How the party-state runs the economy

A model of elite decision-making in the financial market

Authored by: Victor Shih

Routledge Handbook of the Chinese Communist Party

Print publication date:  August  2017
Online publication date:  August  2017

Print ISBN: 9781138684430
eBook ISBN: 9781315543918
Adobe ISBN:

10.4324/9781315543918.ch12

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Abstract

How are financial and economic policies made in China? What motivates policy-makers? This chapter presents a quasi-market model for financial decision-making in which multiple agencies headed by power-maximizing ministers propose a range of policy options on multiple issues to spark the interest of power-maximizing elite policy consumers. If a senior leader or an elite decision body sponsors a policy, then the lead agency that proposes that policy would enjoy elite attention and heightened formal power. A market analysis of financial policy-making suggests an impetus for persistent policy innovations, a strong preference for rapid fixes, a tendency to disregard long-term consequences of policies, and prolonged jurisdictional competition between agencies involved in the financial sector.

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