The Role of the State in Economic Transformation: Comparing the Transition Experiences of Russia and China

This paper compares two radically different approaches to transforming an economic system based on central planning and state property into a capitalist system, the neoliberal transition strategy and the state directed transition strategy. Russia’s transition since 1992 is examined as an example of the neoliberal approach, while China’s transition since 1978 is analyzed as an example of the state directed approach. The primary explanation for China’s economically superior transition performance is located in the advantages of the state directed transition strategy. However, contradictions in a state directed transition strategy are identified which tend to promote an eventual shift toward a neoliberal strategy. JEL Categories: P27, P21, P52