China under the Shadow of Asian Financial Crisis: Retreat from Economic and Political Liberalization?

The article examines the following research questions: In what ways did the Asian crisis lead to an economic slowdown and political instability in China ? How did the Chinese government respond to the Asian crisis? In particular, has the Asian crisis induced China to speed up the reform measures, or has it resulted in the slowing down of economic reforms and political liberalization in China? And what is the prospect for China’s development? This articles argues that the Asian crisis has revealed the urgency of economic reforms and given a strong push to implement reform measures. However, at the height of the crisis, the Chinese leaders compromised by slowing down economic reforms in order to avoid the political risks of a short-term contraction. They also resorted to “soft authoritarianism” to suppress dissent and pacify labor unrest. China’s leaders have the capacity to carry out the above policies because of their unified leadership, the country’s strong external fundamentals, and a relatively insulated Chinese economy. Once the Asian crisis is over, Chinese leaders will probably be even more determined to promote economic reforms.