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Whither China?Restarting the Reform Agenda$
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Wu Jinglian and Ma Guochuan

Print publication date: 2016

Print ISBN-13: 9780190223151

Published to Oxford Scholarship Online: May 2016

DOI: 10.1093/acprof:oso/9780190223151.001.0001

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The Role of the “Dual-Track” System and Its Consequences

The Role of the “Dual-Track” System and Its Consequences

Chapter:
(p.120) Dialogue 9 The Role of the “Dual-Track” System and Its Consequences
Source:
Whither China?
Author(s):

Wu Jinglian

Ma Guochuan

Xiaofeng Hua

Nancy Hearst

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190223151.003.0009

Under China’s dual-track system, in which the command economy and the market economy coexisted, transition was to be achieved through a gradual strengthening of the market and a step-by-step weakening of the plan. This approach had obvious advantages, including the opening up of opportunities for the development of the private sector, which led to bursts of previously suppressed creativity and entrepreneurship. Nonetheless, under the incremental reform strategy, whereby the private sector and the state sector coexisted in parallel, the dual-track pricing strategy for many products and services allowed those in power to reap huge personal gains, and ultimately led to large-scale official profiteering and corruption. However, based on rent-seeking theory, corruption is not an inevitable outcome of a market economy. The corruption in China originated from the administrative controls and the government interventions in market activities, that is, the so-called mixing of power and business.

Keywords:   Chapter dual-track system, market economy, profiteering, rent seeking, private sector, command economy, corruption

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