China's economy went on a long detour under the traditional planned economy. Around the world, except for the silver lining of several East Asian economies, many developing countries shared the same woes as China. So, it is no surprise that when China started its reform and opening in the late 1970s, many other socialist countries and developing countries also embarked on reforming their economic systems. Different reform ideas and approaches produced disparate results. Countries guided by the then-mainstream economic theories failed to achieve their desired results. But China, based on its own exploration, achieved unprecedented success with its gradual dual-track reform, once ridiculed as the worst reform model.

Starting with this chapter, I will introduce China's reforms in different fields and the remaining issues. Solutions will also be proposed, based on the theoretical framework in Chapters 5 and 6.

The process of reform

Consider the pre-reform institutional arrangements for agriculture. The land reform was implemented between 1949 and 1952. The Agricultural Cooperative Movement was launched in 1953. After a three-year agricultural crisis in 1959–61, a new system of cooperation based on the production team as the business unit was initiated in 1962, remaining in place until 1978.

Before 1962 the government wished to improve productivity without increasing inputs, so it constantly expanded the scale of cooperatives to boost output through economies of scale. After 1962 the focus shifted from economies of scale to developing and using modern agricultural technologies such as fertilizer and improved seed varieties.