Governments typically set a wide range of goals. This is reasonable and expected: For a society to grow sustainably, social stability-related targets are just as critical as economic ones.

Faced with a broad array of objectives and limited hours in a day, government officials will prioritise projects that befit their career stage. This, in turn, may affect local firms more than they realise.

For instance, younger officials will pay more attention to hard KPIs that could lead to a promotion. Meanwhile, older ones will focus on softer targets that could bring them personal benefits after retirement or at least ensure a smooth transition when they leave office.

They may not be as interested in pushing large economic growth-enhancing projects whose results may come too late to help their career.

In our newly published article,Running out of steam? A political incentive perspective of FDI inflows in China (co-authored with Zhitao Zhu and Shuo Chen), we looked at foreign direct investments (FDI) inflows into 224 Chinese cities at the prefecture level, from 2003 to 2010. We showed that the political term, as a core feature of career advancement in state bureaucracy, influences newly appointed government officials’ efforts to attract FDI.

In Chinese bureaucracy, large-scale leadership turnover happens every five years, right on the heels of the Party’s National Congress.

Think of it as a window of opportunity for promotions, but with a few constraints.

  • First, the law often mandates how many terms an official can serve in one specific position.
  • Second, promotions are based on tournaments rewarding quantified economic…

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