Strategic investment, uncertainty and distribution reform in the P.R. China: Why a gradual reform strategy works

A study attempts to provide an explanation to the success of the gradual reform strategy of China by showing that such a strategy can minimize the uncertainty created in the process of transition from a centrally-planned economy to a market economy. In a commitment versus flexibility game, low uncertainty motivates enterprises to adopt a strategy of pre-committing their investment which is crucial in obtaining a faster growth rate in the industry. In addition, China's successful use of market forces of competition and entry is also an important factor in the transition process.