Regularized National Congresses and Political Business Cycle: Institutionalized Economic Volatility in China

Does an institution-based political business cycle (PBC) exist in China? To explore plausible institutionalized economic volatility, we investigate a core feature of Chinese politics since the reform and opening era: the regular convention of the National Congress of the Communist Party of China (NCCPC) and the National People's Congress (NPC) once every five years. Matching province-level economic growth data with biographies of provincial leaders over more than three decades, we estimate the political business cycle (PBC) effect of the First Plenary Session of NCCPC and NPC by exploiting provincial growth variations under leaders with varying attributes. Leveraging multiple identification strategies with detrending techniques, we document a strong growth effect in the First Plenary Session of NCCPC and NPC years, driven mainly by aggressive fixed investment growth in coastal provinces. The observed PBC patterns cannot be explained by provincial leadership turnovers, yet they vary according to the characteristics of incumbent provincial leaders. We argue that the increasing institutionalization of elite politics, through enforcement of regular promotion and retirement windows, structures bureaucratic competitions and anchors elite expectations, resulting in observed patterns of PBC. To what extent the breaking of institutional precedence in the 20th NCCPC may have destabilized our reported PBC pattern deserves a careful reassessment of past historical records. This page contains the data and programming codes used to conduct this analysis.