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How Reform Worked in China: The Transition from Plan to Market


  • Qian, Yingyi

    (Tsinghua University, School of Economics and Management)


As China has transformed itself from a centrally planned economy to a market economy, economists have tried to understand and interpret the success of Chinese reform. As the Chinese economist Yingyi Qian explains, there are two schools of thought on Chinese reform: the “School of Universal Principles,” which ascribes China’s successful reform to the workings of the free market, and the “School of Chinese Characteristics,” which holds that China’s reform is successful precisely because it did not follow the economics of the market but instead relied on the government. In this book, Qian offers a third perspective, taking certain elements from each school of thought but emphasizing not why reform worked but how it did. Economics is a science, but economic reform is applied science and engineering. To a practitioner, it is more useful to find a feasible reform path than the theoretically best way. The key to understanding how reform has worked in China, Qian argues, is to consider the way reform designs respond to initial historical conditions and contemporary constraints. Qian examines the role of “transitional institutions”—not “best practice institutions” but “incentive-compatible institutions”—in Chinese reform; the dual-track approach to market liberalization; the ownership of firms, viewed both theoretically and empirically; government decentralization, offering and testing hypotheses about its link to local economic development; and the specific historical conditions of China’s regional-based central planning.

Suggested Citation

  • Qian, Yingyi, 2017. "How Reform Worked in China: The Transition from Plan to Market," MIT Press Books, The MIT Press, edition 1, volume 1, number 026253424x, December.
  • Handle: RePEc:mtp:titles:026253424x

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Wei Xiong, 2018. "The Mandarin Model of Growth," NBER Working Papers 25296, National Bureau of Economic Research, Inc.
    2. James W. Ellis, 2018. "Hong Kong’s Elusive Identity: Searching in the Past, Present, and Future," Asian Culture and History, Canadian Center of Science and Education, vol. 10(2), pages 1-90, September.
    3. Rohit Lamba & Arvind Subramanian, 2020. "Dynamism with Incommensurate Development: The Distinctive Indian Model," Journal of Economic Perspectives, American Economic Association, vol. 34(1), pages 3-30, Winter.
    4. Chen, Sophia & Ratnovski, Lev & Tsai, Pi-Han, 2021. "Credit and fiscal multipliers in China: Evidence from a political economy based estimation," Journal of International Money and Finance, Elsevier, vol. 119(C).
    5. Li, Weijia & Roland, Gérard & Xie, Yang, 2022. "Crony capitalism, the party-state, and the political boundaries of corruption," Journal of Comparative Economics, Elsevier, vol. 50(3), pages 652-667.
    6. Markus K. Brunnermeier & Michael Sockin & Wei Xiong, 2020. "China’s Model of Managing the Financial System," Working Papers 2020-45, Princeton University. Economics Department..
    7. Rongrong Sun, 2021. "Requiem for the interest rate controls in China," Pacific Economic Review, Wiley Blackwell, vol. 26(2), pages 139-160, May.
    8. Markus K. Brunnermeier & Michael Sockin & Wei Xiong, 2020. "China's Model of Managing the Financial System," NBER Working Papers 27171, National Bureau of Economic Research, Inc.
    9. Qu, Xi & Xu, Zhiwei & Yu, Jinxiang & Zhu, Jun, 2023. "Understanding local government debt in China: A regional competition perspective," Regional Science and Urban Economics, Elsevier, vol. 98(C).
    10. Wei Xiong, 2019. "The Mandarin Model of Growth," Working Papers 2019-10, Princeton University. Economics Department..

    More about this item


    economics; Chinese; market; growth; development; political science; political economy; international; Asia; history; dual track; system; socialist; transitional economies; federalism; local government; fiscal incentives; public; comparative; analysis; intergovernmental relations;
    All these keywords.

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East


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