A Treadmill of Reforms

China took off in the 1980s on the strength of its rural entrepreneurship, facilitated by financial liberalization. Politics was trending liberal, providing space and flexibilities for bottom-up reforms. China was still an autocracy but it was a frictional autocracy, an autocracy in which an autocrat faced obstacles in implementing his ideas. That changed dramatically after 1989. A new leadership team, the Shanghai technocrats, came into power and promptly reversed many political reforms instituted in the 1980s and recentralized China’s finance and taxation. A statist development model replaced the directionally liberal model of the 1980s. China ushered in an era of the China Model, which was rooted in urban bias and anchored on statist finance and autocracy.