The paper makes recommendations for extending the reform effort while establishing macroeconomic equilibrium in China. The recommendations concern increasing the decision-making power of enterprises, which are to respond to profit incentives; creating the conditions for effective competition in Chinese industry; reforming prices; linking bonuses to work performance; establishing an effective monetary policy; rationalizing the banking system; and setting realistic interest rates. The paper indicates the need for taking simultaneous action in all these areas.
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Béla Balassa (1987) studied this question.