Thursday, December 22, 2011

Paper on China's institution

The University of Hong Kong professor Xu Chenggang has written a paper about the fundamental institutions of China's economic reform and development. This over-70-page article provides one of the latest and most comprehensive analysis of the institutional account for China's miraculous economic development in the past three decades. He argued that it is China's regionally decentralized authoritarian system - a combination of political centralization and economic regional decentralization - that can explain the "China puzzle", i.e., why a seemingly ill-suited institution could achieve such spectacular growth and poverty reduction. In addition, he pointed out that grave social problems are also determined by this governance structure.

Here is the abstract:
China's economic reforms have resulted in spectacular growth and poverty reduction. However, China's institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve the "China puzzle," this paper analyzes China's institution—a regionally decentralized authoritarian system. The central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. China's reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure.
Full text can be found here (log in needed) and here.

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