The Political-Economy Logic of the China Miracle

The difference in long-term economic performance does not mainly depend on economic growth rate, but also on the magnitude and frequency of its shrink, which is determined by the interaction of politics-economy and the stability of order embedded in the institutional changes toward an open access order. For long-term economic performance, there are three key requirements. Firstly, to fulfill orderly rent distribution arrangements, the reforms in political areas are needed, including effective state capacity building, control of violent resources and external accountability. Secondly, to ensure the new rules are conducive to economic growth and rent performance improvement, reforms in economic system are requested through reset of market access rules and rights, protection of property rights and the impersonalized rules. Last but not the least, to prevent institutional decay caused by imbalances in rent distribution and institutional structure, continuous political-economic interaction is particularly required, and this serves as the core logic for understanding the China miracle. Periodically interaction and adjustment between political system and economic institutions ensure the fluent transition of China’s economy from “institutional transformation” to “high growth” since its reform and opening-up. However, there are still performance dilemmas and out of order risks impeding the country from achieving sustainable economic performance, and an institutional system towards more open-access order is essential.