Institutions which determine the future of China: for Prof. Kornai's 85th birthday

Abstract

Professor Kornai has been one of the most influential economists in China in more than three decades. One of his biggest influences to Chinese reformers is on the necessity of institutional change. Following his steps, this talk discusses the problems in China’s institution. The question I will address is, what are the major obstacles that have prevented China from establishing constitutional rules? I argue that grave socio-economic problems in China, e.g. low domestic demand, worsening corruption and inequality, intensifying social conflicts, etc. are all created from China’s fundamental institution: Regionally Decentralized Authoritarianism (RDA). The RDA regime which contributed to China’s reform and growth in the past now threatens the stability and sustainability of China. However, reforming this regime posts great challenges, since the power of the party-state is unlimited, although administration and economy are decentralized; the party-state has nested interests to resist any constitutional reform. The fate of constitutional reform in China is the biggest factor which determines China’s future.