ABSTRACT
Seeking an appropriate role for the state in managing the development process has been a persistent problem throughout the history of the People's Republic of China. From the mid-1950s to the late 1970s, this history was dominated by a recurring cycle of centralisation-decentralisation. Dissatisfied with the Soviet model and its attendant bureaucratisation and stratification, Mao launched his assault on the central planning apparatus by drastically curtailing its allocative role, first with the Great Leap Forward campaign, and later with the Cultural Revolution. Rather than transferring resource allocation to the market, however, Mao had turned it over substantially to the lower level administrative units of provinces, cities, prefectures, counties and rural collectives, and called on them to develop their economies on the basis of 'self-reliance'. 1 It is by now well-known that this strategy of administrative decentralisation was largely unsuccessful. While injecting some flexibility into the system and allowing some local economies to flourish, local management of resources introduced many new rigidities as well. By the late 1970s, the fragmentation and compartmentalisation of resources under the control of regional and functional authorities was widely perceived as a key source of inefficiency in the Chinese economy. 2 Furthermore, recurrent macroeconomic problems engendered considerable policy instability, with high tides of decentralisation invariably followed by periods of recentralisation. In the words of one Chinese economist, the problem was that 'centralisation (led) to rigidity, rigidity (led) to complaints, complaints (led) to decentralisation, decentralisation (led) to disorder, and disorder (led) back to centralisation' (Jiang Yiwei 1980, p. 55).
