Why alias inside function does not work?

I don't use dash, but here is what bash manual has to say about aliases:

The rules concerning the definition and use of aliases are somewhat confusing. Bash always reads at least one complete line of input before executing any of the commands on that line. Aliases are expanded when a command is read, not when it is executed. Therefore, an alias definition appearing on the same line as another command does not take effect until the next line of input is read. The commands following the alias definition on that line are not affected by the new alias. This behavior is also an issue when functions are executed. Aliases are expanded when a function definition is read, not when the function is executed, because a function definition is itself a compound command. As a consequence, aliases defined in a function are not available until after that function is executed. To be safe, always put alias definitions on a separate line, and do not use alias in compound commands.

And another quote, this time from zsh manual:

There is a commonly encountered problem with aliases illustrated by the following code:

          alias echobar='echo bar'; echobar

This prints a message that the command echobar could not be found. This happens because aliases are expanded when the code is read in; the entire line is read in one go, so that when echobar is executed it is too late to expand the newly defined alias. This is often a problem in shell scripts, functions, and code executed with source or .. Consequently, use of functions rather than aliases is recommended in non-interactive code.

I'm pretty sure it is similar in other shells as well.

If you're not averse to using eval:

$ busybox ash -c 'a()(alias x=echo\ hi;type x;alias;eval x);a'
x is an alias for echo hi
x='echo hi'
hi

I have no idea why this works.