China's Local Political Budget Cycles

This article examines the political budget cycles in Chinese counties. The shift to a more performance-based cadre evaluation and mobility system during the reform era has created an incentive structure for local leaders to increase government spending at strategically important time points during their tenure to enhance the prospect of official promotion. Such expenditures help local leaders to impress their superiors with economic and political achievements, especially those visible and quantifiable large-scale development projects. At the same time, economic and fiscal decentralization increased the capacity of local leaders to influence government budget expenditures as the need rises. The hypothesized curvilinear relationship between a leader's time in office and increased spending was tested using a comprehensive data set of all Chinese counties from 1997 through 2002. The panel data analysis shows that growth in local government spending per capita is the fastest during a leader's third and fourth years in office.