CHINA KELON CASE

China Kelon case

China Kelon case

Introduction

China's economic reform has been characterized as a gradualist and incremental approach. The Chinese state initiated market reforms without a roadmap, starting from partial and experimental reforms, and gradually practicing successful experiments on a nationwide basis. This approach turned out to be successful, and has widely been considered the primary reason China has been enjoying continuous economic growth and political stability. The gradualism is particularly admired in market transition and economic reform studies. Scholars argue that due to the gradual approach, China was able to avoid the troubles associated with radical market transition programs such as "shock therapy."

Discussion

China's State Reform

The Chinese state's adaptability and responsiveness to local market conditions or the degree of the penetration of market has been considered the main reason for the success of its market reform and gradualist approach. As is prescribed in the Deng era's slogans, such as "practice is the sole criterion of truth," "start from reality," or "seeking truth from facts," the Chinese government and the Chinese Communist Party (CCP) flexibly reformed its system according to market conditions at local levels. However, is the Chinese state's adaptability to market conditions the only reason that China's reform has been so successful? If the country has been successful in its market reforms, and the primary objective of the reforms was a transition to a market economy.

The adaptability of the Chinese state-both the central and local levels-to market conditions has been well documented and researched in the literatures on China's economic reform. The central government took a decentralization policy and provided local governments incentives to increase wealth and power over their territories. This resulted in the rise of local state corporatism or developmental state at local levels that guided China's economic growth and market transition. The CCP also provided entrepreneurial incentives to party cadres, bureaucrats and local governments to directly engage in profit making activities. Although such incentives increased corruption, the central government was still able to impose political order and local compliance in its policies. The corporatist approach also indicates the CCP's adaptability to the rise of the private economy. In order to pre-empt the formation of autonomous interests and limit political participation, the Leninist state co-opted private entrepreneurs and included them into the system through corporatist arrangements. As part of the corporatist arrangement, the Chinese government assisted non- state firms' business operations through semi-official business associations such as the All China Federation of Industry and Commerce.

Foreign Pressures for Adaptability

The Chinese state has also adapted to the global market and foreign pressures exceptionally well. Through interactions with the international community, such as WTO negotiations, the institutional norms of foreign trade and economic bureaucracies have increasingly conformed to the norms of the international regimes. The new elites who developed a new thinking, a more globalized and liberal perspective, form a cohort within the policy elites, often directly participating in economic policy making, and become a driving force of economic liberalization. Some also argue that China's integration with the ...