ABSTRACT
This chapter examines how the results of privatization have been affected by the differences in the way communism in Russia and China evolved. It provides insights into what pitfalls China must avoid if it wants to implement a successful program of privatization. China lacks the resource wealth that so influenced the process in Russia. In contrast to Russia, China moved very slowly and cautiously toward privatization, in large part because of fear that privatizing state industry might result in massive worker layoffs and subsequent labor unrest. If Russian reforms had been successful, then neither Soviet-era factory directors nor members of the Soviet nomenklatura would have automatically become owners of the state factories they had been administrating. The same should be the goal in China. All those who become owners of state property should have had to compete to obtain that ownership on an equal footing and should pay a fair value for it.
