The China Quarterly

China's Transitional Economy

The Role of the Local State in China's Transitional Economy

Jean C. Oi

All states have a role in development, but this varies widely. The spectrum is defined at one end by the laissez faire minimalist state whose role is limited to ensuring a stable and secure environment so that contracts, property rights and other institutions of the market can be honoured. At the opposite end are the centrally planned Leninist states that directly replace the market with bureaucratic allocation and planning. Between these two extremes are the capitalist developmental states of Japan and the East Asian Newly Industrializing Countries (NICs) that are neither Communist nor laissez faire, but exhibit characteristics of both. The state plays an activist, rather than a minimalist, role; there is planning, but it is geared toward creating maximum competitive and comparative advantage for manufacturers within a market economy.