China's economic transition, 1978--2000: An alternative institutional analysis

Between 1978 and 2000 China's economy underwent an unprecedented transition from a centrally planned economy to an economy driven primarily by market forces operating within a context of increasing privatization. China's transition was initiated by the existing planning regime and boosted by the state's leading role in allocating resources, providing incentives, facilitating information flow, and orchestrating institutional reform. During its transition, China maintained a sustained growth rate higher than the growth rate of almost any other country in the works. More surprising yet, although China's transition was carried out under a socialist regime, this same regime ultimately invited entrepreneurs to become members of the Communist Party. In contrast, Russia's transition (until 2000) focused on regime change as a strategy for achieving a market economy. But it carried out few changes in its non-political institutions. Unlike China, Russia's transition was marked by a failed economy and a collapsed regime.; This dissertation consists of a multi-dimensional search for the critical institutional and social dynamics that shaped China's transition between 1978 and 2000. It begins with a review of several published theories and models of the transition that look primarily at economic factors. After examining the shortcomings of these models with their limited focus on market-hierarchy dilemmas, this dissertation proposes a complex sociologically-grounded analysis of China's transition. It explores social expectations, thickness of institutions, and depth of history in trying to account for the relative success of China's economic transition. This dissertation provides evidence that China's transition began shortly after the Cultural Revolution, when people were eager to end chaos and establish social order. The Chinese public feared a return to the highly unstable era of the Cultural Revolution. China's changing social expectations were shaped by China's political processes and encouraged by reform activists and intellectual avant-gardes who had experienced a limited pursuit of their unfinished enterprises in the years prior to China's transition. To initiate China's transition, the state introduced specified arenas in which the Chinese public could respond to market forces. These introductions eventually prompted a nation-wide entrepreneurial zeal on the part of the Chinese public and myriads of state-led institutional reforms. This dissertation examines a number of China's institutional reforms related to markets, hierarchies, and networks, several of which produced innovative forms of hybridization and decentralization. By drawing heavily on China's unique history and social institutions, some of these innovations managed to address effectively the dilemmas between efficiency and legitimacy. This dissertation concludes with the suggestion that as an increasing number of economic and institutional reforms are successfully introduced into China, they may pave the way for a regime change that eventually will introduce democratic political institutions into China.