Transformation to a socialist market economy in People's Republic of China

This article deals with the transformation process, occurring in People's Republic of China, from an economic regime based on central planning to a new order called "socialist market economy". This process is a gradual passage of a country ruled by a communist party to a market economy under the strict control of the government. First, the main features and constitutional foundations of this transformation are explored; then the process is detailed in the light of economic reforms. In this context, following topics are discussed: ownership regime, rural reform, administrative and fiscal decentralization, banking reform, state-enterprises reform, planning reform, privatization of public services, and the evolution of direct foreign investments. The first conclusion is that, this process should be considered as a response of China Communist Party to the collapse of socialist system in Soviet Block, as an attempt to cope with globalization pressure and as a way taken by the Party in order to keep its legitimacy and political power. The second conclusion is that this transformation has been implemented with a manageable, strictly controlled, planned, gradual and pragmatic approach. In spite of liberalization policies, the state remains the strongest actor of country's economy, and this process reflects basic features of new public management approach. During the Cold War era the world security was dependent on "horror balance" between USA and Soviet Union. It seems that this balance disappeared after the collapse of Soviet Union could be now recreated between USA and People's Republic of China on economic power.