China's Great Economic Transformation is a superb collection of generally up-to-date analyses of many aspects of China's economic development over the 30 years of reform. In addition to being of interest to scholars, this book could serve as a main text for undergraduates or main reference text for graduate students taking courses on contemporary China in a range of social science disciplines.
Given the evolving and multifaceted process of economic development in China over these three decades, the nearly comprehensive survey of this complex phenomenon provided in this volume is an impressive feat. While the majority of contributors are economists, the book has contributions from legal scholars, political scientists, management scholars and demographers, among others, as it addresses a wide range of concerns from environmental degradation to the geographic factors in China's development. More impressive still for an edited volume, this book does not contain any noticeably weak contributions despite having 19 separate substantive chapters.
One structural improvement that could be made would be to organize the chapters in the form of dialogues. Currently, each chapter is a stand-alone piece with some limited interaction and acknowledgement of the findings in other chapters. Understandably, the chapters that seem to best utilize or react to the findings from the other chapters are those co-authored by one of the two editors, Loren Brandt and Thomas Rawski. Admittedly, not all of the chapters have an obvious partner in dialogue, but there are some topics addressed that scream out for this approach. Several chapters offer data and analysis that could provide for an informed, provocative debate on the nature of institutions shaping private enterprise in China. Franklin Allen, Jun Qian and Meijun Qian in their chapter on China's financial system present a very positive view of the informal mechanisms of finance supporting hybrid firms, which they define as non-state, non-listed firms. In contrast, Stephan Haggard and Yasheng Huang present a very different take in which the Chinese state has consistently discriminated against a subset of these hybrid firms, the private firms. Several other chapters also offer important perspectives on this issue, such as Christine Wong and Richard Bird's chapter on fiscal relations and Donald Clarke, Peter Murrell and Susan Whiting's chapter on law and economic development in China. Another major debate running through many of the chapters is the question of how widespread the social costs of China's development path have been.
Turning to outstanding individual chapters, Clarke, Murrell and Whiting's chapter on the role of law in China's economic development provides an excellent survey of co-evolution of the economy and the legal system over the reform period and a thoughtful exploration questioning how tight the law–growth nexus actually is, given China's weak legal institutions and high growth. Drawing on Whiting's earlier work, the chapter explains how local governments effectively supplied property rights within their jurisdiction during the first two decades of reform while noting that the current decade's growth of the private economy has made local government quasi-rights less relevant. Disappointingly, the chapter stops short of exploring the property rights situation in the current decade, declaring that topic to be an important area for future research. Happily, the examinations on the legal aspects of trade in goods and services and corporate governance extend into the current decade.
Another interesting contribution worth highlighting is the chapter on industrial development where Brandt, Rawski and John Sutton apply Sutton's analytic framework, examining the interaction of linkages across sub-products and the effectiveness of capability building to assess whether China has moved towards being a competitive market economy and how far its industrial capabilities have improved. Providing case studies in a range of industries from auto components to textiles, they find that capabilities rise and market shares fluctuate as domestic firms enter into more heated competition with each other, new entrants and foreign rivals. Sutton's model also predicts exit of firms and consolidation, but little evidence for overall consolidation is found. The authors plausibly argue that even with market forces for consolidation reform policies have eased barriers to entry and thus balanced out the forces for consolidation. They also quite rightly point out the unhelpful interference of the state in a number of industries. If there is one quibble to be had with this detailed review of an array of industries, it is to question whether Sutton's model is relevant across all industries now that fragmentation of industrial production is commonplace. For example, the upgrading in the household appliances industry could in fact be very limited given that most of the key high value-added components remain mainly in the hands of foreign businesses.
Lee Branstetter and Nicholas Lardy's chapter on China's embrace of globalization marshals a wealth of data to demonstrate how liberalized and open China's economy is, while also pointing out where China's policies have contributed to global imbalances, a salient point given the global financial crisis. More up-to-date data would have made a stronger case for China's role in these imbalances since the EU's trade deficit with China exploded after 2002, the last year of data used for the bilateral trade balances in this chapter.
Serving well in its role as concluding chapter, the thorough forecast of China's future economic growth up to 2025 by Dwight Perkins and Rawski is convincingly comprehensive except for its optimism on air quality. James Roumasset, Hua Wang and Kimberly Burnett's chapter on China's environment points out that China's data does not count small particulate matter and thus probably seriously undercounts China's air pollution, but Perkins and Rawski blithely ignore this important fact when presenting their data on China's supposedly clean air relative to other countries at the same or more advanced level of development. Nevertheless, their prediction of a reasonable likelihood, albeit one dependent on continued reforms, investment and savings, for six to eight per cent annual GDP growth from 2006 to 2016 and five to seven per cent for the following decade is a persuasive one.
Having perhaps spent more time in this review pointing out this book's minor flaws rather than trumpeting its major accomplishments, I will end this review by reiterating my unequivocal recommendation of this important, wide-ranging contribution to our knowledge of China's economic, social and political changes over the last 30 years of economic reform.
