Why China grew: Understanding the financial structure of late development

This dissertation explores how economic institutions governing finance and investment have contributed to growth in reform-era China. Economic and political reforms transformed Chinas prior centrally-planned economy. Although reforms incorporated elements of market institutions and private enterprise, state institutions exercising extensive authority over a wide range of economic affairs critically and fundamentally played a central role in transforming this economy from one of the worlds poorest to the worlds second largest in the span of one generation. I explain the emergence of a unique configuration of institutions supportive of industrial policy implemented by largely autonomous local government officials. In combination with state-directed bank credit, this local government industrial policy finance has played a significant and positive role in development of exports in China. Though private entrepreneurs are often seen as dynamic engines of growth in Chinas reform-era economy, I show the vast majority of entrepreneurs are low-skilled, low-productivity, and exhibit non-positive rates of capital accumulation. Most entrepreneurs would experience higher earnings were they not segmented into self-employment occupations by adverse socioeconomic conditions. Rather than engines of growth, Chinas entrepreneurs resemble more the vast numbers of informal sector self-employment prevalent in many developing countries