China's Mayor Economy

Kongbrailatpam Rajeshwar Sharma *

Frankly speaking, I know almost nothing about economics and its theories. However, all I know is about the Great Depression or economic downturn of the late thirties of the 20th century in America that threw thousands of workers out of work, and the industrial recession that preceded the Great Depression made poverty creep into the lives of thousands of Americans.

The ten-year long economic downturn that began in 1929 lasted till 1939. The impact of the Great Depression on the American society was so severe that thousands of families left their homes in search of work.

The mass migration of workers from Oklahoma to California, where migrant workers, who are known as Okies, were exploited and treated like slaves, produced great works of literature such as The Grapes of Wrath, the novel that brought laurels to its author John Steinbeck. The Grapes of Wrath won him the Pulitzer Prize in 1939, and subsequently the 1962 Nobel Prize in literature was awarded to him.

With little knowledge about economics and the economies of the world, recently I wondered how one could bring peace and develop the economy of Manipur which is bogged down by economic blockades targeted against its own people, internecine communal conflicts and curfews. Its future is completely eclipsed by the dark clouds of uncertainty.

Similarly there is a country in East Africa named Rwanda which was almost destroyed by ethnic-conflicts in the 1990s but it has become the fastest growing economy in Africa with GDP growth of 9.4 percent in 2025. It is now called the Singapore of Africa.

Rwanda is a landlocked country as much as Manipur is. With its hilly terrain and valleys along with its multi-ethnic communities, Rwanda is no less similar to Manipur in terms of geographical appearance and ethnicity. However its leaders are not tainted with corruption and immorality, and they make sure that there is absolute rule of law in their country.

If Rwanda can rise from the ashes of its own bloody ethnic-conflicts, there is no reason why Manipur will not be able to stand up and bring peace and prosperity to its people provided that the Government has the courage to deal with the current violence toughly. This freak of an idea prompted me to look for an economic model that can be used as a template. So I browsed on the Internet for a book that explains the economy of a developed country.

It showed me a book – The New China Playbook : Beyond Socialism and Capitalism. The book seemed to be beckoning me with its cover on top of which a fluttering red flag flies, and a red star shines in between its title to highlight the last four words of the title. At the bottom run two words, Keyu Jin, the name of the author that does not sound like an English name. The name of the author further aroused my curiosity.

As the adage says the proof of the pudding is in the eating, I ordered the book on Amazon to read it in order to know more about how China has become the second largest economy of the world within a span of just thirty years.

“This book is about reading China in the original, coming to understand its people, economy, and the Government…..” writes Keyu Jin, the author of The New China Playbook, as she begins to present her country in its new avatar to the world, which would otherwise be an authoritarian communist country.

As an attempt to clear the doubts about “China’s juggernaut economy” off the minds of the skeptics particularly in the west, Keyu Jin, a Harvard educated economist who serves as an Associate Professor of Economics at the London School of Economics and Political Science, wrote The New China Playbook and it was published in 2023 by Swift Press in Great Britain. She has also worked with the China Banking and Insurance Regulatory Commission, the World Bank and the IMF.

Until Deng Xiaoping, the ‘supreme leader’ of China, introduced his new economic reforms during the late seventies of the last century, China was struggling to lift its more than eight-hundred million strong people out of poverty under Chairman Mao who was under the spell of Joseph Stalin’s economic success in the USSR (Union of Soviet Socialist Republic). They were living on ‘rationed food coupons.’

However, since 1978 when Deng Xiaoping came to power, China has transformed itself into what Keyu Jin calls “a unique blend of the State and the market economy”, and China has witnessed everywhere tangible results of Deng’s new economic reforms in the forms of “new buildings springing up overnight, and in the flood of new tramways, cars, trucks, railway lines, bridges, highways, roads, and canals.”

His economic reforms have amply shown that market economy is not only compatible with capitalism but also with socialism. Keyu Jin calls it “a breakthrough that set the Nation on a course of economic liberalization.”

This ‘breakthrough’ put an end to ‘coupon rationing’ of food in China once and for all. It has become a thing of the past. “By the time I reached middle school in the early 1990s, food was not just available in endless supply, but also in dazzling variety” writes Keyu Jin. Not only did China bid farewell to food rationing, but she also saw a wave of entrepreneurs starting private businesses.

This trend is described as xiahai or “the plunge into the sea” of private businesses. Moreover the most remarkable result of Deng’s economic reforms is that China has been able to achieve an average GDP (Gross domestic product) growth rate of “an astounding 10 percent” during a period of thirty-three years from 1978 to 2011, for which he is regarded as the ‘architect of modern China’.

In defending his new economic reforms that have transformed China into ‘managed capitalism’ or ‘mayor economy’, Deng Xiaoping is said to have said “It doesn’t matter if a cat is black or white, so long as it catches mice.”

The LSE (London School of Economics) Professor of Economics, Keyu Jin, in explaining the unique economy of China, writes that there are elements of both market and “mayor” economies in the hybrid economy of China that results from ‘economic decentralization’ and ‘the confluence of consumers, enterprises, and the State’, but it has ‘significant power’ over the financial system.

Although Keyu Jin does not say about the source of the phrase ‘mayor economy’ in her book, she refers to the success story of the city of Hefei as a model of ‘mayor economy’ where ‘local Governments have strong incentives to help promising businesses overcome barriers and to foster innovation in their locality.’

She also writes that instead of Adam Smith’s ‘invisible hands’ that work behind the scenes, in China they are replaced by the ‘thousand-arm Buddha’s extended and very visible hands.’ Such a metaphor implies the transparency of China’s economic policies and programs.

About 400 kilometers west of Shanghai lies the city of Hefei, the capital of Anhui province in China. It is a prefecture-level city where guanxi or amicable relationships between private businesses and local Government are established by offering ‘a helping hand to private enterprises.’ It is an economic strategy of the city Government to boost its economy.

It involves ‘selectively deploying investment funds it (the city Government) controls to organize the growth of manufacturing supply chains in high-tech sectors.’ The city Government of Hefei not only provided lands to the manufacturers but in April 2020 it also invested one billion dollars in Nio, a Chinese electric vehicle start-up.

“It injected cash in return for a stake in the company, provided it with cheap land, and offered all kinds of services to ease Nio’s journey” writes Keyu Jin. As part of the deal, Nio shifted its headquarter from Shanghai to Hefei.

Subsequently, Hefei became an economic success story when Nio was listed on the New York Stock Exchange in 2018. The city of Hefei was able to quadruple its GDP between 2010 and 2022. Not only did Hefei Government earn ‘great reputation’ but it could also earn ‘a huge financial payoff as its stock price soared.’

The success story of Hefei city Government has inspired other local governments in China. About 1200 kilometers away from Hefei, the local government of Guangzhou city in the south of the country was replicating the Hefei model of ‘mayor economy’ by helping another private EV company, XPeng. Keyu Jin’s catalogue of economic success stories of ‘mayor economy’ does not end there.

She narrates another success story of a local government of Kunshan ‘an unremarkable agricultural town’ which is sandwiched between Shanghai and Suzhou. It had no chance of winning the attention of US and European multinational corporations for investment.

In spite of its weakness, the local government of Kunshan initiated a wide range of business-friendly policies that include financial support, land leases and one-stop license applications. And above all, the local government adopted ‘a tough no-tolerance policy on corruption.’ As a result, ‘more than four thousand new companies sprang up in Kunshan.’

Although The New China Playbook was written for “Those who wish to see China succeed”, the book is essentially about how China’s economy functions. It also highlights the fundamental differences between China and the West.

Keyu Jin writes, “there are many areas of contention and differences in values, pers- pectives, and political approaches, so all too often immediate events and political dramas eclipse consi- deration of economics.”

Moreover The New China Playbook is an indispensable book for students of economics as well as individuals and writers who are curious about how China managed to become the second largest economy of the world next to the United States of America.