September, 2007

Local Knowledge and the Interventionist Dynamic during China's Economic Reforms, 1978-1992

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China's recent growth experience has resulted from its incorporation of local knowledge into their reforms and adept handling of the unintended consequences of the reforms. The first wave of reforms occurred in the agricultural sector and incorporated local knowledge. Their success led to some unintended consequences- the inter-provincial cotton price wars and the rise of corruption- that threatened continued reforms. In response, the Communist Party chose to shift ideology rather than re-intervene in the economy. Thus, it avoided the adverse consequences of sustained intervention.

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