However, all of these reform movements experienced set backs in the early 1970s, due to the unfavorable changes in the political environment.

## (4) Transition to a Market Economy

This is defined as a movement from a centrally planned economy to a market economy. Unlike (3), this is not a reform within the traditional system but a transformation of the economic system itself. The IMF and the World Bank often call this “market-oriented reform”. Although there have been arguments about the analogy between structural reform and transition to a market economy, it should be pointed out that there is a distinct difference between them in terms of the initial conditions.

## 1 -1-2 Initial Conditions

The abovementioned reforms are divided into two groups in terms of “initial conditions”. In the case of the first two, that is (1) and (2), the initial condition is basically a market economy, although in some developing countries market mechanism is very much underdeveloped. It should be pointed out that the distinguishing feature of the initial condition of (3) and (4) is not the fact that the role of market mechanisms is negligible or market mechanisms do not exist at all. As a matter of fact, in some centrally planned economies such as Vietnam and the southern China the state enterprises sector accounted for relatively low share of GDP, and the non-state sectors played some important roles even before the start of reforms. The most important point is that the principle of command economy, which is completely different from a market mechanism, was well developed and established, at the beginning of the reform.

Because of this essential distinction, the process of transition to a market economy inevitably leads to fundamental changes in social structure, rather than changes in institution, procedures, and policy measures. $ ^{2} $

## 1 -1-3 From Reform Campaigns to Transition

One interesting feature of the recent economic reforms in the former centrally planned economies is that reforms within the traditional framework and transition to a market economy occurred in a series, and the distinction between the two phases is not necessarily clear.

There is a consensus among experts that the reform program in China was launched in December 1978, at the Third Plenum of the Central Committee of the Communist Party. $ ^{3} $ It should be pointed out that the reform program in the initial stage dealt with only limited issues, such as agricultural reforms, the opening up to the outside world, and very limited decentralization in state enterprises. The nature of the reforms in the early stages was quite similar to the “market socialism” of Eastern Europe in the 1960s.

In those days, the word “market economy” was avoided very carefully. Even in 1987, the economic system was described officially as “planned commodity economy”, in which “the state regulates the market, and the market guides the enterprises”. $ ^{4} $ However, in February 1992, the Communist Party finally announced their intention to establish a “socialist market economy”; this is “a new paradigm”, aiming “to establish an economic structure in which market forces, under the macroeconomic influence of the state, will determine relative prices