Until the early 19th century, China was the largest economy in the world (Maddison, 2007) and was characterised by a market system. The institutional departure from the market towards state command followed over a century of economic stagnation and was the result of the new state ideology introduced by Mao Zedong and the Chinese Communist Party (CCP) after establishing the People's Republic of China (PRC) in 1949. Over the last 30 years, we have been observing the installation of a new market system and China is often believed to have been undergoing an extensive process of post-socialist transformation. This process will be the subject of the examination in this chapter.

Post-socialist transformation – the overview

As it embraces around 25% of the human population, post-socialist transformation is by all means a process of historical significance. It is hardly possible to imagine complex and extensive systemic changes that equal those taking place in parts of Europe and Asia. In simplistic terms, the process is twofold in nature: from the political perspective, authoritarian regimes are being replaced by democracies; and from the socio-economic perspective, the systems are being transformed ‘from centrally-planned economies based on state ownership domination and bureaucratic control mechanisms into the free market economies based on private ownership and a deregulated market’ (Kolodko, 2004b, p 32). Some scholars also include a third process of the transformation, namely, nation building. Naturally, there are regional variations, and, indeed, each country in transition would have its own personal set of characteristics.

The process of post-socialist transformation is often referred to in the scholarly literature as post-communist transformation, since the term ‘communism’ was broadly associated with the Eastern bloc's authoritarian political regimes of one-party rule propagating communist principles. The scholarly discussion on what defines socialism and what defines communism is broad and falls beyond the main scope of this book. Nevertheless, in order to establish what constitutes post-socialist and post-communist transformations in very general terms, one needs to attempt to present some general perceptions as to the differences between socialism and communism. A communist country or a communist regime would commonly be defined as a state/regime in which a communist party rules and political mechanisms do not allow for the contestation of its power.