The mayor economy

“China is a country that has been growing the fastest, for the longest period of time, in all of the human history. For the first time in the history, a developing country with only 25% of GDP per capita as compared to US, is at a cutting edge of technology and leading it in many ways”, Dr. Keyu Jin, PhD from Harvard, and professor of Economics.

This huge economic success has been attributed, to a greater extent, to the Local Governments of China. These Local Governments are adequately autonomous, resourceful, and target oriented. She has termed it “The Mayor Economy”.

We, in Pakistan are repeatedly and painfully “missing” the miracles of this powerful government tool.

Mayor economies work efficiently in China due to the economic decentralization. China is politically centralized, and economically decentralized. Central government focuses on making policies and setting targets. They set the GDP Growth Targets for the country as well as for the provinces. And this is where the “GDP Growth Race” starts at the local government level.

The provincial GDP growth targets are passed down to the Prefecture-level cities, counties, towns, and villages. All of these administrative divisions are run by their respective mayors.

Once the Mayors get the GDP targets from their provincial heads, they zero in on achieving these targets. They set their focus on private firms. They know the crucial role these firms can play in economic development. In the words of Dr. Jin,

“If you are a tech company, Local Governments will move mountains to accommodate you and make you successful. They will remove red tape, find you more financing, offer land at discounted rates, and even arrange spouses for your employees. They are a one stop shop, as they like to call themselves. It is a marriage between hyper- charged local government officials and intrepid entrepreneurs”. This is the dynamic spirit of a Mayor Economy.“

Chinese economists Chong-En Bai, and Zheng Song researched about the rise of Chinese firms. They visited south China. They found that the primary focus of local governments was to attract and support private businesses. Vice Mayors of each city were spending most of their time prospecting for new businesses. Each Vice Mayor is a point person for about thirty private firms.

Behind every economic success story of a private enterprise, stands a local government that has supported it at every step along the way.

A good example is of an electric vehicle company NIO. Company is notable for operating battery-swapping stations for its electric vehicles, as an alternate to conventional charging stations. Established in 2014, NIO’s share price had fallen 62 percent by 2020.

The company was on the brink of bankruptcy. At this point, the local government of the city of Hefei stepped in, successfully investing about US$1 billion. In exchange it got 25 percent stake in the company. NIO moved its headquarters to Hefei.

The local government helped it secure loans from six large state banks. It helped NIO create, organize, and coordinate a supply chain for batteries, engines, and control systems. In just over a year’s time, NIO’s car production grew by 81 percent. Its total valuation went up from USD 3 billion to about USD 100 billion.

The local government benefited handsomely in many ways. It was able to attract a high-quality enterprise to its high-tech park, create employment, improve city infrastructure, and glorify itself.

Hefei is a prefecture-level city - a large city with multiple county level cities in it. Here is a story of the city of Kunshan, a county-level city. This city is in between two powerful economic hubs, Shanghai and Suzhou. With such strong neighbors, Kunshan had little chance of attracting western multinationals. Its local government decided to develop a niche market for Taiwanese investors. It initiated a wide range of business-friendly policies. These policies included financial support, land leases and one-stop license applications.

The city formed tough anticorruption policies. Investors felt important and safe. They were given personal attention by the local authorities. So much so that if they fell sick, local leaders came to visit them and personally attended to their well-being. In the wake of this support and warmth, more than four thousand new companies sprang up in Kunshan.

This is the potential of a target-oriented local government.

In China, GDP growth race is referred to as “GDP Worship”. The GDP growth rates across various cities are showcased in the media, creating an environment of tough competition. The competition moves to such a level where it is discussed in the local governments. Growth figures are meticulously analyzed to find out how a particular city achieved a specific growth rate. The cities compete, strategize, cheat and do whatever they can to get ahead.

Here one might think why a mayor would take GDP growth targets so seriously. Mayors have a personal interest. They aim to move up the Party hierarchy. From town to county; from a prefecture-level city to province, and then to the central party cadres. This upward movement depends on their performances. The performances of mayors are closely monitored by the Central Committee of the Chinese Communist Party (CCCPC). The Party Secretaries prepare the

“Performance Reports”. The reports are forwarded to the Central Committee. There is a system of meritocracy inside the Party. This merit based oversight system ensure that the mayors remain motivated, all the time.

Central Government provides adequate powers and financial resources to the local mayors. Similar to Pakistan’s National Finance Commission (NFC) Award, China’s central government allocates funds to the provinces based on their population, living standard, development levels. But the funds do not stop at the provincial levels.

The provinces, in turn, pass the finances to the city governments. Provinces trickle down funds as they depend on the local governments for their own performances. The collective performances of the local governments make up for the performance of the Province.

Michael Dunford, Professor emeritus at University of Sussex’s School of Global

Studies and a visiting professor at the Chinese Academy of Sciences, in his paper “China’s development path, 1949–2022” provides trends of expenditure shifts from central to local governments. In the year 1958 the share of central government in the total national expenditures was around 70%. With time, this got totally turned around. Today local governments’ share stands at around 80% of the total national expenditure.

Local governments also generate revenue from land sales and land related taxes. Provincial governments only play a regulatory and supervisory role. The share of land sale revenue, and property related taxes, accounted for 38 percent of total local government revenues in the year 2021.

Almost all of the city needs, like administration, education, healthcare, industry support, social security, public transportation, infrastructure, housing & Urban Development, are taken care by the local governments.

Authority, resources and responsibilities, all are part of the design.

Having said that much for the local governments, without doubt the remarkable success of China cannot be attributed to any one factor.

China is among the oldest and a continuous civilizations. Confucius gave guidelines to the society some 2500 years back. Emperor, or the ruling party, is cherished as a father figure. Meritocracy in Chinese bureaucratic system dates back to Han Dynasty some 4,000 years ago. Today, President Xi Jinping is strictly following a policy of zero tolerance for corruption.

Along with these historical and contemporary facts, Mayor Economies have played an important role. It has helped bring millions of people out of poverty, improve their living standards, transform the society, and make country world leader in 37 out of 44 hi tech industries.

Private enterprises have been nourished to become the driving force. Today, private enterprises account for more than 50 percent of tax revenue, 60 percent of GDP, 70 percent of innovation, and 80 percent of urban jobs. Indeed an incredible achievement.

We stand missing the miracles.

With no dearth of talented youth, enough natural resources, a huge market, large diaspora, we hold every possibility to turnaround our economy. To make it happen, resources and authorities need to be trickled down to the local level. Local Mayors need to be made resourceful, powerful and accountable.

Our Mayors can do the miracles.

Copyright Business Recorder, 2025