DP7654 The Institutional Foundations of China?s Reforms and Development

Author(s): Chenggang Xu
Publication Date: January 2010
Keyword(s): authoritarianism, China, decentralization, economic development, economic reform, federalism, Institution, political economics
JEL(s): D02, D86, E02, E62, G20, G30, H11, H70, K00, O10, O53, P36
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7654

China?s economic reforms have resulted in spectacular growth and poverty reduction. However, China?s institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve "China puzzle" this paper analyses China?s institution - a regionally decentralized authoritarian system. The central government has control over personnel, whereas sub-national governments run the bulk of the economy; and they initiate, negotiate, implement, divert and resist reforms, policies, rules and laws. China?s reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure.