Chinese economy has long been characterized by multilevel planning, with local governments controlling nearly half of total industrial output and allocating substantial resources. Because of the important role played by local governments, market reforms have not brought a straight-forward transfer of decision-making authority from the central government to economic agents. Instead, there has been a good deal of "leakage" in the reform process, with local governments retaining and even expanding control over enterprises through a variety of informal mechanisms, as well as through their control over geographically immobile factor resources. This paper looks at the local sector and how mark..