AS THE PEOPLE'S REPUBLIC OF CHINA CELEBRATED its fiftieth anniversary, economists look back on a remarkable kaleidoscope of events and policy shifts that, despite episodes of vast suffering and waste, have brought enormous material benefits to China's teeming masses. The economy inherited by China's new communist leaders in 1949 was overwhelmingly agrarian, ravaged by twelve years of warfare, and wracked by hyperinflation. Despite the strains imposed by China's participation in the Korean War, the new government quickly resolved difficult short-term economic obstacles and embarked upon a long-term process of socialization and development.China's experience of socialist planning, which roughly coincides with the period from 1949 until the death of Mao Zedong in 1976, left a mixed economic legacy. As in other socialist regimes, China's new leaders poured resources into activities and industries linked to the expansion of national power. Production of steel, machinery, and building materials multiplied prodigiously. China succeeded in fabricating nuclear and thermonuclear weapons. Although these advances relied initially on technical and financial support from the Soviet Union and its east European allies, China's success in penetrating new industries and mastering new technologies following the withdrawal of Soviet aid demonstrated that a succession of Five-Year Plans had propelled China to a new level of development.In addition to steel and locomotives, socialism delivered important material benefits to China's citizenry. Although economists are still struggling to map out the exact dimensions of national product and other economic aggregates, demographic figures tell a remarkable story of improved welfare. Comparison of the census results for 1953 and 1982 shows that average life expectancy rose from just over 40 years to nearly 70 years during less than three decades. The census figures, especially those for 1953, are hardly precise, but there can be no doubt that Chinese socialism produced large gains in life expectancy and, furthermore, that these gains were not confined to China's (relatively) prosperous urban minority, but extended to the farm populace as well. Chinese socialism anticipated the World Bank's strategy of emphasizing the provision of 'basic needs' to entire low-income populations as a foundation for socio-economic development.These gains, however, came at a high cost. The Great Leap Forward, a series of political campaigns that disrupted normal economic life during 1958-60, triggered an immense famine that may have claimed 30-40 million lives. Shortly after China's economy recovered from this cruel blow, Mao Zedong unleashed a fresh barrage of political campaigns, known as the Cultural Revolution, which again dislocated economic life, although less severely than the Great Leap.To these episodes of largely self-inflicted damage must be added the toll of stifled incentives, productivity shortfalls, and wasted resources inherent in any system of central planning. 'Storming' or 'shock work,' in which enterprises race to fulfil monthly, quarterly, or annual plans creates a peculiar (and costly) pattern of seasonal output fluctuations that two decades of reform have failed to eradicate. Excessive vertical Integration is another hardy legacy of the plan system. Because their attention is focused on satisfying their own plan requirements, suppliers are least reliable as important deadlines approach, thus firms and agencies struggle to create captive suppliers. These efforts cumulate to vast and costly duplication of component manufacture, repair services, even whole networks of schools and telecommunications.Growing awareness that economic growth among its east Asian neighbours had far outdistanced China's economic achievements contributed to muted but widespread dissatisfaction with China's economic performance. The extraordinary economic gains of Taiwan and Hong Kong, both with large populations of recent migrants from China, were particularly galling. …