Reform and the Non-State Economy in China: The Political Economy of Liberalization Strategies (review)

This book is a solid, in-depth study of China's successful reform strategies that have managed leadership conflict, guided economic reforms, and ensured rapid, sustained economic growth for more than a quarter century. It consists of nine chapters. Chapter 1 provides a critical review of approaches to transitions and views of China's success. The remaining eight chapters cover topics ranging from an overview of China's policies toward nonstate sectors, an examination of China's top leadership, and the Politburo, the selection of the first provinces for economic liberalization to a comparison of the attitudes of two late-coming provinces toward reform policies and related consequences.

The study identifies and explains the key to the Chinese leadership's successful policy making in the country's economic reforms. During economic reforms, the divisions within the political leadership caused political cycles that interfered with economic reforms. The pro-reform leaders were, however, able to reduce conservative resistance and put an end to the Maoist closed economy by forging reform alliances at the top, incrementally opening up the Chinese economy to private and foreign competition, minimizing chances of failure in the early stage of reforms, and maximizing reform performance and the number of people benefiting from and, therefore, supporting the reforms. By exploring the interplays between leadership strategies and divisions and between economics and politics, this volume provides us an invaluable insight into the process of successful policy making in China's economic reforms.

Through rich, meticulous data analyses, the book convincingly proves that the gradual opening of Chinese cities for reform experiments was not merely a casual chain of events, but rather a result of deliberate and careful planning and choice making by China's pro-reform leadership at various reform stages. To embark on experiments with market principles, the Chinese leadership handpicked four tiny "special economic zones" (SEZs) in only two of the many coastal provinces because of their proximity to Hong Kong and Macau. In these SEZs, they were able to encourage foreign firms to invest in those industries with fastest returns. This reform approach seemed timid, but was most confidently associated with calculated success upfront. Moreover, as soon as positive results were identified, the Chinese leaders wasted no time in spreading the experiments to more and bigger cities and sectors. This insight adds to our existing knowledge linking China's economic success to its gradual and decentralizing approach to economic reforms and makes a precious contribution to transition economics and development economics.

This study involves not only analysis of standard economic data such as exports, FDI, and GDP growth. It also employs analysis of coded ideological control and fiscal policies, coded provincial leaders in reforms, provincial opening index, national leadership in the Politburo (including size, age, generation, membership, ideological orientation, functional and educational backgrounds; central or local experience, regional backgrounds, and provincial backgrounds), provincial leaders in Guangdong, and officials with close ties with Guangdong, as well as national patrons of provinces.

However, this book has not taken into account those issues that have not been successful so far, such as the environment, education, and rural-urban disparity, to name only a few. The reader has also to keep in mind that the Chinese success story is limited to the transformation of its economic institutions, and is largely not shared by that of its political institutions. Therefore, the evaluation of this situation can be an extremely important and interesting study, in which questions need to be answered, such as if this is also part of China's successful reform strategy, and if this will be changed in the near future.

Each chapter is furnished with figures and tables, which provide a very important illustration of various issues, as well as notes and a bibliography of materials used, which indicate the width and depth of the research and guide the interested reader in further research...