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China’s Socialist Market Economy - Lessons Of Success

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  • Arvind Virmani

    (Indian Council for Research on International Economic Relations)

Abstract

Through the 1990s China was widely and often held up as a paragon of economic policy reform driven growth and an example for others to follow. We in India were not immune to the temptation to do the same. There is no doubt that China has lessons that India and many other countries can learn, lessons that will help improve their growth rate. Some of these lessons have been correctly learned, for instance those related to the export led growth model adopted by many S. E. Asian and E Asian countries. There is however a great danger of learning wrong lessons, This danger arises from the fact that information can and is controlled much more easily in a communist party ruled State than it is in a democracy, even a flawed one. China has also gone out of the way to make economic interaction with it (e.g. FDI, outsourcing of manufacturing) profitable for foreigners (non-Chinese), so their interests are best served by publicising information that ensures that profitable interaction with the Chinese Communist Party (CCP) and the State continue. The present paper is an attempt to derive a more balanced picture of Chinas past success so that better and more fruitful lessons can be drawn for the use of other noncommunist countries. In this context the economic history of India, characterised as it is by 30 years of Indian Socialism can be quite beneficial as it comes closest to the market based Socialism with Chinese Characteristics. In contrast comparisons of China with Soviet socialism (USSR) can be very misleading and those with Cuba or North Korea are deliberate red herrings. With the exception of the degree of external openness (FDI & foreign trade), Chinas economy in 2005 is still much more socialist than Indias was in the heyday of the Indian Version of socialism.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22274.

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Date of creation: Jan 2006
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Handle: RePEc:eab:macroe:22274

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Keywords: China; Market Economy; Economic Transition; Socialist Market Economy;

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  1. Zhai, Fan & Hertel, Thomas & Wang, Zhi, 2003. "Labor Market Distortions, Rural-Urban Inequality and the Opening of China’s Economy," GTAP Working Papers 1323, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Hehui Jin & Yingyi Qian, 1998. "Public Versus Private Ownership Of Firms: Evidence From Rural China," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(3), pages 773-808, August.
  3. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc.
  4. Shang-Jin Wei & Eswar Prasad, 2005. "The Chinese Approach to Capital Inflows," IMF Working Papers 05/79, International Monetary Fund.
  5. John Whalley & Shunming Zhang, 2004. "Inequality Change in China and (Hukou) Labour Mobility Restrictions," NBER Working Papers 10683, National Bureau of Economic Research, Inc.
  6. Eswar Prasad & Shang-Jin Wei, 2005. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Working Papers 11306, National Bureau of Economic Research, Inc.
  7. David E. Bloom & David Canning & Jaypee Sevilla, 2001. "Economic Growth and the Demographic Transition," NBER Working Papers 8685, National Bureau of Economic Research, Inc.
  8. Lixin Colin Xu, 1997. "The productivity effects of decentralized reforms - an analysis of the Chinese industrial reforms," Policy Research Working Paper Series 1723, The World Bank.
  9. Lardy,Nicholas R., 1992. "Foreign Trade and Economic Reform in China," Cambridge Books, Cambridge University Press, number 9780521414951, 9.
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