China as a Developmental State

The paper examines the notion of a 'developmental state' and shows that China possesses the characteristics of a developmental state.  It explains the political economy which generated such a state in China and in some other economies.  It analyses the methods and mechanisms that were introduced to create a developmental state, in particular the incentive structures that the leadership used to solve the principal-agent problem.  These include personnel policies, fiscal decentralization, and patronage relationships.  That leads to a review of its successes, limitations and adverse consequences, and to the question: can China's developmental state be sustained?  Conclusions are drawn for both China and other developing countries.