DUALISM AND REFORM IN CHINA

Argues that an appreciation of the relationships between sectors characterized by distinctive institutions, constraints, and behaviors is a key to understanding structural change and economic reform in China. From the mid-1950s until the late 1970s, China's economy exhibited a sharply dualistic structure. This article suggests that the further progress of China's reforms may depend on devising a strategy to protect the earnings of existing state sector workers as an exception to the overall goal of market-determined prices because the wages of these workers would fall below a sociopolitical feasibility constraint upon transition to a fully marketized economy. Section I discusses the institutional and structural bifurcation of the Chinese economy under Mao and briefly summarizes that economy's performance. Section II considers the impact of reform on China's sectoral-institutional structure. Section III analyzes the difficulties with the reform of the state sector and section IV analyzes how inability to reform the general price structure has stalled institutional reform in agriculture. Section V considers the problems with the effort to reform China's price system on an incremental basis. Section VI summarizes the conflicts between the main sectors of China's economy and considers ways of furthering the reform process and possible difficulties, and section VII summarizes and concludes the discussion. -from Author