Concept

Mayor Economy

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Mayor Economy

Economist Keyu Jin‘s term for the mechanism she argues actually drives China’s growth: political power in China is extremely centralised, but the economy it presides over is run in a highly decentralised way, through local mayors and provincial officials competing against one another on a yardstick set by Beijing. The idea cuts against the common Western assumption that a small group, or a single leader, directs the Chinese economy day to day — Jin calls that assumption the single biggest misconception about China.

The mechanism

Beijing holds one decisive lever over local officials: it decides their fate — promotion, demotion, dismissal, even prosecution. It does not need to manage the economy directly; it only needs to set the metric officials are judged against and let inter-jurisdiction rivalry do the rest. The metric has moved through several stages as the centre’s priorities changed:

  1. GDP growth (industrialisation era). The first and purest yardstick. A mayor who out-grew the GDP of a neighbouring city was a candidate for national recognition and promotion, up to and including a path toward the premiership. The competition was, in Jin’s words, ‘extremely competitive’ between local officials personally, not just between their jurisdictions.
  2. Land and real estate. Officials discovered that selling land to property developers generated fiscal revenue that could be reinvested in growth, so real estate development and urbanisation became a second major channel for the same underlying tournament.
  3. Environmental compliance. For years, environmental protection went nowhere, because taking it seriously cost GDP growth under a GDP-only metric. Only when the central government made environmental performance an explicit penalising factor — something that could cost a mayor their job — did compliance move quickly; Jin cites the rapid appearance of visibly bluer skies in Beijing as evidence the incentive, once correctly aimed, works fast.
  4. Innovation and ‘unicorns’. Most recently, technological achievement (EV brands, solar manufacturing, semiconductor firms, and — since early 2025 — a locally headquartered AI success story such as DeepSeek) has become an implicit yardstick, with each city racing to have its own national champion.

The ‘big push’ and its costs

The same mechanism explains, in Jin’s account, why China’s industrial policy takes the shape it does: to launch a new strategic sector, the state (via local governments and state-directed capital) mobilises resources and coordinates supply chains faster than an unassisted market would — a ‘big push’ with no equivalent in the canonical Western economic playbook, where state initiation of this kind is unusual and often disparaged. Once a sector reaches a baseline level of genuine competition, Jin argues the state should withdraw and let market mechanisms — venture capital, consumer demand, competitive failure — decide the eventual winners.

The upside is speed and scale: China’s internal-combustion-engine industry, where no comparable state push occurred, never became internationally competitive, whereas EVs, solar panels, and (accelerated by US export controls) semiconductors have. The downside is real and acknowledged rather than dismissed: duplicated, wasted investment (by Jin’s estimate, roughly 80 Chinese cities each backing their own EV brand), and a misallocation problem inherent in letting political rather than market judgement pick early winners.

The missing metric: consumption

Jin’s sharpest critique of the mayor economy is structural, not incidental: every yardstick Beijing has used so far — GDP, land revenue, environmental compliance, innovation — rewards production, investment, or compliance. None of them rewards raising household consumption directly. Because a mayor’s career has never turned on whether local households feel secure enough to spend rather than save, the local-government incentive structure has never been aimed at building the social security, healthcare, and job-security infrastructure that would shift China from a production-heavy to a consumption-balanced economy. She argues explicitly that a consumption-weighted yardstick could redirect the same competitive machinery toward China’s actual current weakness.

Where mainstream views differ

The Western popular account Jin is arguing against holds that China’s economy is directed, in substance if not always in literal fact, by a small centralised leadership — a single-point-of-control model in which local variation is mostly implementation detail. Jin’s account inverts the emphasis: centralisation exists, but almost entirely as a career-incentive mechanism operating on local officials, not as day-to-day direction of firms or markets, which she describes as functionally ‘more decentralised than the US’s.’

A separate, harder-edged critique — one Jin herself partly accepts — is that the mechanism is not efficient by ordinary market standards: a tournament judged by a political principal, not by profit or consumer demand, will systematically overinvest in whatever the current metric rewards (duplicated EV brands, oversupplied real estate) and underinvest in whatever it does not (consumption-supporting social infrastructure). Economists in the institutions camp — see Yasheng Huang on the Development of the Chinese State and Dan Wang on What China and America Can Learn from Each Other — locate China’s binding constraint in a different place: the historical absence of any institution capable of checking the central state (no independent judiciary, church, or merchant class), which they argue limits what local competitive dynamism alone can achieve regardless of how well-calibrated its yardstick is. Jin’s account and theirs are not mutually exclusive — a career-tournament mechanism and a weak-institutional-check diagnosis can both be true — but they locate the analytical weight differently: Jin on the incentive design local officials face, Huang and Wang on the deeper absence of institutional constraint on the centre that sets the incentive in the first place.

In the wiki