Why China's economic reforms differ: the M-form hierarchy and entry/expansion of the non-state sector

Qian, Yingyi and Xu, Chenggang (1993) Why China's economic reforms differ: the M-form hierarchy and entry/expansion of the non-state sector. CEP Discussion Papers (CEPDP0154). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

China's thirteen years of reforms (1979-1991) have achieved an average GNP annual growth rate of 8.6%. What makes China's reforms from those of Eastern Europe and the Soviet Union is the sustained entry and expansion of the non-state sector. We argue that the organization structure of the economy matters. Unlike their unitary hierarchical structure based on the functional or specialization principles (the U-form), China's hierarchical economy has been the multi-layer-multi-regional one mainly based on territorial principle (the deep M-form, or briefly, the M-form). Reforms have further decentralized the M-form economy along regional lines, which provided flexibility and opportunities for carrying out regional experiments, for the rise of non-state enterprises, and for the emergence of markets. This is why China's non-state sector share of industrial output increased from 22% in 1978 to 47% in 1991 and its private sector's share from zero to about 10%, both being achieved without mass privatization and changes in the political system.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 1993 The Author(s)
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O10 - General E - Macroeconomics and Monetary Economics > E0 - General > E00 - General
Date Deposited:	21 Feb 2024 11:03
Last Modified:	21 Feb 2024 11:18
URI:	http://eprints.lse.ac.uk/id/eprint/121941

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