Choosing a Strategy for China's Economic Reform

Ever since 1956, the argument over choice of economic reform strategy in the Peoples' Republic of China has revolved around 2 approaches. The first approach stresses the overconcentration of decision-making power as the main defect of the traditional socialist economic system, while the 2nd stresses resource allocation through administrative commands as the main defect. The reform spirit after 1979, in its advocacy of Delegate Power and Relinquish Revenues (DPRR), was close to that of 1956, with 2 major differences. The 1958 reform stressed administrative decentralization. The 1979 reform, while much wider in scope than the 1956 reform, laid more emphasis on the expansion of enterprise decision-making power. Some reformers feel that the fast gross national product growth shows the wisdom of delegating powers, while coordinated reformers argue that economic results underscore the shortcomings of a DPRR approach. Price reform, as a first and key step, is necessary. Such reform involves a fundamental readjustment of vested interests. The emphasis now has shifted to micro reform.