The Political Foundation of Chinese Style Gradualism: A Paradox of too Strong Private Interests?

We present a game-theoretical model of policy reforms focused on institutional reforms of the political system. We show that (i) gradual reforms in China can be understood as the result of a relatively weak organization of private interests unable to replace the Communist Party at once, but strong enough to credibly demand reforms. (ii) Gradual transition, may be preferable in comparison to a big-bang transition if private interests are largely fragmented. (iii) A dilemma of too strong private interests exists: They may collectively prefer a gradual transition, but due to their commitment problem are forced into a big-bang transition.