How China Escaped the Poverty Trap
Book by Yuen Yuen Ang
Afsana Rahman
Researcher, Dacca Institute of Research and Analytics – daira.
Overview of the book
In contemporary China studies, scholars often struggle to integrate China into social science theory. Some force Western models onto China, leading to misinterpretations, while others isolate it with China-specific theories that lack broader applicability. Yuen Yuen Ang, a professor at the Johns Hopkins University, offers a balanced alternative. In her book, How China Escaped the Poverty Trap (2016), published five years before China eradicated extreme poverty, she challenges conventional economic theories, providing a comprehensive perspective of China’s development. Her work bridges theory and reality, avoiding oversimplification and isolation while fostering a broader understanding on economic growth.
Yuen Yuen Ang’s book provides a deep analysis of how Chinese government policies, including market reforms and investment in human capital, played a crucial role in driving the country’s economic transformation. It offers valuable insights for readers seeking to understand how a nation can transition from poverty to economic prosperity through a unique and adaptive approach. China’s rise from extreme poverty to becoming one of the world’s largest economic powers within a relatively short period is a remarkable achievement. According to Ang, this success was not the result of directly applying Western economic models but rather the development of a distinctive approach tailored to China’s specific conditions and needs. Recognizing that Western models did not fully align with their realities, Chinese policymakers crafted an economic strategy that blended elements of socialism with market-driven reforms.
At the center of China’s economic system lies its socialist roots, where the state retains control over key economic resources such as land, natural assets, and major industries. This system emphasizes economic equality and aims to reduce wealth disparities by ensuring access to essential services like healthcare, education, and welfare. Unlike capitalism, which prioritizes private ownership and market competition, socialism places a stronger focus on social welfare. Over time, China strategically integrated market mechanisms into this framework, allowing for economic dynamism while maintaining state oversight.
One of the defining aspects of China’s transformation was its ability to transition from a purely communist system to a market-driven economy without experiencing the kind of collapse seen in other socialist states. This was achieved through a process Ang describes as “directed improvisation,” in which policies evolved alongside economic growth rather than adhering strictly to external models. Instead of viewing its institutional weaknesses as barriers, China treated them as opportunities for innovation.
A key example of China’s unconventional strategies is its approach to attracting investment. Through “on-mass personalized investment promotion,” officials at all levels leveraged personal connections to draw investors. The boundaries between personal and professional networks were deliberately blurred, allowing China to access resources that might have otherwise remained out of reach. This tactic helped inject much-needed capital into the economy, fostering growth and building a robust financial foundation.
One notable outcome of this improvisational approach was the phenomenon of “fake FDI” (foreign direct investment), where local businesses posed as foreign entities to secure preferential treatment. While this practice was unconventional, it ultimately stimulated capital inflows, strengthened industries, and contributed to China’s rapid economic development. As the economy matured, China shifted its focus toward high-quality investments aligned with long-term goals such as technological advancement and innovation.
Another crucial element of China’s growth strategy was regional specialization. Different regions were encouraged to capitalize on their unique strengths, allowing for a more diversified and resilient economic landscape. This flexibility enabled the country to adjust its development approach as needed, fostering sustained progress.
Ultimately, China’s economic success stemmed from its willingness to experiment, learn from mistakes, and adapt to changing circumstances. Rather than adhering to rigid economic blueprints, China continuously refined its strategies, demonstrating the power of challenging assumptions and embracing adaptability. Ang concludes by emphasizing that developing countries should not merely attempt to replicate existing models but instead build institutions alongside economic growth, improvising and evolving in response to their unique challenges and opportunities.
About the author
Yuen Yuen Ang is a Singaporean political scientist and author known for her influential work on China’s economic and political transformation. She is the Alfred Chandler Chair of Political Economy at Johns Hopkins University. Born in Singapore, Ang pursued her higher education in the United States, earning a degree from Colorado College before completing her Ph.D. in political science at Stanford University in 2010. Her academic career began at Columbia University, where she served as an assistant professor at the School of International and Public Affairs. In 2011, she joined the University of Michigan as an associate professor of political science. In 2023, she became the first newly named professor at the Center for Economy and Society and the Department of Political Science at Johns Hopkins University.
