Transitional institutions, institutional complementarities and economic performance in China: A 'Varieties of Capitalism' approach

Joachim Ahrens and Patrick Jünemann

No 2010-11, Discourses in Social Market Economy from OrdnungsPolitisches Portal (OPO)

Abstract: The paper focuses on institutional change and institution building as integral parts of economic transition in China. China's success, particularly compared with other advanced transition economies, implies a puzzling observation: China did not apply theoretically-derived policy recommendations. Instead, authorities followed a gradual, pragmatic approach to reform, decentralize, and transform the economy. Notable examples of non-orthodox policy measures, which worked effectively in China, include so-called transitional institutions such as the dual-track approach to industrial restructuring, anonymous banking, the establishment of special economic zones or the priority given to create competitive structures while postponing large-scale privatization of state-owned enterprises. Hence, it is not evident what kind of market economy will emerge in China in the long run. The paper aims at (i) applying the Varieties-of-Capitalism (VoC) framework to China and assessing its suitability in a transition context; (ii) addressing the question of what kind of market economy is emerging in China; (iii) analyzing the impact which the emerging type of capitalism will have on the economy's allocative and dynamic efficiency; and (iv) elaborating policy implications which may help generate or strengthen potential institutional complementarities in the long run.

Keywords: institute; China; capitalism (search for similar items in EconPapers)
JEL-codes: H0 O53 P2 P3 (search for similar items in EconPapers)
Date: 2010
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