The process of China's market transition (1978-1998): The evolutionary, historical, and comparative perspectives

China's transition to the market followed a different path from those count ries in eastern Europe and the former Soviet Union. This paper tells the st ory of this transition process. In the first stage (1979- 1993), the system was reformed incrementally to improve incentives and increase the scope of the market. In the second stage (from 1994), new institutions supporting t he market are being built before old institutions have been destroyed. The paper traces the roots to the Chinese planning system since 1958. which dif fered significantly from the Soviet model. The successful Chinese path of t ransition challenges the conventional wisdom but fits Popper's notion of "p iecemeal social engineering."