Essential Skills Training: Understanding Government Business Relations in China

This course is intended to offer an informed perspective into China’s government-business relations, which are critical for our understanding of the Chinese economy and doing business in China. It starts with an analytical framework to understand China’s government system and its interaction with economic transition and development in China. This course will focus on the role of local governments and the incentives and behavior of Chinese local leaders. Following is a discussion in detail about the intriguing interaction between politics and markets and how the characteristics of Chinese local leaders affect the workings of the local economy and business development. Professor Zhou will then investigate government-business relations in China’s context and provide insights about how to deal with Chinese government officials when doing business in China. The theoretical economic analysis will be combined with empirical data and case studies.

Course Outline:

1. Motivation

• China's growth as a puzzle
• Why are government-business relations so important in China?
• Why focus on local governments?
• Roadmap

2. Understanding Chinese government and officials:

• A framework multilayer subcontract system: centralization and decentralization, decentralized authoritarian, or decentralized dictators
• Central-local fiscal relations: increasing role of land revenues in local budgets
• Horizontal political competition: hypothesis of multilayer political tournaments
• Terms, age, and promotion criterion
• Interactions of two dimensions: answering puzzling questions about China's rise, strength and weakness in China's state capacity, helping hand vs. grapping hand from businessmen's perspectives

3. Politics and Markets: How bureaucrats' incentives affect the Chinese economy Interactions between politics and markets:

• Amplifications of Growth Targets
• Age 54 and the growth of bank lending
• Political turnover and its impact on GDP growth
• Housing bubble? China's urban development
• The role of local government in development zones

4. Government-business relations, political connections and co-option strategy of the CCP

• Understanding the mindset of Chinese local officials and which parameters are important
• Tips for dealing with Chinese local officials and lower-level bureaucrats
• Case studies