Local State Autonomy and Economic Transformation: A Comparative Study of Two Chinese Cities

Beginning in the early 2010s, many of the cities in China dominated by state-owned enterprises began to attract investment from the country's more developed east coast, thereby opening the way for their economic development. However, this transition was not consistent across all regions. How can regional variation in this transformation be explained? This article argues that the capacity for local governments to make relatively autonomous decisions regarding the state-owned economic sector has been essential for economic transformation. This is because it is only when they have such independence that local officials will be able to fully employ the policy tools necessary for the institutional reforms that allow them to concentrate the resources needed for development. To demonstrate this argument the article uses a controlled comparison of development in Mianyang and Deyang, two neighbouring cities in Sichuan Province.