ABSTRACT
Agriculture thus became the leading edge of China's increasingly far-reaching reforms and provided a textbook lesson in successful reform. Western authors usually describe this as a "decollectivization," although the official Chinese view holds that it is rather a case of allowing individual and collective management to coexist, with each specializing in its area of comparative advantage. The contract responsibility system applies not only to relations between government bodies and firms, but also to all aspects of the Chinese economy where government is involved. A successful transition to a market economy requires two basic changes. First, the institutions and controls of a Soviet-type economy that enable the state to manage economic activity must be dismantled and replaced by the institutions and legal foundations of a market economy. Second, a market economy requires business skills plus regulatory, legal, and banking expertise, among others, that are largely absent in a Soviet-type economy.
