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Can Communist economies transform incrementally? China's experience

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Author Info

  • Gelb, Alan
  • Jefferson, Gary
  • Singh, Inderjit

Abstract

The authors try to answer important questions. How important is the phasing of political and economic liberalization and the active (versus passive) role of the state in reform? What lessons can be learned about comprehensive top-down reform as opposed to experimental bottom-up reforms; fast versus slow liberalization and opening up of the economy; the need to establish full private property rights at the beginning of reform; and reform's implications for welfare and distribution? Can China's excellent performance be linked toparticular reform measure, or does it reflect distinctive initial conditions or social or demographic factors? Is China's performance sustainable without more comprehensive transformation, or does it reflect transient gains that are substantially exhausted? Among the lessons China offers are the following. Partial reform can succeed in raising productivity in agriculture and industry; industrial productivity has grown very rapidly in the nonstate sector but also in state enterprises. A"big bang"is not economically necessary unless justified by the need to address macroeconomic imbalances. There may be virtue in a decentralized"bottom-up"approach to reform. Rapid privatization is not necessary for successful reform, but it is important to diversify ownership and encourage the entry of new firms. Small scale privatization and the liberalization of distribution and service sectors are likely to have the fastest payoff in the reform of property rights. China's rapid growth momentum and macroeconomic stability cannot be sustained without further reforms, including the reform of banking, taxation, and property rights.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1189.

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Date of creation: 31 Oct 1993
Date of revision:
Handle: RePEc:wbk:wbrwps:1189

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Related research

Keywords: Environmental Economics&Policies; Economic Theory&Research; Banks&Banking Reform; Health Monitoring&Evaluation; Municipal Financial Management;

References

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  1. McMillan, John & Naughton, Barry, 1992. "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy, Oxford University Press, vol. 8(1), pages 130-43, Spring.
  2. Gyorgy Szapary & Steven Vincent Dunaway & David Burton & Mario I. Bléjer, 1991. "China: Economic Reform and Macroeconomic Management," IMF Occasional Papers 76, International Monetary Fund.
  3. Rajaram, A., 1992. "Reforming Prices The Experience of China, Hungary and Poland," World Bank - Discussion Papers 144, World Bank.
  4. Jefferson, Gary H. & Wenyi Xu, 1992. "Assessing gains in efficient production among China's industrial enterprises," Policy Research Working Paper Series 877, The World Bank.
  5. McMillan, John & Whalley, John & Zhu, Lijing, 1989. "The Impact of China's Economic Reforms on Agricultural Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 781-807, August.
  6. Harrold, P., 1992. "China's Reform Experience to Date," World Bank - Discussion Papers 180, World Bank.
  7. Michael Bruno, 1992. "Stabilization and Reform in Eastern Europe: A Preliminary Evaluation," IMF Staff Papers, Palgrave Macmillan, vol. 39(4), pages 741-777, December.
  8. Jefferson, Gary H & Rawski, Thomas G & Yuxin, Zheng, 1992. "Growth, Efficiency, and Convergence in China's State and Collective Industry," Economic Development and Cultural Change, University of Chicago Press, vol. 40(2), pages 239-66, January.
  9. Fan, G. & Woo, W.T., 1992. "Decentralized Socialism and Macroeconomic Stability : Lessons from China," Papers 411, California Davis - Institute of Governmental Affairs.
  10. Groves, Theodore & Yongmiao Hong & John McMillan & Barry Naughton, 1995. "China's Evolving Managerial Labor Market," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 873-92, August.
  11. Chen, Kang & Jefferson, Gary H. & Singh, Inderjit, 1992. "Lessons from China's economic reform," Journal of Comparative Economics, Elsevier, vol. 16(2), pages 201-225, June.
  12. Stanley Fischer & Alan Gelb, 1991. "The Process of Socialist Economic Transformation," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 91-105, Fall.
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Citations

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Cited by:
  1. Aizenman, Joshua & Yi, Sang-Seung, 1998. "Controlled Openness and Foreign Direct Investment," Review of Development Economics, Wiley Blackwell, vol. 2(1), pages 1-10, February.
  2. Wang, Yijiang & Chang, Chun, 1998. "Economic transition under a semifederalist government: The experience of China," China Economic Review, Elsevier, vol. 9(1), pages 1-23.
  3. Lin He & Calum Turvey, 2009. "Financial repression in China's agricultural economy," China Agricultural Economic Review, Emerald Group Publishing, vol. 1(3), pages 260-274, September.
  4. Pham van Thuyet, 1995. "The emerging legal framework for private sector development in Viet Nam's transitional economy," Policy Research Working Paper Series 1486, The World Bank.
  5. Camilla Jensen, 2003. "Socialism, Spillovers and Markets in Cuba," Post-Communist Economies, Taylor and Francis Journals, vol. 15(3), pages 435-459.
  6. Yui Leung, Charles Ka, 2001. "Productivity growth, increasing income inequality and social insurance: the case of China?," Journal of Economic Behavior & Organization, Elsevier, vol. 46(4), pages 395-408, December.

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