In the transition from plan to market China achieved great benefits from adopting a gradualist approach, and avoided many of the issues that plagued those countries in Eastern Europe which pursued a ‘big-bang’ model of reform. Nevertheless, economic change in China has been very rapid, and has accelerated since China joined the WTO in 2001. It is now clear that major problems and imbalances have been building up within China's framework of ‘sustained gradualism’ – sustained and cumulative opening to market forces and to private agents, both Chinese and foreign, combined with only limited evolution of the institutions, structures and policies to govern and shape the market. as a result, the Chinese Government has decided that a major reorientation of development strategy is now required. This paper discusses aspects of this critical issue, with particular emphasis on the federalism and governance issues and on health reform as a case study.
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