ABSTRACT

Urban economic reform in China has been geared toward effecting a transition from a centrally planned economy to one significantly driven by market relations. In fashioning this transition, China's reformist leaders have sought to create an economic system that matches, in many essential features, the ideal-typical model of market exchange presented in neoclassical economics textbooks. This chapter examines the actual line between plan and market in China is not nearly so sharply drawn as neoclassical Western economists and Chinese reformers have averred. It also explains that certain operational features of China's pre-reform economy have clearly survived the demise of mandatory central planning, taking the form of hybridized, informal relations of exchange. As the dominant force shaping the social foundation for trading in the pre-reform Chinese economy, the state plan itself promoted relational contracting. In China a process of economic reform has been under way since the much publicized Third Plenum of the Eleventh Central Committee, held in December 1978.