Introduction Comparisons οf the Russian and Chinese transitions from state planning to a market economy tend to focus on two dimensions: speed (“shock therapy” versus gradualism) and sequence (i.e., whether political or economic reform came first). (Wei Li 1999, 120-36) Both interpretations are rather simplistic because neither Russia nor China had a genuine “big bang,” and both countries pursued economic and political reforms simultaneously, albeit reforms οf a significantly different nature. More important, focusing on these two approaches leads to simple, time-dependent conclusions. Today, China’s “gradual” model appears more successful, but in 1990, the big bang approach looked more successful. Steven Solnick’s neo-institutional approach is an important exception to the existing literature, although its main conclusion–that the Soviet order collapsed, whereas the Chinese communist order sustained itself–can be seen as a more sophisticated version οf the sequencing issue. Solnick’s “bank run” on Soviet institutions resulted from Gorbachev’s political restructuring, but China’s relative lack οf political reform left communist-era institutions largely intact. More important, Solnick’s study deals with the collapse οf the older communist-era institutions, rather than the creation οf the new market-oriented institutions that have emerged in both Russia and China since each transition began (Steven Solnick, 1998). Russia and China both had to create institutions capable οf attracting foreign investment to facilitate their transition processes. The Soviet Union and the People’s Republic οf China (PRC) had developed as largely autarkic economies closed to most foreign trade and investment. Opening up to the outside world has been one οf the key aspects οf the transition, if not the key aspect, in both economies. Hard-currency trade and investment was the first vehicle for introducing hard-budget constraints and market incentives to the Soviet and Chinese economies (Janos Kornai, 1998, pp. 11-17). Given the relative lack of οf pre-existing institutions designed to deal with hard-currency transactions and the rapid increase in foreign investment after the beginning οf the transition, the evolution of οf foreign investment and advice provides an opportunity to compare how communist-era institutions as a whole evolved in Russia and China. In both countries, the older institutions οf the state-planning system had to evolve to deal with foreign trade, while new ones also were created, particularly in China. Trace privatization in Russia Russia began its economic transition with a big bang in January 1992. Under Prime Minister Egor Gaidar, most state-controlled prices were liberalized virtually overnight, beginning a process that would rapidly privatize the country’s industry. Foreign economic advisers, such as Harvard’s Jeffrey Sachs and the Swedish economist Anders Aslund, were instrumental in launching Russia’s shock-therapy program. Aside from government debt instruments, there were very few vehicles available to foreign investors for actually investing in the Russian economy in the early 1990s. Corporate debt and equity markets were as yet under-developed, and direct investment was hampered by the lack οf clearly defined property rights, which persisted despite the advertised success οf “spontaneous” privat