This paper investigates the institutional reasons underlying the change in the trajectory
of economic growth in post-reform China, and argues that the growth trajectory is the
outcome of changes in political and inter-governmental fiscal institutions following the
1989 political crisis. By any standards, these institutional modifications were successful,
because they induced faster growth and achieved political stability. Without them,
China might not have been able to maintain the political stability of the last 20 odd
years since 1989.