Political Competition at a Multilayer Hierarchy: Evidence from China

The most salient feature of China’s economic development in the past three decades is the remarkably high and sustained level of economic growth: China’s real GDP growth rate was on average 9.6 per cent during the period 1978–2010. Even when the world economy was hit by the global financial crisis in 2007–08, the Chinese economy, which initially suffered a big drop in the growth (from 12 per cent in 2007 to 8 per cent in 2008), quickly recovered its normal strength, recording 8.7 per cent in 2009 and 10.4 per cent in 2010. The other important feature of the Chinese economy is the positive role played by local governments at the different levels (Oi 1992; Montinola et al. 1995; Walder 1995; Qian and Weingast 1997; Che and Qian 1998; Blanchard and Shleifer 2001; Li and Zhou 2005; Xu 2011). While bureaucrats tend to grab private business in many developing and transition countries, Chinese local officials have served as a helping hand to their local economies by building infrastructure, encouraging local business entrepreneurship and attracting foreign investment (Frye and Shleifer 1997; Easterly 2005).