Policy and Reality in China’s Economic Reforms
ARTHUR R. KROEBER
This chapter considers two major questions. First, what is the best way to describe China’s economic development path? Second, how successful has this path been, not only in generating high GDP growth, but in respect to three other criteria: (1) acquisition of technology and development of innovative capacity; (2) development of competitive domestic firms; and (3) acquisition of political power in the international trading system.
I argue that Chinese economic development since 1978 is partly explicable by the model of the “East Asian developmental state” devised to describe common features of the development experience of Japan, South Korea, and Taiwan after World War II. But the Chinese case differs from that of its East Asian neighbors in at least three important respects. First, the task of building a modern industrial economy was accompanied throughout by the task of dismantling an inherited communist economic system while maintaining the Communist Party’s monopoly on political power. Second, China’s enormous physical size and legacy of relatively autonomous local governments and local production units made it far more difficult for the central government to enforce the cartels and national industry restructuring plans that were important elements of Japanese and South Korean industrial development. Finally, China’s reform-driven economic takeoff from 1978 onwards took place during a time when international trade and investment rules were rapidly liberalized. Unlike Japan, South Korea, and Taiwan before it—all of