How China Became Capitalist

Ronald Coase and Ning Wang examine China’s embrace of capitalism.

When Mao Zedong, founder of the People’s Republic of China, died on 9 Sept. 1976, China was in the midst of a Cultural Revolution that was meant to rejuvenate socialism, ridding it of capitalist corruption and bureaucratic rigidity. Mao believed that China could shrug off poverty and jump on to the ‘golden highway’ to socialism if the Chinese people, united in thought and action, threw all their talents and energy behind the collective cause. Instead, Mao’s deeply flawed ideology reduced enterprising people to lifeless cogs in the socialist machines.

So it was that China started its post-Mao journey with no roadmap and no destination in mind.

The need for reform was urgent but, unable to contemplate eradicating communism and starting afresh, the policy was to adjust the existing system while learning from different models of capitalism.

Once the Chinese people were freed from the shackle of ideology, they were able to...