1 See Blanchard, Olivier, Dombusch, Rudiger, Krugman, Paul, Layard, Richard and Summers, Lawrence, Reform in Eastern Europe (Cambridge, MA: MTT Press, 1992)Google Scholar; Blanchard, Olivier, Boycko, Maxim, Dabrowski, Marek, Dornbusch, Rudiger, Layard, Richard and Shleifer, Andrei, Post-Communist Reform: Pain and Progress (Cambridge, MA: MIT Press, 1993)Google Scholar; Kornai, János, The Road to a Free Economy: Shifting from a Socialist System, The Example of Hungary (New York: Norton, 1990)Google Scholar; and Peck, Merton J. and Richardson, Thomas J., What is to be Done? Proposals for the Soviet Transition to the Market (New Haven: Yale University Press, 1992).Google Scholar Peck and Richardson (p. 20) write, “the solution lies in abandoning the search for halfway houses, in abandoning the dream of a regulated market economy,” while Kornai (p. 58) argues “it is futile to expect that the state unit will behave as if it were privately owned and will spontaneously act as if it were a market-oriented agent. It is time to let go of this vain hope once and for all… state ownership permanently recreates bureaucracy.”

2 See Nolan, Peter, “China's post-Mao political economy: a puzzle,” Contributions to Political Economy, Vol. 12 (1993), pp. 71–87CrossRefGoogle Scholar, and “The China puzzle: ‘touching stones to cross the river’,” Challenge, Vol. 37 (January-February 1994), pp. 25–31; Rawski, Thomas G., “Chinese industrial reform: accomplishments, prospects, and implications,” American Economic Review Vol. 84, No. 2 (May 1994), pp. 271–275Google Scholar, and “Progress without privatization: the reform of China's state industries,” in Milor, Vedat (ed.), Changing Political Economies: Privatization in Post-Communist and Reforming Communist States (Boulder: Lynne Rienner, 1994), pp. 27–52.Google Scholar

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5 Ibid, and Sachs, Jeffrey, Poland's Jump to the Market Economy (Cambridge, MA: MIT Press, 1993), pp. 81–82Google Scholar, where in the midst of a spirited argument in favour of rapid privatization, we read, “But what about China? Hasn't China maintained state ownership and yet succeeded in growing rapidly? The answer is yes, but the Chinese policymakers themselves know that state ownership has been a hindrance, not a help, to their economic growth since the start of the reforms. It is estimated that two thirds or more of state-owned enterprises are losing money in China. This has been a serious threat to macroeconomic stability. Moreover, the great dynamism of the country has come in the nonstate sector, including township and village enterprises and joint ventures.”

6 See Sicular, Terry, “Grain pricing: a key link in Chinese economic policy,” Modern China, Vol. 14 (October 1988), pp. 451–486CrossRefGoogle Scholar, “Plan and market in China's agricultural commerce,” Journal of Political Economy, Vol. 96 (1988), pp. 283–307, and ”China's agricultural policy during the reform period,” in Joint Economic Committee, Congress of the United States, China's Economic Dilemmas in the 1990s, Vol. 1 (Washington D.C.: U.S. Government Printing Office, 1991), pp. 304–364.

7 See Putterman, Louis, “Dualism and reform In China,” Economic Development and Cultural Change, Vol. 40 (April 1992), pp. 467–93CrossRefGoogle Scholar, p. 475; McMillan, John, Whalley, John and Zhu, Li Jing, “The impact of China's economic reforms on agricultural productivity growth,” Journal of Political Economy, Vol. 97 (August 1989), pp. 781–807CrossRefGoogle Scholar; Putterman, Louis, “Does poor supervisability undermine teamwork? Evidence from an unexpected source,” American Economic Review, Vol. 81 (September 1991), pp. 996–1001Google Scholar; and Rozelle, Scott, “Decision-making in China's rural economy: the linkages between village leaders and farm households,” The China Quarterly, No. 137 (March 1994), pp. 99–124.CrossRefGoogle Scholar

