presentation 3.08f.pptVIP

4.Market Transition: Strategy and Process 4.1The Chinese Approach to Transition Put development ahead of reforms—Gradualist approach vs Shock Therapy reasons: a. the per capita income was too low b. no enough information c. market institutions need time to emerge and to become well-coordinated d. Stability is more important than reforms (the collapse of the former Soviet Union was viewed as a negative lesson) 4.2How Did Reform Start? The Initial Breakthrough came from farmers Keeping collective land ownership, privatizing land use rights Contract, quota for security, and above-quota to provide incentives to farmers Later, this dual-track system was applied to the non-farming sector 4.3A Two-Phase Framework of Economic Reform Reforms without a blueprint Deng: “Get across a river by groping stones” Gradualist vs. shock therapy Pragmatism: Deng: “I don’t care a good cat is white or black as long as it can catch mice.” 4.4Elements of Chinas Transition Through 1992 4.4.1 Dual-Track System 4.4.2 Growing Out of the Plan 4.4.3 Paticularistic Contracts 4.4.4 Entry 4.4.5 Prices Equating Supply and Demand 4.4.6 Incremental Managerial Reforms Instead of Privatization 4.4.7 Disarticulation to avoid affecting the core economy The precondition to keep the momentum of a gradualist approach to reforms: Pareto improvement, or Kaldor improvement 4.4.8 Initial Macroeconomic Stabilization Achieved Through the Plan 4.4.9 Continued High Saving and Investment  4.4.10 Conclusion of First-Phase Reforms Fast growth Inflation Corruption Coservative section and the reform section Political crisis Chen Yun—Birdcaged Economy 4.6The Second Phase of Reform, 1993-Present 4.6.1Prerequisites 4.6.1.1Market Reunification 4.6.1.2Recentralization 4.6.1.3Macroeconomic Austerity 4.6.2Regulatory Approach and Administrative Restructuring 4.6.2.1 Fiscal and Tax System 4.6.2.2 Banking and Financial System 4.6.2.3 Corporate Governance 4.6.2.4 External Sector:Membership in the