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.
Figures and tables; Acknowledgements; Abbreviations; Preface; 1. Introduction; Part I. The Economic and Political Roles of Local Government Officials: 2. Local government officials as economic agents; 3. Local bureaucrats as investors: the investment roles of local governments; 4. The local officials in the bureaucratic hierarchy; Part II. Macroeconomic Policy Developments During the Reform Era: 5. Excess investment demand and austerity policies; Part III. Analyzing Local Investment Behavior: 7. Strategic investment behavior during austerity; 8. Bureaucratic investment behavior; 9. Conclusion: Political institutions, inflation control, and economic reforms; References; Indexes.