Dec 22, 2011

"China puzzle"

Interesting paper in the new number of the JEL: "The Fundamental Institutions of China’s Reforms and Development" by Chenggang Xu.
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 this “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.

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