Rethinking China’s Path of Industrialization

This study shows that China’s post-1949 state-led industrialization has closely followed an underlying path that began in the late nineteenth century. It was initiated by pressing national defence needs and has since been motivated by the same and strong incentives for a faster catch-up with the West despite radical regime shifts. Government determined or influenced resource allocation benefited selected industries and hence nurtured vested interest groups connecting and integrating with the ruling elite, which have strengthened and sustained the path. This means that the path is inherently inefficient which is evidenced by a newly constructed dataset. Reform measures can only temporarily improve efficiency performance, but are unable to break the path in the absence of a genuine political democracy.