FEDERALISM, CHINESE STYLE - THE POLITICAL BASIS FOR ECONOMIC SUCCESS IN CHINA

China's remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to mark ets. This reform reflects a special type of institutionalized decentra lization that the authors call ''federalism, Chinese style.'' This for m of decentralization has three consequences. First, it. fosters compe tition, not only in product markets, but also among local governments for labor and foreign capital. This competition, in turn, encourages l ocal government experimentation and learning with new forms of enterpr ises, regulation, and economic relationships. Second, it provides ince ntives for local governments to promote local economic prosperity. Fin ally, it provides a significant amount of protection to local governme nts and their enterprises from political intrusion by the central gove rnment