ABSTRACT
The Communist leadership, emboldened by the radical transformation of their economy, sought to move to a new phase of development more consistent with their factor endowments. It is paradoxical that this new policy, as seemingly rational in the abstract as the old one was seemingly irrational, proved to be their undoing. The immediate task of the Chinese Communist leadership, after the assumption of power in 1949, was restoration to some semblance of order of an economy badly battered by war and inflation. The balanced growth model may be thought of as covering a broader range of experience and representing the expansion of all sectors of the economy, including agriculture, with the guideline for investment being maximization of output as measured by market price relationships. Given the unpreparedness of the Chinese Communists to face on their own the problems posed by industrialization, it was almost inevitable that they should choose the Soviet model as a pattern for their development efforts.
