Isabella M. Weber - How China Escaped Shock Therapy

One of the most consequential economic debates in China over the direction of reform took place in the 1980s and focused on how markets should be created. The outcome of that debate set the pattern for much of Chinas subsequent economic reforms. Isabella Weber, drawing on interviews of the participants and others together with many new sources of unpublished and published information, does a masterful job of explaining how this debate evolved and its ultimate impact.

DWIGHT H. PERKINS, Harvard University, Director of the Harvard Institute for International Development, 19801995

This superb book presents the most compelling interpretation I have read of the sources of Chinese gradualism and its success in fostering economic growth and transformation while preserving enough social cohesion to hold the Chinese society together. It is the product of an independent, inquisitive, open mindthe only type that can hope to grasp the phenomenon that is modern China. It is also the work of a first-rate economist, in the best sense of that term.

JAMES K. GALBRAITH, The University of Texas at Austin, former Chief Technical adviser to Chinas State Planning Commission for macroeconomic reform

Isabella M. Webers book gives an excellent historical overview of Chinas economic statecraft bringing the reader to the crucial period of market reforms and to the decision to avoid the full implementation of the neoliberal agenda, thus setting the stage for the fastest and longest growth in world history.

BRANKO MILANOVI, LSE and CUNY, former Lead Economist, World Bank Research Department

Isabella M. Weber succeeds in offering a powerful account of Chinas reform-era market creation that is of acute interest to economists and historians alike. Her book is a call to economists to ponder the relevance of political economy with its European roots in classical economics of the early modern era and with Chinese roots in a period almost two millennia earlier.

R. BIN WONG, Director of the UCLA Asia Institute and Distinguished Professor of History

Chinas debates in the 1980s about reform of the non-market economy are centrally important to understanding global political economy in the 21st century. The resolution of the debates about the Big Bang set China on the course of pragmatic system reform (groping for stones to cross the river) that has remained in place ever since. Isabella M. Webers study is unique. It uses information not only from a wide array of written documents but also from extensive interviews with participants in the debates. Her remarkable book provides a rich, balanced and scholarly analysis which illuminates the complex reality of this critically important period in modern world history.

PETER NOLAN, University of Cambridge, Founding Director of the Universitys Centre of Development Studies

How China Escaped Shock Therapy

China has become deeply integrated into the world economy. Yet, gradual marketization has facilitated the countrys rise without leading to its wholesale assimilation to global neoliberalism. This book uncovers the fierce contest about economic reforms that shaped Chinas path. In the first post-Mao decade, Chinas reformers were sharply divided. They agreed that China had to reform its economic system and move toward more marketizationbut struggled over how to go about it. Should China destroy the core of the socialist system through shock therapy, or should it use the institutions of the planned economy as market creators? With hindsight, the historical record proves the high stakes behind the question: China embarked on an economic expansion commonly described as unprecedented in scope and pace, whereas Russias economy collapsed under shock therapy. Based on extensive research, including interviews with key Chinese and international participants and World Bank officials as well as insights gleaned from unpublished documents, the book charts the debate that ultimately enabled China to follow a path to gradual reindustrialization. Beyond shedding light on the crossroads of the 1980s, it reveals the intellectual foundations of state-market relations in reform-era China through a longue dure lens. Overall, the book delivers an original perspective on Chinas economic model and its continuing contestations from within and from without.

Isabella M. Weber is Assistant Professor of Economics at the University of Massachusetts, Amherst.

Routledge Studies on the Chinese Economy

Series Editor

Peter Nolan

Director, Center of Development Studies;

Chong Hua Professor in Chinese Development; and

Director of the Chinese Executive Leadership Programme (CELP),

University of Cambridge

Founding Series Editors

Peter Nolan, University of Cambridge and

Dong Fureng, Beijing University

The aim of this series is to publish original, high-quality, research-level work by both new and established scholars in the West and the East, on all aspects of the Chinese economy, including studies of business and economic history.

1 Chinese Economists on Economic ReformCollected Works of Lou Jiwei

Lou Jiwei, edited by China Development Research Foundation

2 Chinese Economists on Economic ReformCollected Works of Ma Hong

Ma Hong, edited by China Development Research Foundation

3 Chinese Economists on Economic ReformCollected Works of Wang Mengkui

Wang Mengkui, edited by China Development Research Foundation

4 Chinese Economists on Economic ReformCollected Works of Yu Guangyuan

Yu Guangyuan, edited by China Development Research Foundation

5 Chinese Economists on Economic ReformCollected Works of Zhou Xiaochuan

Zhou Xiaochuan, edited by China Development Research Foundation

6 Chinese Economists on Economic ReformCollected Works of Li Jiange

Li Jiange, edited by China Development Research Foundation

How China Escaped Shock Therapy

The Market Reform Debate

Isabella M. Weber

First published 2021

by Routledge

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2021 Isabella M. Weber

The right of Isabella M. Weber to be identified as author of this work has been asserted by her in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

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A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data

A catalog record has been requested for this book

ISBN: 978-1-138-59219-3 (hbk)

ISBN: 978-1-032-00849-3 (pbk)

ISBN: 978-0-429-49012-5 (ebk)

Typeset in Bembo

by Deanta Global Publishing Services, Chennai, India

To Fides and Lena

Contents

PART I
MODES OF MARKET CREATION AND PRICE REGULATION

PART II
CHINAS MARKET REFORM DEBATE