Using a comprehensive collection of 3.7 million Chinese policy documents and government work reports spanning the past two decades, we identify 115,679 distinct policies and systematically trace their initiation and diffusion. Our analysis reveals three key findings. First, China's policymaking has historically been highly decentralized, with local bureaucrats playing crucial roles in both creating new policies and spreading them. Second, since 2013, policymaking has become substantially more centralized, driven primarily by changing bureaucratic incentives: bottom-up innovation is no longer rewarded, while strict compliance with central directives is. Third, our analysis of industrial policies shows that centralization affects both policy suitability and effectiveness. Top-down industrial policies tend to align poorly with local conditions and are less effective at fostering industrial growth, underscoring the costs of centralization. At the same time, centralization provides offsetting benefits by mitigating distortions in decentralized policy diffusion that stem from strategic competition among local officials. Overall, our quantitative assessment indicates that the economic costs of centralization in China have substantially outweighed its benefits.

Shaoda Wang is an Assistant Professor at the University of Chicago Harris School of Public Policy, a Faculty Research Fellow at the National Bureau of Economic Research (NBER), and an affiliate of the Bureau for Research and Economic Analysis of Development (BREAD). He also serves as the Deputy Faculty Director of the China centers of the Becker Friedman Institute (BFI China) and the Energy Policy Institute at UChicago (EPIC China). He is an applied economist with research interests in development economics, environmental economics, and political economy, with a regional focus on China. He holds a BA from Peking University and a PhD from the University of California, Berkeley. Prior to joining Harris, he was a Postdoctoral Scholar in the Department of Economics and the Energy Policy Institute (EPIC) at the University of Chicago.