DISTINCTION BETWEEN ECONOMIC TRANSITION IN CHINA AND RUSSIA (SOVIET UNION)

Two of the most profound communist economies were Soviet Union and China. Both countries were engaged in transition from planned to market economy. However, the results have been almost the opposite. Communism in Soviet Union collapsed while Chinese transition is characterized by rapid emergence of the market economy. The paths of economic transition in these two countries were distinct, especially, the period when reforms started. Notably, many reasons caused the success of China, as well as Soviet crash. Nevertheless, while Russia has fully complied to International Monetary Fund and World Bank shock therapy transition model, China has established innovative gradual approach to the economic reforms and full market economy. In this paper we examine the cause of different success of transition in these countries and point out the key factors which cause it, such as initial conditions, political leadership and empirically-based pace of reforms.