By Liu Yong, Research Department of Development Strategy and Regional Economy, DRC

Research Report, No.111, 2019 (Total 5611) 2019-7-11

Abstract: Viewing from the perspective of economic reform, this paper illustrates the important role of local governments in pushing forward China’s rapid economic growth, analyzes the main reasons why local governments could play such a crucial role in economic development, reveals the fact that based on relevant institutional mechanism, the local governments have channeled the maximum production factors into economic development and throws light on the major issues facing the current local governments’ system as well as the ways for promoting local governments’ functional change from taking economic growth as the primary goal to focusing on social development by drawing on experience from Western developed countries. The paper narrows down to the following basic conclusions. In the past, in order to meet the requirement of swift market economic growth in the initial phase, the role played by local governments went beyond the expectations, which was also due to the incomplete reform of the economic system and the improper market system. In the future, with the increasingly full-fledged system of market economy, we need to further deepen the institutional reform of local governments and the transformation of their functions in order to bring into play their proper functions and bolster the healthy and sustainable economic development.

Key words: local governments, China’s economy, institutional reform