China's reform process, stock market development, and testable hypotheses.

Milton Friedman states in the 2002 preface of his classic "Capitalism and Freedom" that "there is no doubt that the residents of China are freer and more prosperous than they were under Mao — freer in every dimension except the political".16 This statement rests on the fact that China is uniformly ruled by the Communist Party of China (CPC). Nevertheless, to fully understand the factors that shape economic policy-making in China, the incentives and constraints among the interest groups within China's political structure need to be considered. In general, opposition has taken place within a three-level state structure: The senior leadership, central government leaders and local government leaders.17 [ABSTRACT FROM AUTHOR]