Rapid Growth as Destabilising Force: China's Economic Transformation Reconsidered

Abstract

Market-oriented reforms in a developing economy cannot be treated as a simple process of economic liberalisation heading for a laissez-faire market economy. The economic development of the People's Republic of China, as a huge developing country with an overwhelmingly peasant population, requires effective interventions from a development state of the East Asian type. Although China is now facing some severe economic problems that erode its long-term growth potential, the central government is gradually losing its policy capacity to undertake effective development management in the process of rapid economic growth. The trend will cause instability in the near future if the increasing tensions between tradition and emerging agents of change cannot be eased so that the reform of the Chinese state can keep pace with the largely market-driven economy.