China Must Rein in Local Governments
The decentralization of decision-making was essential to China’s economic boom in its early years. But now, facing massive local-government debt and local leaders’ frequent interventions in resource allocation, further economic reform will require the central government to reassert control over all industrial and fiscal policies.
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BEIJING – Decentralization of decision-making from the central government to local authorities is widely regarded as one of China’s most effective policy reforms of the past four decades. As the Communist Party’s priorities shifted from class struggle to economic development, decentralization turned out to be a tremendous catalyst for growth.