The Limits of Economic Prediction: Reassessing the Lin-Yang Debate on China's Dual-Track Reforms
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The Limits of Economic Prediction: Reassessing the Lin-Yang Debate on China's Dual-Track Reforms

Yiyang Sun 1*
1 London School of Economics
*Corresponding author: y.sun111@lse.ac.uk
Published on 14 October 2025
Journal Cover
AEMPS Vol.226
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-345-1
ISBN (Online): 978-1-80590-346-8
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Abstract

Yang, drawing on his inframarginal economics framework, argued that China's dual-track reforms would fail without constitutional shock therapy, predicting that the absence of proper institutional transitions would lead to corruption and economic stagnation. Conversely, Lin's New Structural Economics advocated for gradual reform based on comparative advantages, arguing that late-comers could benefit by developing industries aligned with their factor endowments. This essay examines the 2002 to 2003 debate between economists Justin Yifu Lin and Xiaokai Yang regarding China's economic reforms and late-comer advantages. Through an analysis of recent empirical evidence (2020-2025), this essay demonstrates that Yang's predictions largely failed to materialize: China's dual-track system succeeded despite lacking constitutional transformation, with state-owned enterprises contributing positively to growth and anti-corruption campaigns improving productivity. However, Lin's framework also proves insufficient in explaining China's success. The paper concludes that economic forecasting necessarily sacrifices scientific rigor in favor of broad generalizations, suggesting that economics should focus on explaining existing phenomena rather than predicting uncertain futures.

Keywords:

Late-comer advantage/disadvantage, Constitutional transition, Chinese economy, Dual-track reforms, Empirical revolution

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Sun,Y. (2025). The Limits of Economic Prediction: Reassessing the Lin-Yang Debate on China's Dual-Track Reforms. Advances in Economics, Management and Political Sciences,226,51-56.

References

[1]. Sachs, J. D., Woo, W. T., & Yang, X. (2000). Economic reforms and constitutional transition (CID Working Paper No. 43). Center for International Development at Harvard University.

[2]. Holz, C. A. (2008). China's economic growth 1978–2025: What we know today about China's economic growth tomorrow. China Economic Review, 19(1), 54-65.

[3]. Reserve Bank of Australia. (2014). Financial reform in Australia and China (RDP 2014-10). Retrieved from https: //www.rba.gov.au/publications/rdp/2014/2014-10.html

[4]. World Bank. (2019). The World Bank in China's state-owned enterprise reform since the 1980s (Report No. 134778). World Bank Group.

[5]. Podpiera, R. (2006). Progress in China's banking sector reform: Has bank behavior changed? (IMF Working Paper WP/06/71). International Monetary Fund.

[6]. Cheng, W. L., Sachs, J. D., & Yang, X. (1999). An infra-marginal analysis of the Ricardian model (CID Working Paper No. 13). Center for International Development at Harvard University.

[7]. Lin, J. Y., & Rosenblatt, D. (2012). Shifting patterns of economic growth and rethinking development. Journal of Economic Policy Reform, 15(3), 171-194. https: //doi.org/10.1080/17487870.2012.700565

[8]. Lin, J. Y., & Wang, X. (2022). Dual circulation: A new structural economics view of development. Journal of Chinese Economic and Business Studies, 20(4), 303-322. https: //doi.org/10.1080/14765284.2021.1929793

[9]. Lin, J.Y., 2019. China's Growth Deceleration: Causes and Future Growth Prospect. Frontiers of Economics in China, 14(1).

[10]. Lin, J.Y., 2016. The latecomer advantages and disadvantages. Diverse development paths and structural transformation in the escape from poverty, 43.

[11]. Lin, J. Y., & Wang, Y. (2020). Structural change, industrial upgrading, and middle-income trap. Journal of Industry, Competition and Trade, 20, 359-394.

[12]. Zhang, M., & Rodríguez-Pose, A. (2024). Government reform and innovation performance in China. Papers in Regional Science, 103(3), Article 100023. https: //doi.org/10.1016/j.pirs.2024.100023

[13]. Allen, F., Cai, J., Gu, X., Qian, J., Zhao, L., & Zhu, W. (2022). Centralization or decentralization? The evolution of state-ownership in China (SSRN Working Paper No. 4283197). Stanford Center on China's Economy and Institutions. https: //papers.ssrn.com/sol3/papers.cfm?abstract_id=4283197

[14]. Tao, M., Dagestani, A. A., Goh, L. T., & Zheng, Y. (2023). Do China's anti-corruption efforts improve corporate productivity? A difference-in-difference exploration of Chinese listed enterprises. Socio-Economic Planning Sciences, 87(Part B), Article 101624. https: //doi.org/10.1016/j.seps.2023.101624

