Hayek (1945) predicts that where local information is important, the organization of production should be decentralized. This prediction is tested and supported in the context of the decentralization of Chinese state-owned enterprises (SOEs). SOEs are more likely to decentralize with increasing distance from the seat of the oversight government. This likelihood is especially strong when performance heterogeneity is greater and/or transportation costs are higher.
The roll-out of the internet in China boosted firms’ exports and overall performance even before the rise of broadband and major e-commerce platforms. This finding is relevant for the many developing countries trying to strike a balance between widening access to basic internet services and deepening it through the creation of broadband networks and connections to major e-commerce platforms.
This study traces the heterogeneous effects of government credit across different levels of the supply chain. I find that China Development Bank's industrial loans to state-owned enterprises crowd out private firms in the same industry but crowd in private firms in downstream industries. Moreover, China Development Bank's infrastructure loans crowd in private firms. It is important for policy makers to disentangle these opposing effects of government credit.
The general lesson from this book is this: for a reform to be successful, it is important to use the universal principles, even if they are not enough by themselves, and it is equally important to find specific ways to implement the reform by fully incorporating the initial historical conditions as well as contemporary constraints. The perspective of reform provided by this book’s analysis on China can also be useful beyond China, precisely because it emphasizes that to make reform work, it is not enough to understand why reform works, but also how reform works.