The “Mayor Economy” in China: Local Entrepreneurialism and the Political Economy of Growth
The term shìzhǎng jīngjì (市長經濟)—commonly rendered in English as the “mayor economy”—captures a distinctive feature of China’s economic development since the launch of reform and opening-up in 1978: the central role played by local government leaders, especially mayors and municipal Party secretaries, as de facto entrepreneurs, investors, and chief strategists of regional growth. Though not an official designation, the concept reflects a system in which local officials exercised extraordinary discretion over land, capital, and policy levers to compete for investment, expand infrastructure, and boost output—often with remarkable success, but not without significant systemic risks.
The origins of the mayor economy lie in the decentralising reforms of the 1980s. Under fiscal contracting arrangements, local governments retained a growing share of tax and non‑tax revenues, while personnel evaluations increasingly emphasised GDP growth, fixed‑asset investment, and fiscal receipts (Oi 1992). This created what economists Li and Zhou describe as a “tournament model” of promotion incentives, wherein officials vied intensely against peers in neighbouring jurisdictions (Li & Zhou 2005). Mayors, in particular, became pivotal: they negotiated directly with foreign investors, allocated industrial land, launched development zones, and restructured local state‑owned enterprises (SOEs)—all in pursuit of measurable growth targets.
A cornerstone of this model was tǔdì cáizhèng (土地財政), or “land finance.” With authority over urban land leases following the 1988 constitutional amendment permitting land use rights to be transferred, municipal governments monetised land to fund infrastructure, social services, and subsidies. Local Government Financing Vehicles (LGFVs) were later established to borrow against future land revenues—fueling rapid urbanisation but also embedding fiscal vulnerabilities (Huang 2015). Cities such as Shenzhen, Suzhou, and Hefei exemplify how visionary mayoral leadership—combined with institutional latitude—could catalyse industrial upgrading: Shenzhen’s rise as a tech hub, Suzhou’s partnership with Singapore in its industrial park, and Hefei’s bold equity investments in firms like BOE and NIO all reflect the mayor economy in action.
Yet this model generated well‑documented distortions. Over‑reliance on land sales and debt‑funded investment led to overcapacity, speculative property bubbles, and environmental degradation. Moreover, the fusion of administrative power and economic discretion created fertile ground for corruption, epitomised by high‑profile cases such as that of Bo Xilai in Chongqing. Critics argue that the mayor economy prioritised quantity over quality—sacrificing sustainability, equity, and institutional development for headline growth figures (Huang 2015).
Since the early 2010s—and especially under President Xi Jinping—the central government has reined in the autonomy that once defined the mayor economy. Anti‑corruption campaigns, tighter fiscal oversight, and a shift in performance metrics toward “high‑quality development” (高質量發展)—emphasising innovation, green transition, and common prosperity—have repositioned mayors from entrepreneurial pioneers to policy implementers within a more centralised framework (Naughton 2022). Recent efforts to deleverage LGFVs, regulate local land markets, and integrate regional planning (e.g., the Greater Bay Area, Yangtze River Delta) further signal the waning of the classic mayor‑led growth paradigm.
In conclusion, the mayor economy was neither aberration nor anomaly, but rather an institutional adaptation that powered China’s meteoric rise for over three decades. Its legacy endures in China’s urban landscape and industrial base—but its evolution also reflects a broader recalibration of the state–market relationship, as China seeks to balance dynamism with stability in a new development phase.
By Les and Noelle Conn
SunTzu.Consulting
References (simplified)
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Oi, J. C. (1992). State and Peasant in Contemporary China. University of California Press.
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Li, H., & Zhou, L.-A. (2005). “Political Turnover and Economic Performance: The Incentive Role of Personnel Control in China.” Journal of Public Economics, 89(9–10), 1743–1762.
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Huang, Y. (2015). Capitalism with Chinese Characteristics: Entrepreneurship and the State. Cambridge University Press.
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Naughton, B. (2022). “China’s Economic Model in Transition.” China Leadership Monitor, 70.