The Cat that Catches Mice: China's Challenge to the Dominant Privatization Model
82 Pages Posted: 7 Nov 2011
Date Written: 1995
Nominally socialist but steadfastly market-oriented, China is embarking on a strategy of slow but steady economic transformation and their economy is currently experiencing one of the most rapid growth rates in the world. There are generally two means of privatization of a formerly centrally based economy. The “Big Bang” exit, characterized by the radical “shock therapy” prescriptions adopted by many of the Eastern European countries, involves immediate privatization of the state sector, including the swift transfer of assets from public to private hands. Second, the more gradual, less explosive form of disengagement pursued by China, involves the initial creation of a nonstate sector followed by limited privatization of the state sector. The Chinese model has spawned unorthodox economic organizations founded on hybrid, nontraditional concepts of ownership.
As this article argues, the success of these unorthodox entities not only challenges conventional prescriptions for economic reform but also calls into question the traditional dichotomy between centrally planned and market economies. This Article examines the Chinese model and explores why, despite its shortcomings, it still presents a feasible and plausible alternative to the more dominant model that inspired reforms in Eastern Europe. The Article argues that, while economic growth has certainly been fueled by the creation of a market-oriented, nonstate economy, such nonstate growth has also been generated by unorthodox market entities, such as collectives, with vague private property rights.
Keywords: China, growth, economic reform, reform, economic, big bang exit, market entities, collectives, privatization
JEL Classification: K22, O10, P2, P5
Suggested Citation: Suggested Citation