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

Qian, Yingyi and Xu, Cheng-Gang (1993) Why China's economic reforms differ: the m-form hierarchy and entry/expansion of the non-state sector. CEP discussion paper, 154. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

China's thirteen years of economic reforms (1979-1991) have achieved an average GNP annual growth rate of 8.6%. What makes China's reforms differ 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 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: http://cep.lse.ac.uk/
Additional Information: © 1993 the Authors
Library of Congress subject classification: H Social Sciences > HT Communities. Classes. Races
H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 154
Date Deposited: 10 Mar 2008 11:36
URL: http://eprints.lse.ac.uk/3755/

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