China as a Developmental State

Abstract

type="main" xml:id="twec12215-abs-0001"> The paper examines the notion of a ‘developmental state’ and shows that China possesses the relevant characteristics. It explains the political economy which generated such a state in China. It analyses the institutions and methods that were introduced to create a developmental state, in particular the incentive structures that the leadership used to solve the principal-agent problem implicit in having centralised political control but decentralised economic management. These include personnel policies, fiscal decentralisation and patronage relationships. That leads to a review of its successes, limitations and adverse consequences and to the question: can China's developmental state be sustained? Among these issues are the great socioeconomic changes that rapid economic growth has entailed – which have strengthened the case for broadening government policy objectives beyond the previous narrow focus on growth. Conclusions are drawn for both China and other developing countries.