Economic Reform and Performance: A Comparative Study of China and Vietnam

Since the launch of economic reforms in China in 1978 and Vietnam in 1986, both countries have made impressive achievements. However, the two countries have experienced a notable divergence in growth, even though the context and characteristics of their reforms were broadly similar. This paper documents three principal findings: (1) China and Vietnam were similar in their initial conditions and approaches to reform and economic management; (2) the growth divergence between the two countries is substantial not only quantitatively but also qualitatively, and the growth gap widened during good times, when both the countries enjoyed accelerated growth; and (3) the growth divergence between China and Vietnam can be explained mainly by considerable disparity in government effectiveness rather than by a significant gap in the quality of institutions or human capital.