In the debate on postsocialist transitions, China has proved a contentious anomaly for proponents of the “big bang” and “gradualism” to explain. In particular, scholars have contended that China's combination of capitalist markets with socialist purchasing and marketing organs provided opportunities to gain rents by taking advantage of discrepancies between the two price mechanisms. Officials gain from such a pattern of rent seeking, which tends to stall reform efforts. Somewhat paradoxically, Andrew Wedeman argues that economic rents propelled China toward a free market economy, a novel contribution to the debate on postsocialist transitions.

The book offers a detailed account of Chinese local protectionism, primarily focusing on the second stage of China's economic reforms and attempts at retrenchment, 1985–92, a period rife with rent seeking. Protectionism took two distinct forms: (1) export protectionism, raw material and agricultural producers failing to surrender their resources to state procurement agents at fixed prices that fell below market-clearing prices, and (2) import protectionism, provinces or subprovincial units illegally blocking outside goods from entering their territories. Officials and producers engaged in export protectionism because the price scissors created by the state price mechanism favored industrial goods and urban consumers over raw materials and their mainly rural producers. Local officials sought to boost sales on the black market at premium prices and, in the process, capture rents. Import protectionism resulted from supply of a given commodity exceeding demand, thus pitting producers against one another, rather than producers against the state.

The book's most controversial argument is that local protectionism and rent seeking contributed to the development of open markets in China. Wedeman claims that protectionism and rent seeking both raised the prices of goods toward market-clearing levels and undermined state monopsonies. High black market prices increased the supply of goods, which ultimately brought the market-clearing prices down toward the state-set prices. As the price discrepancies narrowed, rents declined, and when supply exceeded demand, the state could remove its price and marketing controls without inducing hyperinflation as occurred in postsocialist economies that followed the big bang model.

Wedeman's analysis of export protectionism is insightful and compelling. He has combed Chinese language materials to provide a rich account of why export protectionism arose and how it forced the state to raise prices toward market-clearing prices. The explanation for export protectionism is less convincing, in part because it relies more on theoretical supposition than on detailed evidence like that provided in the chapter on export protectionism. Essentially, Wedeman offers a prisoner's dilemma in which localities may choose to cooperate (engage in free trade) or not to cooperate (engage in import protectionism). In the late 1980s, excess supply of goods caused localities to move toward a position of mutual noncooperation. The author contends that the central government played a crucial role in moving localities back to a position of free trade (in their “rational self-interest”), not so much with coercion as by convincing localities that it would serve as an “honest broker” (p. 211). As evidence of the commitment to playing such a role, the center cracked down on “triangular debts” and “debt chains,” which were series of debts that producers from one locale refused to pay to producers in other regions. As long as debt chains persisted, localities could not be sure that producers in other localities would treat local producers fairly. By Wedeman's own admission, the central government tried but was unable to eliminate the debt chain problem (p. 212). It is difficult to discern if the central government's well-intentioned actions assuaged local officials' fear of moving to a sucker's position by lowering import walls while other localities maintained their own barriers. Moreover, the presumed harmony of interests in open trade should be rooted in specialized production of different products, but in the cases described by Wedeman beer-producing regions tried to keep out beer from other regions and refrigerator producers tried to block imports from other refrigerator factories.

A second potential weakness of the book's analysis is the scant appearance of international trade factors. Foreign investors in China sought to open up the country's market and pressured central officials to alter domestic trade relations. Too, foreign trade likely affected trade scissors in China for tobacco, silk, cotton, and wool, the key commodities analyzed in the chapter on export protectionism. The rapid rise of China's textile trade gave strong encouragement to local officials and local producers to operate outside of the state's monopsony. Thomas G. Moore's (2002) China in the World Economy reveals how the quantity and unit prices of Chinese textile exports to the United States, for example, climbed during the late 1980s and early 1990s (pp. 83–93). China faced strong foreign pressure through the Multi-fiber Arrangement to rein in exports of cotton products and silk products (after 1992), which might explain the state's persistent pursuit of monopsonies on textile inputs. Imports of foreign cigarettes gave rise to the marketing of many Chinese cigarettes under false foreign labels. The premium prices paid for foreign cigarettes widened the price scissors for tobacco, creating greater incentives for noncompliance with state demands to sell tobacco to its agents.

The book's conclusion points out how the Maoist legacy of China's fragmented and decentralized economy, in contrast to the Former Soviet Union's more centralized economic structure, contributed to China's market transition. Wedeman contends that post-Mao China could not keep central control over rents in the same way that Russia's economy, which was rife with monopolies, did. Hence, the rent seeking of the late 1980s helped China to get prices to market-clearing levels and to undermine the already fractured state monopolies and monopsonies. From Mao to Market offers a rich theoretical discussion and detailed analysis of China's price reforms, focusing on a pivotal period, 1985–92, and undoubtedly it will spur debate among scholars of Chinese political economy and postsocialist transitions.