Paradoxes of China's Economic Boom

Abstract

China's stunning economic performance for the past three decades was not only unexpected but contradicts much received wisdom in the study of development. Four paradoxes posed by China's record are critically examined: (a) China's traditional culture and institutions as obstacles to development; (b) the necessity of big bang comprehensive reforms to transform a centrally planned economy into a market economy; (c) the perils of state-directed economic development (especially when the state is composed of lifelong communist bureaucrats); and (d) the necessity of getting the institutions right in order to foster development, particularly by establishing secure private property rights. Reasons why China was able to defy expectations and the received wisdom and develop so successfully are discussed. The Chinese case indicates that countries cannot succeed at development by a standard cookbook approach but must tailor their development policies and institutions to their distinctive history, potentials, and limitations.