CUHK Research: Changing the world

It appears inexplicable that China has been witnessing remarkable economic growth although it has been in the middle of international rankings on business environment. In “Special Deals with Chinese Characteristics”, a paper published in 2019, Professor Song and his two co-authors unlocked the mystery of China’s economic miracle over the past three decades. They argue that the answer lies in the set of informal institutions that emerged in China in the early 1990s, the special deals provided by local governments in China for favoured companies. “The helping hands for favoured firms range from exemptions to compliance of certain regulations, provision of land below market prices to blocking competitors,” Professor Song explains. “Unlike their counterparts in developing countries, local governments in China have strong administrative capacity and abundant financial resources. In China, fiscal expenditure of local governments Chinese economy Unlocking the mystery of China’s rapid economic growth Economists in western countries have been puzzled by China’s extraordinary growth over the past three decades despite its perceived weaknesses in the rule of law and protection of intellectual property. Song Zheng, head of CUHK's Department of Economics which ranks among the world’s top five in study of the Chinese economy, attributes the rapid growth to “special deals” adopted by local governments in China. His argument, which has been cited by many international organisations, has made an impact in the international arena. Song Zheng Wei Lun Professor of Economics 50