ABSTRACT
This chapter reviews the institutional changes that took place in mainland China and the consequences that followed for China's economy. It examines the impact that Hong Kong's recent merger with mainland China is likely to have on Hong Kong's economic performance. China's history is linked with cycles of rising and falling dynasties. Some of the more important ones include the Yuan, the Ming, and the Qing. By 1957 nearly all industry in China was state owned or formed into collectives. There are three basic types of industry ownership in China: state-owned enterprises (SOEs), collective enterprises, and private enterprise. China has been very successful in attracting foreign investment. The transfer of power from Britain to China has created a remarkable experiment in economic history: the merger of a democratic, capitalist republic with a Communist government. Hong Kong's formal institutions are set by the People's Republic of China.
