The Fundamental Institutions of China’s Reforms and Development
Chenggang Xu*
China’s economic reforms have resulted in spectacular growth and poverty
reduction. However, China’s institutions look ill-suited to achieve such a result, and
they indeed suffer from serious shortcomings. To solve the “China puzzle,” this paper
analyzes China’s institution—a regionally decentralized authoritarian system. The
central government has control over personnel, whereas subnational governments
run the bulk of the economy; and they initiate, negotiate, implement, divert, and
resist reforms, policies, rules, and laws. China’s reform trajectories have been
shaped by regional decentralization. Spectacular performance on the one hand and
grave problems on the other hand are all determined by this governance structure.