| Abstract: | With the alternative perspective of ‘institutional paradigm’ derived from the work of Douglass North and inspired by institutional economics, this paper explores the PRC's political economy from its formative period to the Reform Era. The author tries to show why State power, with overall control of the economic resources in the planned economy, was not total due to inefficient property rights, in which the State was not able to attain authority and legitimacy, and crises of national security occurred naturally. Economic reform has almost totally reconstructed economic and administrative institutions, but the party-centered State power remains unchanged. This paper shows why and how the State protects State-owned enterprises, which belong to the most influential group as well as being part of the established pillar of power. It also shows that the State protects and inspires non-State enterprises because they can produce maximum production and provide more resources for State power. Thus, the economic transition is full of paradoxes due to these internal conflicts with high institutional costs. |