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11 See Nee and Su, “Local corporatism and informal privatization,” Liu, Yialing, “Reform from below: the private economy and local politics in the rural industrialization of Wenzhou,” The China Quarterly, No. 130 (1992), pp. 293–316CrossRefGoogle Scholar; Odgaard, Ole, “Inadequate and inaccurate Chinese statistics: the case of private rural enterprises,” China Information, Vol. 5 (Winter 1990), pp. 29–38.CrossRefGoogle Scholar

12 See, for example, Wong, Christine P. W., “The economics of shortage and problems of reform in Chinese industry,” Journal of Comparative Economics, No. 10 (December 1986), pp. 363–387CrossRefGoogle Scholar; Walder, Andrew G., “The informal dimension of enterprise financial reforms,” in Joint Economic Committee, Congress of the United States, China's Economy Looks Towards the Year 2000, Vol. 1 (Washington, D.C.: U.S. Government Printing Office, 1986), pp. 134–149Google Scholar; Naughton, Barry, “Hierarchy and the bargaining economy: government and enterprise in the reform process,” in Lieberthal, Kenneth G. and Lampton, David M. (eds.), Bureaucracy, Politics and Decision-Making in Post-Mao China (Berkeley: University of California Press, 1992), pp. 245–279Google Scholar; and Andrew G. Walder, “Local bargaining relationships and urban industrial finance,” in ibid. pp. 308–333. Kornai would later synthesize his arguments in The Socialist System: The Political Economy of Communism (Princeton: Princeton University Press, 1991).

13 Putterman, “Dualism and reform in China,” p. 478; Kung, James Raising, “Food and agriculture in post-reform China: the marketed surplus problem revisited,” Modern China, Vol. 18 (April 1992), pp. 138–170CrossRefGoogle Scholar, and Weimer, Calla, “Price reform and structural change: distributional impediments to allocational gains,” Modern China, Vol. 18 (April 1992), pp. 171–196.CrossRefGoogle Scholar

14 Putterman, “Dualism and reform in China,” p. 478. See also Walder, Andrew G., “Wage reform and the web of factory interests,” The China Quarterly, No. 109 (March 1987), pp. 22–41CrossRefGoogle Scholar, and “Factory and manager in an era of reform,” The China Quarterly, No. 118 (June 1989), pp. 242–264.

15 Putterman, “Dualism and reform in China,” p. 478. See also Walder, “Wage reform,” and “Factory and manager”; Terry Sicular “Public finance and China's economic reforms,” Discussion Paper No. 1618, Harvard Institute of Economic Research, November 1992, and “Going on the dole: why China's state enterprises choose to lose,” unpublished paper, University of Western Ontario, May 1994. Sicular finds evidence of a managerial orientation to the maximization of retained funds rather than profits, and a propensity to spend these funds disproportionately on consumption and benefits for employees. However, she disputes the view that the profitability of state enterprises has suffered major declines.

16 Sachs and Woo write, “The results of attempts to reform the state sector have been extremely disappointing. On almost all fronts, the state-enterprise sector in China has continued to perform poorly. It is heavily loss-making; lagging in total factor productivity growth behind the non-state sector; dependent on state subsidies; and apparently suffused with economic corruption. China's growth has come despite the lack of discernible progress in establishing satisfactory performance of state industrial enterprises, with a heavy macroeconomic burden resulting from state enterprise losses” (p. 18).

17 Wong, Christine P. W., “Interpreting rural industrial growth,” “Fiscal reform and local industrialization: the problematic sequencing of reform in post-Mao China,” Modern China, No. 18 (April 1992), pp. 197–227CrossRefGoogle Scholar, and “Central-local relations in an era of fiscal decline: the paradox of fiscal decentralization in post-Mao China,” The China Quarterly, No. 128 (December 1991), pp. 691–715.

18 For a recent overview of China's reforms that emphasizes their limits, see Wong, Christine, “China's economy: the limits of gradualist reform,” in Joseph, William A. (ed.), China Briefing, 1994 (Boulder: Westview, 1994), pp. 33–54.Google Scholar

19 See especially Naughton, Barry, Growing Out of the Plan: Chinese Economic Reform. 1978–1993 (New York: Cambridge University Press, 1995)CrossRefGoogle Scholar, and Rawski, “Progress without privatization.”

