Suchergebnisse

This paper intends to properly account for the People's Republic of China's (PRC) two decades of market transition by examining its institutional foundations. The journey of transition is analyzed as a two-stage process. In the first stage (1978-93), the system was reformed to unleash the standard market forces of incentives, hard budget constraints, and competition. The underlying institutional forms and mechanisms, however, were far from conventional: reforming government through regional decentralization; entry and expansion of non-state (mostly local government) enterprises; financial stability through "financial dualism;" and a dual-track approach to market liberalization. In the second stage, PRC aimed to build a rule-based market system incorporating international best practice institutions but proceeded in its own way. Major progress was made in the first five years (1994-98) on the unification of exchange rates and convertibility of the current account; the overhaul of the tax and fiscal systems; reorganization of the central bank; downsizing of the government bureaucracy; and privatization and restructuring of state-owned enterprises (SOEs). To complete its transition to markets, however, PRC still faces serious challenges, especially in transforming its financial system and SOEs and in establishing the rule of law. The paper concludes by reflecting on the economics of reform and institutional change from the PRC experience. The main lesson learned is that considerable growth is possible with sensible but not perfect institutions, and that some unconventional "transitional institutions" can be more effective than the "best practice" institutions for a period of time because of the second-best principle. Specific lessons include: incentives, hard budget constraints, and competition should apply not only to firms but also to governments; reforms can be implemented without creating many or big losers; and successful reforms require appropriate, but not necessarily optimal, sequencing.

AbstractThe past reforms of state‐owned enterprises in China delegated many effective control rights to managers while maintaining ultimate control rights for the Party and government. The result is that either the agency costs are high because managers lack accountability or the political costs are high because the government causes political interference. Reform of state‐owned enterprises in China should aim at reducing both political and agency costs, which can be done through depoliticization, effective corporate governance, and deserialization. In particular, China needs an ownership transformation with a combination of privatization, denationalization, and pluralization; a state assets management system to limit political influence from the government; and corporatization to establish effective corporate governance which may take a variety of forms.

AbstractAfter three decades of market development, the problem in China is no longer how to achieve growth but how to manage its consequences and how to sustain it. One of the most important consequences is the growing inequality – between skilled and unskilled workers, between the genders, between rural and urban areas, and between inland and coastal regions. The papers in this symposium shed light on the important issue of inequality during rapid market development in China. Analysis based on ground level empirical studies can help us to understand better the sources of the rising inequality and to illuminate the nature of the future challenges.