Ang’s research focuses on the intersection of industrial development, technological innovation, and political institutions, with a particular emphasis on China. She is widely recognized for her analysis of China’s economic policymaking, which she describes as “directed improvisation” a system in which the central government sets broad policy goals while local governments determine the specifics of implementation. Beyond academia, Ang actively engages in public policy discussions, contributing to renowned publications such as Foreign Affairs and Project Syndicate. She has also been featured in media outlets like Freakonomics Radio and The Ezra Klein Show. Her contributions have been widely recognized, earning her prestigious accolades such as the Peter Katzenstein Book Prize, the Theda Skocpol Prize, and the Andrew Carnegie Fellowship. Through her scholarship, Ang continues to shape global conversations on governance, economic development, and China’s evolving political landscape.
Context
How China Escaped the Poverty Trap was published in 2016, a time when China had already established itself as the world’s second-largest economy and was increasingly asserting its global influence. The book was written in the context of ongoing debates about China’s development model, contrasting it with Western economic theories that emphasize strong institutions as prerequisites for growth. Ang sought to explain China’s unconventional path to modernization, particularly how it transformed its weak institutions into engines of economic success. The book also responded to contemporary concerns about the sustainability of China’s growth, governance challenges, and lessons for other developing nations.
According to the author, every explanation of China’s development is correct but lacks completeness as a whole. At the beginning of China’s economic reform in 1980, the country’s GDP per capita was among the lowest in the world, placing it near the bottom of the UN’s Least Developed Countries (LDC) list. During this period of transition, a striking allegorical phrase emerged from the central government: “Wading across the river by feeling for stones on the riverbed.” This saying encapsulated the essence of China’s economic reform strategy taking steady steps, improvising, experimenting, and continuously learning. Decades later, the world bore witness to China’s remarkable economic transformation, a shift that would become one of the most significant success stories in modern development.
Ang critiques the traditional notion that economic growth must be catalyzed by foreign capital investments from developed nations. She highlights a paradox: if impoverished countries struggle to attract investments, how do they escape poverty? She points out that studies have often questioned the link between foreign aid and prosperity, with some even suggesting that aid has exacerbated corruption and hindered genuine development. Furthermore, the widely accepted Weberian model which posits that “good governance leads to growth” is problematic when applied to early-stage economic development. In China’s case, Ang argues, a rigid application of this model would have overlooked the value of local personal networks and the mobilization power of the communist apparatus, both of which played a crucial role in fostering growth.
A key argument in Ang’s book is that China leveraged its existing institutions, even its weak ones to stimulate development. Through case studies, she illustrates how local governments took bottom-up initiatives, mobilizing local resources to drive economic progress. The idea that nations must work with what they have harnessing human capital and even weak institutions is an empowering message for other developing countries. This perspective challenges the prevailing method of ranking institutions based on their distance from “global best practices” and instead encourages a pragmatic approach to growth.
The 2017 World Development Report on Governance and the Law supports this line of thinking by emphasizing three institutional functions essential for effective policy: making credible commitments, inducing cooperation, and coordinating beliefs and complementary actions. In the early stages of China’s development, these functions were often performed by informal institutions rather than legal frameworks. For example, investment commitments were not initially backed by strong legal protections but rather by personal relationships and trust between investors and local authorities. Similarly, cooperation among officials was driven by a strong performance management system rather than formalized rules.
Ang’s work urges scholars to engage more deeply with unconventional development models. Rather than dismissing countries like China, Vietnam, Rwanda, Bangladesh, or Cambodia as outliers, she argues that we should analyze how they evolved institutional solutions to address commitment, cooperation, and coordination challenges. Understanding these mechanisms could help other nations chart their own paths to sustainable economic growth.
The second part of Ang’s book discusses the theme of adaptability in governance. While adaptive approaches to development have become a buzzword in policy discussions, Ang brings a structured analysis to the concept. She emphasizes that successful adaptation requires empowering local agents to experiment with strategies, selecting the most effective ones, and leveraging diversity to create synergy. In China, this adaptive governance took shape through a combination of clear but flexible central goals, a decentralized system that granted local officials autonomy in policy experimentation, and a high-powered incentive structure that rewarded successful initiatives.
Her analysis of how party slogans and guidelines function as both directives and flexible frameworks is particularly intriguing. She suggests that China’s governance model allowed for variation and innovation at the local level while maintaining centralized oversight—a balance that contributed to its economic success.
A key area for consideration is the contestability of China’s policy arena. As the country grapples with complex trade-offs in development, could a more open policy-making process one that incorporates feedback from diverse stakeholders lead to better outcomes? Should the central government delegate more goal-setting and accountability to local jurisdictions to allow for greater regional variation in policy decisions?