20 Naughton, Barry, “Implications of the state monopoly over industry and its relaxation,” Modern China, No. 18 (January 1992), pp. 14–41.CrossRefGoogle Scholar Sicular, “Public finance and China's economic reforms,” however, argues that Naughton overstates the extent of the decline of profitability in state enterprises and also the declines in government revenue.

21 See the following series of publications, which lay out the evidence: Chen, Kuan, Jefferson, Gary H., Rawski, Thomas G., Wang, H. C. and Zheng, Y. X., “Productivity change in Chinese industry: 1953–85,” Journal of Comparative Economics, No. 12 (1988), pp. 570–591Google Scholar, Jefferson, Gary H., Rawski, Thomas G. and Zheng, Yuxin, “Growth, efficiency, and convergence in China's state and collective industry,” Economic Development and Cultural Change, No. 40 (1992), pp. 239–266CrossRefGoogle Scholar, Jefferson, Gary H. and Xu, Wenyi, “The impact of reform on socialist enterprises in transition: structure, conduct, and performance in Chinese industry,” Journal of Comparative Economics, No. 15 (1991), pp. 45–64.CrossRefGoogle Scholar More accessible summaries of the evidence are provided in Rawski, “Progress without privatization”; Jefferson, Gary H. and Rawski, Thomas G., “Enterprise reform in Chinese industry,” Journal of Economic Perspectives, No. 8 (Spring 1994), pp. 47–70Google Scholar; and Rawski, Thomas G., ”Chinese industrial reform: accomplishments, prospects, and implications,” American Economic Review, Vol. 84, No. 2 (May 1994), pp. 271–275.Google Scholar The work of a second group who also find evidence of changes in the behaviour of state enterprises has recently begun to appear: Groves, Theodore, Hong, Yongmiao, McMillan, John and Naughton, Barry, “Autonomy and incentives in Chinese state enterprises,” Quarterly Journal of Economics, Vol. 109, No. 1 (1994), pp. 183–209.CrossRefGoogle Scholar

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24 Sachs and Woo, “Structural factors.” See also Woo, Wing Thye, “The art of reforming centrally planned economies: comparing China, Poland, and Russia,” Journal of Comparative Economics, Vol. 18 (June 1994), pp. 276–308.CrossRefGoogle Scholar

25 Walder, Andrew G., Communist Neo-Traditionalism: Work and Authority in Chinese Industry (Berkeley: University of California Press, 1986)Google Scholar, ch. 2.

26 Sachs and Woo, “Structural factors.”

27 Vogel, Ezra F., One Step Ahead in China: Guangdong Under Reform (Cambridge, MA: Harvard University Press, 1989).Google Scholar

28 See, for example, Franz Schurmann, H., Ideology and Organization in Communist China (Berkeley: University of California Press, 1968)Google Scholar, Riskin, Carl, China's Political Economy. (New York: Oxford University Press, 1987)Google Scholar, and Wong, Christine P. W., “Material allocation and decentralization: impact of the local sector on industrial reform,” in Perry, Elizabeth J. and Christine P. W., Wong (eds.), The Political Economy of Reform in Post-Mao China (Cambridge, MA: Harvard University Press, 1985).Google Scholar

29 See Riskin, Carl, “Small industry and the Chinese model of development,” The China Quarterly, No. 46 (April/June 1971), pp. 245–273CrossRefGoogle Scholar, and Dwight, Perkins (ed.), Rural Small-Scale Industry in the People's Republic of China (Berkeley: University of California Press, 1977).Google Scholar

30 See Christine P. W. Wong, “Ownership and control in Chinese industry: the Maoist legacy and prospects for the 1980s,” in Joint Economic Committee, Congress of the United States, China's Economy Looks Towards the Year 2000, Vol. 1; and Granick, David, Chinese State Enterprises: A Regional Property Rights Analysis (Chicago: University of Chicago Press, 1990).Google Scholar

31 See, for example, Byrd, “Entrepreneurship, capital, and ownership,”; Oi, “Commercializing China's rural cadres,” and ‘Fiscal reform”; Wong, Christine P. W., “Between plan and market: the role of the local sector in post-Mao China,” Journal of Comparative Economics, No. 11 (1987), pp. 385–398CrossRefGoogle Scholar, and “Interpreting rural industrial growth.”

