The Fall of the Old Guards: Explaining Decentralization in China

In the absence of a credible constitution, what mechanism can commit authoritarian leaders to preserving local economic autonomy? We explore the political origin of the puzzling economic decentralization in China, which persisted for two decades. Through a detailed analysis of the composition of the Central Committee of the Chinese Communist Party, we find that the Cultural Revolution radically reoriented the composition of the elite selectorate from one favoring central agencies to one favoring local interests. Due to relatively lower turnover in subsequent years, this realigned elite incentive to favor decentralization policy, thus committing the Chinese leadership in the 1980s to a path of decentralization. In addition, the association between the party elite composition and policy orientation also emerged in other Leninist regimes, particularly Taiwan under Kuomintang (KMT)'s rule and the Soviet Union. The re-population of central officials in the Central Committee in the 1980s and the 1990s led to robust economic centralization into the 2000s, making decentralization an unlikely path of reform in the near future.