The Transition Process in China: a Theoretical and Empirical Study

In this paper we model the transition process in China. First we review the economic reform policies since 1978. Based on the review, a two-segment-model is constructed. The model can be viewed as a general equilibrium model, with a planned segment that produces some distortion in the model, and a market segment that tries to correct this distortion and keeps the whole economy in equilibrium. Then we examine diverse reform policies such as the price reform, the financial market reform, and the labour market reform. In the last section, the main conclusions of this study will be summarised and commented from a viewpoint of further development of the study.