China and the Ideal Economic Reform

Abstract

Economists studying socialist transition have established a paradigmatic view that emphasizes flexible prices, openness to international trade, minimal government intervention in market operations, and private ownership of productive resources. China's, the largest and best performing transition economy, deviates widely from this approach. This paper explores the conflict between standard prescriptions and Chinese reality. The author concludes that gradual reform is unavoidable, that partially reformed systems can generate huge growth spurts, that economists overstate the importance of ownership, and that the institutional structures of market systems are far more complex than most observers imagine.