What Russia Can Learn from China in its Transition to a Market Economy

Abstract

The new Russia began its attempted transition from a centrally planned economy to a market economy in January 1992, just days after the dissolution of the Soviet Union on Christmas Day 1991. It was not alone in its efforts to meet this daunting challenge. The Administration and Congress of the United States hoped to build a positive economic and political relationship with its former adversary. International financial institutions and Western donors pledged hundreds of millions of dollars in loans and assistance. Prominent economic advisers converged on the scene to offer their services. Unfortunately, thirteen years later, many Russians are worse off in a large number of ways than they were under the Soviet system, while the need for structural reform of the economy is as great as ever. Life expectancy and living standards have fallen, while crime, corruption, alcoholism, drug abuse and inequality of income have risen.¹ The positive developments in the economy in the past few years mainly stem from the boosts that the Russian economy received from the devaluation of the rouble following the currency crisis in August 1998, and from the more recent trebling of the oil price on the world markets.