China's 'mayor economy': How it helps Tesla, others

What on Earth is the “mayor economy”?

Think of it as The Hunger Games (bureaucrat edition).

Only instead of fighting in an arena, China’s local mayors and governors are slugging it out in a high-stakes competition to grow their cities' economies. 

Welcome to the “mayor economy”, a term popularised by the brilliant Dr. Keyu Jin — a Harvard-educated, China-born economist, professor at the London School of Economics, and author of The New China Playbook (2023).

Mayors in China aren’t just smiling for ribbon-cuttings. They’re laser-focused on GDP growth, real estate booms, tech startups, and even becoming co-investors in local innovation.

US electric vehicle maker Tesla is a major beneficiary of this practice. For example, local officials in Shanghai helped Elon Musk's company secure unusually rapid approvals for land use, construction, and operations.

China Daily reported that Tesla was the first wholly foreign-owned automaker allowed in China — thanks to strong local backing and national support for EV expansion.

Why bend the rules for a US company like Tesla?

Because in China’s system, economic performance is a ticket to political promotion. Build a booming economy, get a bigger job. It's that simple — and that intense.

The Shanghai Gigafactory, Tesla’s first outside the US, was built in under a year — a timeline that would be unthinkable in most countries.

Dr. Jin (now a Youtube and Tiktok sensation), has unpacked this system in her global talks from Davos to Beijing to Boston.

She says this competition has turned local Chinese governments into lean, mean, growth-driving machines. 

They support private businesses, invest in infrastructure, and sometimes build “ghost towns” (widely reported by Western media), which eventually turn into into thriving hubs — all to win the national leaderboard of GDP growth.

It’s not capitalism, and it’s not communism. It’s competitive mayorship. It’s transformative.

In the ‘mayor economy’, she explains, “the local governments want to do good."

Why? First of all, they want to be promoted politically. 

“But then if you think about it — if they help the good private sectors, they help build an industrial cluster. Many companies start to move in. Lots of jobs, lots of tax revenues — fiscal revenues, which is really important for them. 

“The land of their local jurisdiction is suddenly worth much more. They collect more fiscal resources. They are actually an equity stakeholder of the entire economy.

"Why would local governments actually put up capital to invest — become equity stakeholders of startups? It's not just for the returns. It is for this whole 'pie' that they want to grow. 

“The point about this is that their incentives are totally aligned with private companies, for the most part. Now of course you're going to get these very corrupt officials and get lots of stories, but again, this is the model that, by and large, actually spurred China forward — and that's the local economy.”

Local officials — governors and mayors — are incentivised by the central government through GDP targets. Their chances of promotion often depended on how much economic growth they could generate in their jurisdictions.

There exists a sort of gamified, “tournament-style competition” among local governments. Provinces and cities compete with each other to outgrow their neighbors, which fosters dynamism and innovation despite the absence of Western-style democracy.

Local governments were motivated to nurture productive private companies because economic success led to promotions. They avoided overregulating or stifling the private sector, especially during periods of rapid industrialisation and urbanisation

After industrialisation, local governments shifted toward urbanisation and property development as faster ways to achieve economic targets. This led to phenomena like the reported “ghost towns”, which often filled up over time.

By supporting thriving local economies, officials could raise fiscal revenues — especially by increasing land values and collecting fees. Local governments became quasi-equity stakeholders in regional economic growth.

To grow their economic “pie,” local governments sometimes co-invested in startups, not just for financial returns but to stimulate broader development, innovation, and employment in their regions.

In this model, the interests of government officials and private enterprises are often aligned. When businesses thrive, local leaders benefit politically and fiscally, creating a mutually reinforcing development cycle.

In her The New China Playbook, Dr Jin states:

“One big factor in the success of China’s economy is its ability to embrace change, innovation, and risk – qualities we do not typically associated with politically centralised machines.

"Though the stakes are high, from the beginning, the local chiefs are encouraged to try out bold ideas.

"Importantly, there were a few penalties meted out for trying and failing. Because these efforts tend to be local, the fallout from failure was contained. But successful plans were loaded and emulated around the nation, their sponsors  showered with recognition and praise."

"This high-risk, high-reward environment led to the development of an entrepreneurial state within a highly centralised one."

"Officials are encouraged to bend or even break rules and traditions, to come up with even the most outlandish original ideas, and to make creative and intuitive decisions even when the outcome wasn’t certain. They were both emboldened and empowered.”

 This, alone, makes China a very important part of the global economy.