How Reform Worked in China

64 Pages Posted: 21 Jul 2002

See all articles by Yingyi Qian

Yingyi Qian

Tsinghua University - School of Economics & Management; Centre for Economic Policy Research (CEPR)

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Date Written: June 2002


China's reform worked and produced one of the most impressive growth in the largest developing and transition economy in the world in the past twenty-two years. That China has managed to grow so rapidly despite the absence of many conventional institutions such as rule of law and secure private property rights is puzzling. To understand how reform works in a developing and transition economy that has great growth potential, it is not enough to study the conventional "best-practice institutions" as a desirable goal. One should also study how feasible, imperfect institutions have evolved to complement the initial conditions and to function as stepping stones in the transition toward the goal. Underlying China's reform is a series of institutional changes concerning the market, firms, and the government in the novel form of "transitional institutions." These institutions succeed when they achieve two objectives at the same time: to improve economic efficiency by unleashing the standard forces of incentives and competition on the one hand, and to make the reform a win-win game and thus interest compatible for those in power on the other.

Keywords: China, institution, reform, transition

JEL Classification: P20, P26

Suggested Citation

Qian, Yingyi, How Reform Worked in China (June 2002). Available at SSRN: or

Yingyi Qian (Contact Author)

Tsinghua University - School of Economics & Management

Beijing, 100084

Centre for Economic Policy Research (CEPR)

United Kingdom