| Summary/Abstract |
This article contends that increasing centralisation of decision-making in China will undermine the country’s future economic growth. It highlights the declining role of private enterprises and the increasing role of state-owned enterprises (SOEs) in the economy, and the extension of Communist Party influence in both SOEs and the private sector through the Party’s Organization Department and United Front Work Department. It argues that the increasing role of the state in the economy over the past decade has stifled growth through a decline in ‘total factor productivity’ because of increasing misallocation of resources. Centralisation, with associated losses in efficiency, objectivity, agility, speed and finesse regarding allocations of risks and investment, has debilitated decentralised decision-making and reduced the incentives for undertaking risks and innovation. The article argues that increasing Party control over the SOEs and the private sector will negatively impact the corporate structure and management decisions, exacerbate the fundamental problems of corporate governance and limit or hamper innovation.
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