4 - A Political Economy of China's Economic Transition

Summary

China began its transition to a market economy nearly thirty years ago under an authoritarian and hierarchical political system. Today, after market transition has wrought fundamental changes in China's economy and transformed every aspect of China's society, that political system survives, with its basic features intact. Indeed, the two most surprising aspects of China's recent past are the thoroughness of economic change and the durability of the Communist Party (CP)-run political system. During the economic transformation, the CP hierarchy did not sit off to one side, frozen in time while everything else in China changed. Rather, the hierarchical political system shaped the process of market transition, and the political hierarchy itself has been reshaped in response to the forces unleashed by economic transition. The critical economic transition policies were made by national leaders acting in the context of their positions in the authoritarian political system and as a result, many of the basic features of the reform process can be explained by the structure of the political system and the changing needs of politicians within that system.

China's enduring “gradualist” approach to transition obviously suits the needs of its authoritarian leaders. More interesting is that the concrete policy content of China's transition – which differed dramatically in different periods – can also be traced to the changing structure of power and strategic calculations of leaders within the authoritarian system.