ABSTRACT
China is often viewed with admiration for its remarkable developmental successes, not only because of its massive reduction of poverty and high level of economic growth, but also as this country is steadily increasing its global influence. However, successful outcomes of the reforms were by no means clear cut and predictable. At the beginning of the reform in 1978, China was still in the aftermath of the Cultural Revolution which severely distorted social and economic structures. What sets China’s development apart from the reform of many other transition and developing countries, was its cautious and slow pace as well as its decentralized policy experimentation. This meant that policies were first tried out at provincial level. If successful, they were subsequently adopted at national level. Moreover, the slow pace of reform created a political economy in which the vested interest groups such as the communist party elite, the bureaucracy, as well as society at large could support the liberal reform agenda. The final step in transition was the accession into the World Trade Organization (WTO), which required both deepening of the market based allocation system as well as internationalization of the economy. Moreover, this international treaty effectively “locked” China “in” a market based economic system. The emergence of China as an economic and financial power was further enhanced in the wake of the 2009 G-20 summit in London, which highlighted China’s important role in the global financial architecture. The success of China is more striking when considered in the perspective of its overall transitional and developmental challenges.
