The political roles of Taiwanese business people (taishang) in cross-strait relations have been increasingly noteworthy under Hu Jintao's policy of "counting on the Taiwanese people." But contrary to widely accepted allegations, this paper argues that attempts by China to use Taiwanese business people as a means to gain political leverage over Taiwan will probably not pan out as a successful strategy.

This research proposes a new theory called bilateral rent‐seeking to explain the dramatic growth of foreign direct investment (FDI) inflow into China over the past several decades. We construct a Nash bargaining model to illustrate the relevance of how the reciprocal relationship between the local state and foreign investors leads to the greater incentives for the latter to invest in the local market, thus resulting into the huge FDI inflows into the domestic market in China in the past several decades. The empirically evidence presented in the end is broadly consistent with the theories proposed in this paper (JEL D21, D72, L52)

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How can China develop so quickly and yet maintain stability? Most scholars pinpoint the efforts of China's local government leaders as a primary factor. Regarding what motivates these leaders, however, scholars display wide disagreement. The widely accepted “promotion tournament” hypothesis stresses competition among local leaders as the driving force, but empirical test results vary considerably and create controversy. We argue that tests of promotion competition should target leadership behaviour rather than institutional inducements; the latter are, at best, a necessary condition of the former. Informed by extensive fieldwork, this study proposes an alternative and more direct approach to verifying the promotion tournament hypothesis by examining the impacts of promotion competition on leaders’ performance efforts. Our test results show, however, that competition for promotion has no significant impact on local leaders’ behaviour, thereby indicating that the promotion tournament hypothesis cannot be the primary explanation for China's economic achievements and regime resilience. In so doing, our study illuminates the oversimplified assumptions behind a prevailing proposition in Chinese politics and offers empirically informed insights into the tensions between political institutions and leadership behaviour.

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