Economic Reform in China, India, and

JapanSara Hsu

Initial Conditions Began their growth processes

intentionally, through guided and targeted economic policies

Began with different initial conditions Different histories of economic

repression Began at different times Different global political economies Selective liberalization

Initial Conditions Different geographies Different levels of human capital and

population Different levels of initial success in

reform-China and India began industrialization sooner but failed

Japan through WWI Began its growth trajectory during

the Meiji era, 1868-1885 Eliminated feudal institutions Uniformity of money Machinery Agriculture Heavy industry

Japan after WWI Post World War One Zaibatsu Post World War Two Devastation and occupation Increase in exports Advanced economy

China before Nineties Led by ideology under Deng Xiaoping Deng Xiaoping Theory Dual Track System Household Responsibility System State Owned Enterprise

Incentivization Price reform Special Economic Zones

China after Nineties “Reform with Losers” Privatization Elimination of Dual Track economy Joining WTO

India before 1991 Attempted to reform after

Independence Focus on agriculture Eighties deregulation “License Raj” Crisis in 1991

India after 1991 Reforms accelerated after 1991 New Industrial Policy Reduction in licenses Reform of banking industry Special Economic Zones

The Political Economy of Reform

Japan: reform occurred after the Tokugawa Shogun was defeated and Emperor’s power restored;

China: reform occurred after Mao died and Deng Xiaoping took power-his policies were supported;

India: crisis speeded up the reform process.

Effects of Reform Prize for best reform process goes to? Role of growth in reform Social services

Bottom Line China, India and Japan began reforms

under different initial conditions; Had different approaches to reform; Faced different political economies of

reform.

Did You Know? China, Japan and India are

counterexamples to other countries that have attempted reform and have been far less successful.

These include countries in eastern Europe and the former Soviet Union, and countries that faced crisis after liberalization including Southeast Asia and much of Latin America.

Fin Questions?