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The Fundamental Institutions of China's Reforms and Development
Chenggang Xu
Journal of Economic Literature. Dec 2011, Vol. 49, No. 4: Pages 1076-1151

The Fundamental Institutions of China's Reforms and Development

Chenggang Xu1

1University of Hong Kong and WCU–SNU.

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. (JEL O17, O18, O43, P21, P25, P26)