Dollar, David2012-05-292012-05-292008-02https://hdl.handle.net/10986/6581China has been the most successful developing country in this modern era of globalization. Since initiating economic reform after 1978, its economy has expanded at a steady rate over 8 percent per capita, fueling historically unprecedented poverty reduction (the poverty rate declined from over 60 percent to 7 percent in 2007). Other developing countries struggling to grow and reduce poverty are naturally interested in what has been the source of this impressive growth and what, if any, lessons they can take from China. This paper focuses on four features of modern China that have changed significantly between the pre-reform period and today. The Chinese themselves call their reform program Gai Ge Kai Feng, "change the system, open the door." "Change the system" means altering incentives and ownership, that is, shifting the economy from near total state ownership to one in which private enterprise is dominant. "Open the door" means exactly what it says, liberalizing trade and direct investment. A third lesson is the development of high-quality infrastructure: China's good roads, reliable power, world-class ports, and excellent cell phone coverage throughout the country are apparent to any visitor. What is less well known is that most of this infrastructure has been developed through a policy of "cost recovery" that prices infrastructure services at levels sufficient to finance the capital cost as well as operations and maintenance. A fourth important lesson is China's careful attention to agriculture and rural development, complemented by rural-urban migration.CC BY 3.0 IGOADULT POPULATIONAGRICULTURAL DEVELOPMENTAGRICULTURAL OUTPUTAGRICULTURAL PRODUCTIONAIRAIR POLLUTIONAIR QUALITYAUTO INDUSTRYBASIC NEEDSBUSCAPACITY BUILDINGCAPITAL GRANTSCARCAR USECARSCASH CROPSCENTRAL GOVERNMENTSCITIZENSCLOSED ECONOMIESCOALCOMMODITIESCOMPARATIVE ADVANTAGECULTURAL CHANGEDEBTDEBTSDECISION MAKINGDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPMENT STRATEGIESDIESELDIRECT FOREIGN INVESTMENTDIRECT INVESTMENTDOLLAR PRICEDOMESTIC INVESTORSDRIVINGECONOMIC DEVELOPMENTECONOMIC PERFORMANCEECONOMIC REFORMENERGY EFFICIENCYENVIRONMENTALENVIRONMENTAL DAMAGEENVIRONMENTAL ISSUESENVIRONMENTAL PROTECTIONENVIRONMENTAL PROTECTION AGENCYENVIRONMENTAL REGULATIONSEQUITY INVESTMENTEXCESS MORTALITYEXPRESSWAYSEXTERNALITIESFAMILY MEMBERSFARMSFLEETSFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN TRADEFOREST COVERFUELGASOLINEGASOLINE PRICESGLOBAL ECONOMYGLOBAL MARKETGLOBALIZATIONGOOD TRANSPORTGRAIN PRODUCTIONGROWTH RATEGROWTH RATESHIGHWAYHIGHWAY TOLLSHOUSEHOLD WORKHUMAN CAPITALIMPORTSINCOMEINCOMESINDUSTRIAL PRODUCTIONINFRASTRUCTURE FINANCEINFRASTRUCTURE INVESTMENTINTEREST RATESINTERNATIONAL BANKINTERNATIONAL MARKETINTERNATIONAL TRADEINVESTMENT CLIMATEJOINT VENTURESJURISDICTIONLABOR COSTSLABOR FORCELABOR PRODUCTIVITYLABOR SUPPLYLAND TENURELEGAL MIGRANTSLIFE EXPECTANCYLIVING STANDARDSLOCAL AUTHORITIESLOCAL ECONOMYLOCAL GOVERNMENTLOCAL GOVERNMENTSMARKET PRICEMARKET PRICESMEATMIDDLE-INCOME COUNTRIESMIGRANTMIGRANTSMOBILITYMORTGAGEMOTOR VEHICLEMOTOR VEHICLE USENATIONAL POLICIESNATURAL ENVIRONMENTNATURAL GASNATURAL RESOURCENATURAL RESOURCESNEGATIVE EXTERNALITIESNUMBER OF MIGRANTSNUMBER OF WORKERSOPEN DOOROPEN DOOR POLICYOPEN MARKETSPACIFIC REGIONPOLICY RESEARCHPOLICY RESEARCH WORKING PAPERPOLLUTIONPOLLUTION LEVELSPOPULATION DECLINEPOPULATION GROWTHPOPULATION GROWTH RATEPOPULATION GROWTH RATESPOPULATION PRESSUREPORTFOLIOPORTFOLIO FLOWSPORTFOLIO INVESTMENTPOVERTY LINEPOVERTY REDUCTIONPOWER OUTAGESPOWER PLANTSPRICE OF GASOLINEPRIVATE INVESTMENTPRIVATIZATIONPRODUCERSPRODUCTIVITYPROGRESSPROPERTY RIGHTSPUBLIC SERVICESPUBLIC TRANSPORTRAILRAIL NETWORKRAILROADSRAILWAYRAILWAYSRAPID DEVELOPMENTRAPID EXPANSIONRAPID GROWTHRATE OF GROWTHRATE OF RETURNRATE OF RETURN ON CAPITALREFORM PROGRAMREGISTRATION SYSTEMREGULATORY FRAMEWORKSREMITTANCESRENEWABLE ENERGYREPAYMENTRESOURCE USEROADSRURAL DEVELOPMENTRURAL POPULATIONSAVINGSSAVINGS RATESSOCIAL ISSUESSPILLOVERSTATE ENTERPRISESTATE ENTERPRISESSTOCK MARKETSUB-SAHARAN AFRICATAXTAX RATETELEPHONE LINETOLLTOLL ROADTOLL ROADSTOLLSTRADE REGIMETRADINGTRANSPORT INFRASTRUCTURETRANSPORT MANAGEMENTTRIPTRUEURBAN MIGRATIONURBAN TRANSPORTURBANIZATIONVEHICLESWATER POLLUTIONWILLINGNESS TO PAYWORLD ECONOMYWorld Bank10.1596/1813-9450-4531