China  Geography  Demography (internal migration)  History  Socialism (the appeal of socialist industrialization for developmental catch-up)  Maoism (cult of personality and the emphasis on mass fervor and non-material incentives)

East and West  1820:the highest GDP in the world  Enclave of the British and the French  1911 the end of Manchu  1921 the Communist Party  1928 Kuomintang  1937:Japanese invasion  1946:the Civil War

Evolving Economic System  Period of consolidation:  First five year plan: ( imported Soviet central variety and assisted by the USSR) Information flow and infrastructure constraints for success, greater municipalities weight and lack of centralized tradition.  The Great Leap forward: (labor intensive industrial overhaul) Tremendous quality and environmental costs and a decline.  Proletarian Cultural Revolution: Another politically motivated campaign (GLP) Offsetting the new social class and hierarchy campaign and re-instating crude egalitareianism.  Four Modernizations:1975  1984:price liberalization

Property  SOE  Collectives TVE  Individual  Joint ventures  Foreign (SEZs)

Reform process  The setting of an incomplete systemic environment  Political maneuvers of economic initiatives  The divorce of economics and politics  From abrupt campaigns to strategic gradualism  Pragmatism and de-ideologization (Dengism)  Opening to the West (SEZs)

Stages of reforms  First phase : 1. Agriculture (household responsibility) Chinese collectivized farms were organized as communes consisting of brigades and teams. Larger leased plots would pay rent in quota and sell the remainder on the liberalized market Scissors crisis and subsidies 2. The rise of rural enterprise (TVE) Hard budget constraint, outside of the plan and driven by local market, no captive market and active pursuit of demand, free prices, no social expenses, performance based hiring, firing and rewards 3. Reforms of SOE contract and then tax responsibility system