Governing China's Transition to the Market: Institutional Incentives, Politicians' Choices, and Unintended Outcomes

This essay reviews two books that seek to account for China's success in making economic reforms and sustaining rapid growth. One perspective explains China's reformist approach in terms of politicians making choices under certain institutional rules. The other sees an economic logic of market transition and emphasizes policymakers' limited abilities in governing the economy. The essay assesses the merits of these competing claims. It calls for better specification of the causal linkages between institutional rules and politicians' choices and concludes that both the dynamics and dilemmas of China's political economy are explained in terms of increasing market competition. Finally the essay evaluates the argument that decentralization leads to market segmentation and points to the Chinese government's evolving role in dealing with the economy.