a century of rapid growth, nominal per capita GDP in China remains quite low and only
puts China into the ranks of lower middle income countries as defined by the World
Bank. Nonetheless, there is little doubt that China, in aggregate terms, has become one
of the world’s economic powerhouses and a major engine for global growth. In many
ways, China’s economic transformation has begun to reshape the global economic order
in significant terms.
The combination of massive aggregates and yet modest per capita figures
underscores the challenges for China’s governance and further integration into the global
system. It is one of a list of such combinations or contrasts that have landed China in its
own orbit for political science analysis. Unlike most economies in the former Soviet
Union and East Europe, China has largely made the transition from central planning to
the market without plunging into some sort of shock therapy. Likewise, while much of
the attention in political science has focused on explicating the causes and dynamics of
democratization, China is conspicuous by its absence. Thus the China difference
potentially has much to inform the comparative analyses of reforms, economic
transitions, state-building, and a range of other topics that have fascinated students of
post-socialist economies and societies (Laitin 2000).
The Institutional Sources of China’s Success: Decentralization, De Facto
Federalism, or China Inc.?
The causes and dynamics of China’s reform and rapid growth have naturally
attracted much scholarly attention. Beginning in the late 1970s and until the early 1990s,
the central government signed fiscal contracts with local authorities that essentially made
the local authorities the residual claimants of the revenue stream. This fiscal
Convention