Qianmin Hu

Existing literature on authoritarian political economy emphasizes the state’s power to prey on private assets. Drawing on fieldwork across six Chinese provinces during 2023–24, this paper identifies an emerging phenomenon that I term “reverse expropriation”: some private firms are increasingly extracting substantial state resources, such as subsidies and investments, while reneging on commitments made to local governments that justify these benefits. I argue that this reversal arises from China’s transition from catch-up growth toward industrial upgrading. As the economy approaches the technology frontier, local governments increasingly depend on private firms with innovation capabilities and entrepreneurial skills that the state cannot readily supply or control. Such firms remain scarce relative to local governments’ rising demand, strengthening firms’ bargaining power and creating opportunities for reverse expropriation. Using a national court dataset of government-firm investment disputes, I run a difference-in-differences analysis with the 2015 launch of “Made in China 2025” as a proxy for the pivot toward industrial upgrading. I find that, conditional on a dispute entering litigation, firms in policy-targeted sectors became more likely to breach contracts with local governments after 2015 than firms in non-targeted sectors. These findings reveal an “innovation dilemma” for the Chinese state: in pursuing industrial upgrading, it exposes itself to the risk of being expropriated by the very private firms it seeks to cultivate.

This paper argues that price convergence can result from state intervention rather than free trade and arbitrage. In a hypothetically state-controlled economy where government officials prioritize internal stability and minimize food-related revolts within their jurisdictions, grain prices converge across time and space within political boundaries. I supply my theory with empirical evidence that, in eighteenth-century China, grain prices were clustered by administrative units and that provincial boundaries impeded market integration between neighboring markets. This framework offers an alternative route to the Law of One Price, shedding light on our understanding of market integration and the Great Divergence.

This paper challenges the previous conclusion that China’s regional economies had been more fragmented and less specialized since the 1978 market reform. Using sub-industrial level data and distinguishing the concept of specialization from concentration, this study finds that Chinese provinces have become more specialized and that industries are becoming less geographically concentrated since the early 2000s, indicating an increasingly integrated Chinese economy. These findings imply that domestic trade barriers, the potential cause of the lack of specialization, have limited significance and that local protectionism presumably driven by local officials’ incentives is not as severe as the previous literature suggested.