Ang observes that China’s evaluation of local leaders has evolved to include multi-dimensional performance metrics, some of which are difficult to quantify. However, she warns that the limits of a “directed improvisation model” may be approaching. To ensure sustainable governance, China may need to transition toward a system where local policies are more directly influenced by citizens and where leaders are held accountable at multiple levels. Addressing corruption, for example, requires more than crackdowns, it demands strong checks and balances.
As China stands at a critical juncture, Ang’s work serves as a valuable guide for analyzing its next steps. Her insights extend beyond China, offering lessons for any nation navigating the complexities of development and governance. Moving forward, policymakers must consider the sources of adaptability: How can decision-making processes become more inclusive? How can minority interests be protected? How can emerging challenges be addressed in a way that fosters innovation and dynamism?
Ultimately, Ang’s book highlights the power of pragmatic governance, decentralized adaptation, and institutional evolution. Whether at a national, subnational, or sectoral level, these lessons provide a roadmap for thinking through the adaptive challenges of development in an ever-changing world.
Analysis and Critiques
Drawing on extensive fieldwork, including hundreds of interviews across China, Ang offers valuable insights into China studies, development studies, and social science methodology. Her work presents a broad historical account, spanning centuries of Chinese and Western history, exploring remote regions of China, and even drawing comparisons with mediaval England, colonial America and Nollywood. Ang swiftly and convincingly challenges Western theories of institutional development, instead applying coevolutionary analysis to construct her arguments.
One of her central claims challenges Weberian institutionalists, who typically assume that institutions fostering market development are the same as those that sustain them. Ang argues that weak institutions can play a critical role in market-building, not as second-best alternatives but as essential mechanisms that facilitate economic development. The fact that these institutions often appear flawed is, in her view, precisely the point is China’s development occurred not despite its non-Weberian institutions but because of them. She also moves beyond the conventional debate on whether strong institutions are a prerequisite for economic growth or a product of it. She carefully traces the coevolution of development and institutionalization in China, questioning long-held assumptions in both fields. For instance, she disputes the common belief among scholars of central-local relations that all officials seek promotion within the administrative hierarchy. Her research provides a solid basis for rejecting such simplifications.
Furthermore, Ang decisively dismisses the notion of a “Beijing consensus,” resisting the urge to replace one grand theory with another. Instead, she offers a set of insights from China’s development—a flexible set of ingredients rather than a rigid formula for success. To test her theories, she applies plausibility probes in diverse historical and geographical contexts, including medieval Europe, colonial America, and Nigeria’s Nollywood.
Despite the book’s strengths, scholars deeply engaged in specific debates may find some of Ang’s contributions cursory. For instance, her claim that resistance to reform was “non-existent” in China’s impoverished countryside is debatable and contradicted by accounts from scholars like David Zweig and Jae Ho Chung. Additionally, her assertion that regional inequality as a driver of China’s economic success is “less noticed and examined” does not align with well-documented studies on the subject. Similarly, her depiction of local governments shaping economic policy within central constraints is not a novel contribution to central-local relations scholarship.
Another critique concerns the book’s title and theme. While it suggests a focus on poverty and poverty traps, the book does not establish that China in 1978 was trapped in poverty, a condition implying structural constraints beyond individual control. The term “poverty trap” is not clearly defined in the book, nor does it appear in the index. However, these issues do not undermine the overall persuasiveness of Ang’s argument regarding China’s economic and institutional development.
However, China’s rapid economic growth has come at a cost. Environmental degradation, rampant corruption, and growing inequality pose significant challenges. While China has made strides in addressing these issues, its existing institutional framework may not be sufficient to tackle them efficiently. Ang’s analytical lens raises critical questions: What modifications in governance structures could have enabled China to adapt more quickly? Are current institutions equipped to manage these evolving challenges? What forces will drive the next phase of institutional evolution?
Conclusion
The book presents the idea that development is not a one-size-fits-all process but an evolving, iterative journey where weak institutions can be repurposed to facilitate growth. China’s success, Ang argues, was not about imposing best practices from advanced economies but about adapting and transforming its own system in pragmatic ways. According to the author, every explanation of China’s development is correct but lacks completeness as a whole. The broader lesson extends beyond China is, instead of waiting for ideal conditions, countries can catalyze development by working with what they have and allowing institutional change to emerge dynamically. Ang’s concept of “directed improvisation” aligns with the broader tradition of the “developmental state,” offering a set of generalizable hypotheses that emerge from an Eastern rather than Western context. Her work is remarkably well-written and accessible, making complex discussions engaging for graduate students and even advanced undergraduates. This book is essential reading not only for scholars of China’s development but also for anyone studying contemporary China and economic development more broadly.