ABSTRACT
This chapter discusses prospects of the Chinese economy on the basis of the last decade of decentralization, as well as the recentralization. The planned commodity economy seeks to compromise plans and markets in a given economy. A parallel set of issues emerged in the relationship between the state and nonstate sectors. Endogenous markets must be distinguished from simple state intervention that is independent of partisan interests of economic agents. The behavioral implications of the soft budget constraint and endogenous markets are similar. The enterprise leadership system in China was more orthodox socialist than in any other socialist economy. The reforms sought to separate political work and management decision making between the enterprise party committee and the managers, thereby increasing managerial authority in running the enterprises. Reform of the state sector initially focused on enlarging the autonomy of state enterprises by transferring some property rights from the state bureaucracy to enterprises.
