Introduction: Some Issues of Chinese Economic Reform

Abstract

This year will mark two decades of economic reform in China. Much has been written about China's transition from a plan to a market economy. According to the World Bank 1989-95 data, China scores best among the transitional economies in all the categories of GDP growth, inflation, life expectancy and infant mortality. China is the only country, besides Vietnam, that has never experienced a fall in labour productivity. Its average growth rate of 9.4 per cent in that period has placed the size of its GDP (according to purchasing power calculations) second in world rankings behind the United States and ahead of Japan and Germany. Given the fact that China and the other transitional economies commenced their reform programmes from different sets of initial conditions - for example, 90 per cent of employment in the pre-reform Russian economy was in the industrial sector compared to 19 per cent in China - the question naturally arises as to the applicability of China's reform strategy to other former centrally-planned economies. The first article by Vincent Benziger in this special issue of JAPE addresses this question and concludes that although initial conditions differ between the transitional economies of Eastern Europe and China, the former can learn from the latter's general strategy of gradualism. He focuses attention on the importance of a gradual opening of the state indus­trial sector to international competition and argues that only a gradual introduction of competition can prevent a collapse of employment in the state sector before alternative new jobs are created in the private sector. According to him, far too many jobs are dependent on the state sector in Eastern Europe for it to simply collapse before sufficient new jobs are first created in the private sector.