[15]. Santacreu, A. M., de Soyres, F., Fisgin, E., Gaillard, A., & Young, H. L. (2025). China's role in global innovation is changing. Federal Reserve Bank of St. Louis On the Economy. https: //www.stlouisfed.org/on-the-economy/2025/aug/china-role-global-innovation-changing

[16]. Cheung, S. N. S. (2014). The economic system of China. Man and the Economy, 1(1), 1-49. https: //doi.org/10.1515/me-2014-0008

References

[1]. Sachs, J. D., Woo, W. T., & Yang, X. (2000). Economic reforms and constitutional transition (CID Working Paper No. 43). Center for International Development at Harvard University.

[2]. Holz, C. A. (2008). China's economic growth 1978–2025: What we know today about China's economic growth tomorrow. China Economic Review, 19(1), 54-65.

[3]. Reserve Bank of Australia. (2014). Financial reform in Australia and China (RDP 2014-10). Retrieved from https: //www.rba.gov.au/publications/rdp/2014/2014-10.html

[4]. World Bank. (2019). The World Bank in China's state-owned enterprise reform since the 1980s (Report No. 134778). World Bank Group.

[5]. Podpiera, R. (2006). Progress in China's banking sector reform: Has bank behavior changed? (IMF Working Paper WP/06/71). International Monetary Fund.

[6]. Cheng, W. L., Sachs, J. D., & Yang, X. (1999). An infra-marginal analysis of the Ricardian model (CID Working Paper No. 13). Center for International Development at Harvard University.

[7]. Lin, J. Y., & Rosenblatt, D. (2012). Shifting patterns of economic growth and rethinking development. Journal of Economic Policy Reform, 15(3), 171-194. https: //doi.org/10.1080/17487870.2012.700565

[8]. Lin, J. Y., & Wang, X. (2022). Dual circulation: A new structural economics view of development. Journal of Chinese Economic and Business Studies, 20(4), 303-322. https: //doi.org/10.1080/14765284.2021.1929793

[9]. Lin, J.Y., 2019. China's Growth Deceleration: Causes and Future Growth Prospect. Frontiers of Economics in China, 14(1).

[10]. Lin, J.Y., 2016. The latecomer advantages and disadvantages. Diverse development paths and structural transformation in the escape from poverty, 43.

[11]. Lin, J. Y., & Wang, Y. (2020). Structural change, industrial upgrading, and middle-income trap. Journal of Industry, Competition and Trade, 20, 359-394.

[12]. Zhang, M., & Rodríguez-Pose, A. (2024). Government reform and innovation performance in China. Papers in Regional Science, 103(3), Article 100023. https: //doi.org/10.1016/j.pirs.2024.100023

[13]. Allen, F., Cai, J., Gu, X., Qian, J., Zhao, L., & Zhu, W. (2022). Centralization or decentralization? The evolution of state-ownership in China (SSRN Working Paper No. 4283197). Stanford Center on China's Economy and Institutions. https: //papers.ssrn.com/sol3/papers.cfm?abstract_id=4283197

[14]. Tao, M., Dagestani, A. A., Goh, L. T., & Zheng, Y. (2023). Do China's anti-corruption efforts improve corporate productivity? A difference-in-difference exploration of Chinese listed enterprises. Socio-Economic Planning Sciences, 87(Part B), Article 101624. https: //doi.org/10.1016/j.seps.2023.101624

[15]. Santacreu, A. M., de Soyres, F., Fisgin, E., Gaillard, A., & Young, H. L. (2025). China's role in global innovation is changing. Federal Reserve Bank of St. Louis On the Economy. https: //www.stlouisfed.org/on-the-economy/2025/aug/china-role-global-innovation-changing

[16]. Cheung, S. N. S. (2014). The economic system of China. Man and the Economy, 1(1), 1-49. https: //doi.org/10.1515/me-2014-0008

Cite this article

Sun,Y. (2025). The Limits of Economic Prediction: Reassessing the Lin-Yang Debate on China's Dual-Track Reforms. Advances in Economics, Management and Political Sciences,226,51-56.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICEMGD 2025 Symposium: Innovating in Management and Economic Development

ISBN: 978-1-80590-345-1(Print) / 978-1-80590-346-8(Online)
Editor: Florian Marcel Nuţă Nuţă, Ahsan Ali Ashraf
Conference website: https://2025.icemgd.org/Lahore.html
Conference date: 23 September 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.226
ISSN: 2754-1169(Print) / 2754-1177(Online)

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