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Transition to a Market-Oriented Economy: China versus Eastern Europe and Russia

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Abstract

For the transition from a centrally planned economy to a decentralized market economy, there are two different approaches. The first is a ‘big bang’ or ‘shock therapy’ approach; the reforms undertaken in Eastern Europe and the former USSR in recent years are typical examples. This approach considers stabilization, marketization, and privatization to be the necessary components of a successful transition and attempts to complete all these components simultaneously or in a short sequence. The contrasting alternative is the ‘gradual’, ‘organic’, or ‘evolutional’ approach, and this latter has characterized China’s recent reforms. It is piecemeal, partial, incremental, sequential, often experimental, and without large-scale privatization.

Keywords

  • Interest Rate
  • Total Factor Productivity
  • Foreign Exchange
  • Heavy Industry
  • Allocation Mechanism

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

This paper draws heavily on our book The China Miracle: Development Strategy and Economic Reform (Hong Kong: Chinese University Press, 1996) and our paper ‘The Lessons of China’s Transition to a Market Economy’, Cato Journal, vol. 16, no. 2 (Fall 1996).

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Lin, J.Y., Makarov, V. (1998). Transition to a Market-Oriented Economy: China versus Eastern Europe and Russia. In: Hayami, Y., Aoki, M. (eds) The Institutional Foundations of East Asian Economic Development. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-26928-0_8

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