This paper begins by using a structure-conduct-performance perspective to show that partial reform improved the operation of China's state industries during the 1980s. The authors review the achievements of industries outside the state sector, emphasizing their links to the state sector. The paper focuses on key defects in the industrial system related to finance and ownership; shows how the accelerated reform agenda of the 1980s seeks to resolve these issues; and conclude that China's recent industrial experience demonstrates the feasibility of multiple approaches, including partial and gradual reforms, to the restructuring of industry in former socialist economies.
China's long-term economic dynamics pose a formidable challenge to economic historians. The Qing Empire , the world's largest national economy prior to the 19th century, experienced a tripling of population during the 17th and 18th centuries with no signs of diminishing per capita income. In some regions, the standard of living may have matched levels recorded in advanced regions of Western Europe.However, with the Industrial Revolution a vast gap emerged between newly rich industrial nations and China's lagging economy. Only with an unprecedented growth spurt beginning in the late 1970s has the gap separating China from the global leaders been substantially diminished, and China regained its former standing among the world's largest economies. This essay develops an integrated framework for understanding this entire history, including both the long period of divergence and the more recent convergent trend. The analysis sets out to explain how deeply embedded political and economic institutions that had contributed to a long process of extensive growth subsequently prevented China from capturing the benefits associated with new technologies and information arising from the Industrial Revolution. During the 20th century, the gradual erosion of these historic constraints and of new obstacles created by socialist planning eventually opened the door to China's current boom. Our analysis links China's recent economic development to important elements of its past, while using the success of the last three decades to provide fresh perspectives on the critical obstacles undermining earlier modernization efforts, and their removal over the last century and a half.
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