Key Elememts in the Study of China’s Economy: Institutions, Geography, and Globalization

In this discussion, I will highlight the importance of three key elements in the study of China’s economy. 1. Institutions The primacy of institutions All the endeavours of China’s two-decade long economic transition are about building institutions for a modern market economy. Major problems and shortcomings of China’s economy arose from the legacies of the centrally planned socialist economic system, including the three areas of problems highlighted by Professor Chow—the SOE reforms, the banking and financial sector, and the legal framework. Frontier developments in institutional economics and new comparative economics in the recent decade have established good institutions as the root causes of performance differences in economic development (Acemoglu 2003, Shleifer 2002). The theme of World Development Report 2002 (World Bank) is “Building Institutions for Markets”, reflecting the growing influence of intellectual progress in this field on the international-aid agency’s policy recommendation