Policy Dimensions of Progressive Institutional Change: Lessons from China’s Construction of a Socialist Market Economy

Abstract:

Through a comprehensive review of the progressive institutional change (PIC) literature, I first discuss four possible trajectories of PIC by considering the forces of societal reaction that might frame the path, as well as the scale and scope of the changes. Thus, I pose four questions that need to be asked when related policies are formulated for PIC. To illustrate this method, I scrutinize the evidence from the construction of a socialist market economy by the Chinese government since the 1980s and argue that related policies have successfully promoted PIC from three dimensions: (1) curbing potential conflicts with power groups; (2) promoting a sense of awareness among stakeholders; and (3) minimizing disturbances to the community. Actually, the related changes demonstrate a dynamic “displacement process” for PICs. Despite the success of this sociosystem, it is found that the sustaining of PIC which requires policy factors that enhance instrumental efficiency in the Chinese context will serve as a challenge to the Chinese government ahead.

Keywords:

• China
• displacement process
• economic policy
• progressive institutional change
• special economic zone
• socialist market economy

JEL Classification Codes::

• B52
• O21
• O33
• O38
• P21

Notes

1 Due to the length of this article, details related to a large volume of the literature on the construction of the socialist market economy in China based on economic reform are not discussed. For more information, readers can refer to, for example, Fenwick (1984), Gang (1994), Stoltenberg (1984), and Wei (1995).

2 Shenzhen, Zhuhai, and Shantou in the Guangdong province which neighbor Hong Kong and Macao, and Xiamen in the Fujian province which parallels Taiwan.

3 According to an online cross-country summary provided by StatisticsTimes.com on IMF data released in the World Economic Outlook Database (available at http://statisticstimes.com/economy/countries-by-gdp.php, accessed July 23, 2019), the nominal GDP of the United States in 2018 was US $20.49 trillion, China was US $13.46 trillion, and Japan was US$5.07 trillion, which accounted for 24.2%, 15.9%, and 5.08% of the world’s GDP respectively.

4 Available at https://data.worldbank.org/country/china?view=chart. Accessed August 05, 2019.

Additional information

Notes on contributors

Ricardo C. S. Siu

Ricardo C. S. Siu is an associate professor of business economics in the Department of Finance and Business Economics at the University of Macau (China). The author acknowledges a conference grant, approved by the Faculty of Business Administration of the University of Macau, which allowed him to participate in the AFEE/ASSA 2020 annual meeting in San Diego (CA) to present this article.