ABSTRACT
This chapter presents a quasi-market model for financial decision-making in which multiple agencies headed by power-maximizing ministers propose a range of policy options on multiple issues to spark the interest of power-maximizing elite policy consumers. It helps to demystify policy-making in China by making some simple assumptions about the incentives of Chinese leaders and bureaucrats. The chapter describes the makeup, incentives, and organization of both groups of actors. It also describes how these groups of actors fit into the overall policy process in China. The chapter evaluates the accuracy of this framework through the case of China's "solution" to the problem of local debt. It focuses on policy and theoretical implications of the framework, especially in light of the increasing concentration of power in the hands of President Xi Jinping. Theoretically, the market model of policy-making provides an alternative explanation of the policy cycles in the Chinese financial sector.
