Priority Of Privatization In Economic Reforms: China And Taiwan Compared With Russia

This paper studies one aspect of economic reforms -- privatization. By comparing privatization experiences and the degree of urgency in Mainland China, Taiwan (China) and Russia, I argue that privatization is necessary and inevitable, but not a precondition for economic reforms. Due to different economic structures and initial conditions, China and Taiwan (China) chose to restructure their economies without emphasizing privatization, and their reforms have been very successful. The rapid growth of Mainland China and Taiwan (China) has mainly come from resource reallocation, namely, industrialization -- cheap rural labor moving from a low productivity agricultural sector to the industrial sector. Russia, on the other hand, faces a very different problem: At the time of its reorientation to a market economy, Russia was already highly industrialized, with a very small proportion of rural labor, but a large number of inefficient public enterprises. Therefore, promoting efficiency and restructuring the industrial sector are the key to Russia's economic reform. Theoretically it may have been more appropriate for Russia to go through privatization at an earlier stage than China and Taiwan due to the fact that Russia had a much larger percentage of public enterprises, but it was unable to accomplish this efficiently.