32 Yingyi, Qian and Xu, Chenggang, “Why China's economic reforms differ: the M-form hierarchy and entry/expansion of the non-state sector,” Economics of Transition, No. 1 (1993), pp. 135–170.Google Scholar

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34 Kornai, The Road to a Free Economy, esp. pp. 17 and 22–23.

35 An excellent statement of this interpretation is Hartford, Kathleen, “The political economy behind Beijing Spring, 1989,” in Tony, Saich (ed.), The Chinese People's Movement: Perspectives on Spring 1989 (Armonk, N.Y.: M. E. Sharpe, 1990), pp. 50–82.Google Scholar

36 See e.g. ibid., and Walder, Andrew G., “Workers, managers and the state: the reform era and the political crisis of 1989,” The China Quarterly, No. 127 (September 1991), pp. 491–92.Google Scholar

37 Nicholas Lardy argues persuasively that reports of the death of China's reforms in 1989 were greatly exaggerated in “Is China different? The fate of its economic reforms,” in Daniel, Chirot (ed.), The Crisis of Leninism and the Decline of the Left: The Revolutions of 1989 (Seattle: University of Washington Press, 1991), pp. 147–162Google Scholar. China's record of macroeconomic stability in fact has been quite positive when compared to other transitional economies. See Mackinnon, Ronald I., “Financial growth and macroeconomic stability in China, 1978–1992: implications for Russia and other transitional economies,” Journal of Comparative Economics, Vol. 18 (June 1994), pp. 438–169.CrossRefGoogle Scholar

38 See, for example, Byrd, William A., The Market Mechanism and Economic Reforms in China (Armonk, N.Y.: M. E. Sharpe, 1991)Google Scholar, Naughton, Growing Out of the Plan, and Lardy, Nicholas, Foreign Trade and Economic Reform in China, 1978–1990 (Cambridge: Cambridge University Press, 1992)Google Scholar, all of which document the gradual but fundamental changes in the principles by which China's economic system operates.

39 See Walder, Andrew G., “The quiet revolution from within: economic reform as a source of political decline,” in Walder, Andrew G. (ed.), The Waning of the Communist State: Economic Origins of Political Decline in China and Hungary (Berkeley: University of California Press, 1995), pp. 1–24.Google Scholar

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41 See, for example, Sachs’ discussion of privatization in Poland's Jump to the Market Economy, and the discussion of stalled reforms in Russia in Blanchard, Olivieret al., Post-Communist Reform: Pain and Progress (Cambridge, MA: MIT Press, 1993)Google Scholar, chs. 2–4, and Goldman, Lost Opportunity.

42 Mancur Olson argues that the greater openness of democracy to the influence of special interest groups has so far made the problems of soft budget constraints worse. See his “From communism to market democracy: why is economic performance even worse after communism is abandoned?” unpublished paper, University of Maryland, n.d.

43 See Wong, “Fiscal reform and local industrialization,’” and Wang, Shaoguang, “The rise of the regions: fiscal reform and decline of central state capacity in China,” in Walder, Andrew G. (ed.), The Waning of the Communist State: Economic Origins of Political Decline in China and Hungary (Berkeley: University of California Press, 1995), pp. 87–113.Google Scholar

44 See Walder, , “The quiet revolution from within,” and “The decline of Communist power: elements of a theory of institutional change,” Theory and Society, Vol. 23 (April 1994), pp. 297–323.CrossRefGoogle Scholar

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46 See Montinola, Gabriella, Qian, Yingyi and Weingast, Barry R., “Federalism, Chinese style: the political basis for economic success in China,” World Politics, Vol. 48 (October 1995), pp. 50–81CrossRefGoogle Scholar; and Ronald I. McKinnon, “Market-preserving fiscal federalism: notes on the American and Chinese models,” unpublished paper, Stanford University, August 1993. See also McKinnon's, “Spontaneous order on the road back from socialism: an Asian perspective,” American Economic Review, No. 80 (May 1992), pp. 31–36.Google Scholar

47 Montinola, Qian and Weingast, “Federalism, Chinese style.”