The Politics of Economic Restructuring in China: the Case of Iron and Steel Industry in Hebei Province For a middle-income country like China, whether the state-led development model works well in the economic restructuring where economic activities are relocated from low value-added toward high value-added industries is far from clear. Whereas existing research generally portrays the elite politics in the central government, or government failure in general, as the key political factors impeding the effectiveness of state-led restructuring, this project will emphasis on the active role provincial governments could play in the politics of restructuring in China. I use the case of iron & steel industry in Hebei, by examining government documents, academic works, media reports and interviews, to explore how a provincial government exploits the central instructions concerning restructuring to meet its own interests, tracing efforts since 2000 to build the provincial champion Hebei Iron & Steel Group (hegang). Fearing a merger with Capital Iron & Steel (shougang) which is located in Hebei but is owned by Beijing and considering an enhancement of its control over local economies, Hebei exploited the central instruments of establishing corporation groups to foster series of mergers between locally-owned iron & steel companies within its prefecture and establish a monolith, hegang. The provincial government also exploited the central instructions of cutting over-capacity to restrict the activities of locally-owned and private iron and steel companies and to force them to merge with hegang. For the provincially-owned hegang, however, Hebei resisted any cross-border mergers, and kept increasing investment, despite the low returns.