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Inflation and Investment Controls in China : The Political Economy of Central-Local Relations during the Reform Era - Yasheng Huang

Inflation and Investment Controls in China

The Political Economy of Central-Local Relations during the Reform Era

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Published: 13th November 1999
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How has the Chinese central government been able to avoid the crippling hyperinflation that has bedeviled so many developing and centrally planned economies? China's unique, de facto federalism, Huang argues - a combination of economic and fiscal decentralization and strong political centralization - has spurred economic growth and allowed political institutions to impose restraints on inflation from the top down. Focusing on central-local relations and the controlling role of political institutions, Yasheng Huang explains why local Chinese officials comply, even against their own economic interests, with the investment-reduction and inflation-control policies of the central government. Drawing upon institutional economics, he hypothesizes that the central government's powerful role in appointing and firing bureaucrats at the local level helps to reconcile some of the central-local economic policy differences. Huang uses systematic data analysis to test this proposition. This book also offers detailed descriptions of the roles of local governments in economic and investment management.

This new book by Yasheng Huang is, in my view, one of the most significant studies to have appeared in many years and among other services it underlines, once again, that much of the most illuminating work on the East Asian economies is being done not by economists, but by political scientists, sociologists, historians, and others.' Christopher Howe, The Journal of Development Studies 'Using rigorous quantitative analysis, Professor Huang demonstrates that China's central authorities have not lost their capacity to select and control local government and party officials. This study not only refutes much of the conventional wisdom about Chinese politics during the reform period, it sets a high standard of scholarship in doing so. The book is a model for how this kind of analysis should be carried out.' Dwight Perkins, Harvard Institute for International Development 'Yasheng Huang's book enormously advances three crucial literatures in comparative political economy: on inflationary investment in decentralizing planned economies; on precedence and pacing of economic and political reform, in Communist and in non-Communist authoritarian systems; and on 'federalism' (in Weingast's broad sense) and economic growth in general. With this impressive work, Huang solidly establishes his credentials as the best of the younger scholars of late Communist and post-Communist regimes.' Ronals Rogowski, University of California, Los Angeles 'Must reading. The book uses quantitative and qualitative data to demonstrate convincingly the continued strength of Beijing. It establishes Huang as an outstanding, rigorous, and independent analyst of China's political economy.' Michel Oksenberg, Senior Fellow, Stanford University 'This is one of the most important - and richest - books to be written on post-Mao China. Professor Huang has taken on a difficult subject, the issue of central-local rrelations, and has produced a sophisticated argument that combines solid documentary research and analysis of the structure of China's political economy with skillful statistical analysis.' Steven M. Goldstein, Smith College 'The origins of inflation, Huang emphasizes, arise from the incentives for over-investment that arise at the local level and the difficulties faced by the center in monitoring and sanctioning profligate local behaviour. It is a book that will command a readership among both Chinese specialists and those interested in political economy.' Robert H. Bates, Harvard University

List of figures and tablesp. ix
Acknowledgmentsp. xiii
List of abbreviationsp. xvi
Prefacep. xix
Introductionp. 1
Research aims and strategyp. 4
Local officials in the Chinese political systemp. 8
Investment policy conflicts in Chinap. 10
Some definitionsp. 20
Organization of the bookp. 22
The economic and political roles of local government officials
Local government officials as economic agentsp. 27
Central-local economic institutional arrangementsp. 28
Control over economic resourcesp. 32
Conclusionp. 56
Appendixp. 58
Local bureaucrats as investors: The investment roles of local governmentsp. 63
The evolution of the Chinese investment system before the reform erap. 63
Local investment controls and development imperativesp. 67
Investment managementp. 73
Conclusionp. 85
The local officials in the bureaucratic hierarchyp. 89
The cadre management systemp. 90
Monitoring in the Chinese bureaucratic systemp. 96
Central administrative control during the reform erap. 107
Conclusionp. 119
Appendixp. 122
Macroeconomic policy developments during the reform era
Excess investment demand and austerity policiesp. 127
Excess investment demand in Chinap. 127
Central investment concerns during the reform erap. 151
Austerity policiesp. 158
Conclusionp. 174
Analyzing local investment behavior
Explaining local investment behaviorp. 179
An analytical frameworkp. 180
A bureaucratic model of investment behaviorp. 186
Conclusionp. 206
Appendixp. 208
Strategic investment behavior during austerityp. 212
Aggregate impact of austerity policiesp. 214
Monitoring and investment behaviorp. 228
Monitoring and investment behavior: Empirical evidencep. 233
Conclusionp. 257
Appendixp. 258
Bureaucratic investment behaviorp. 265
Model buildingp. 267
Bureaucratic status and investment behaviorp. 276
Conclusionp. 294
Appendixp. 297
Conclusion: Political institutions, inflation control, and economic reformsp. 305
Summary of findingsp. 305
The nature of Chinese political institutionsp. 315
Political institutions, inflation control, and economic reformsp. 317
Referencesp. 331
Name indexp. 359
Subject indexp. 363
Table of Contents provided by Syndetics. All Rights Reserved.

ISBN: 9780521665735
ISBN-10: 0521665736
Audience: Tertiary; University or College
Format: Paperback
Language: English
Number Of Pages: 396
Published: 13th November 1999
Publisher: Cambridge University Press
Country of Publication: GB
Dimensions (cm): 22.8 x 15.2  x 2.2
Weight (kg): 0.53