The "transition" is the bureaucratic ossification of the Chinese regime, in which a gradualist approach over almost three decades has delivered startling economic results but has more or less exhausted itself and now faces a dead end.
Only by replacing the political structure with a more transparent alternative that includes checks and balances can new potential for growth be found. But the gradual reform of the economy by the Chinese Communist Party since 1978 has focused on avoiding the loss of absolute power.
Pei describes the emergence of a "decentralised predatory state", whose officials focus on their own enrichment and security at the expense of the state, the economy and the people. In such a country, with a fast-growing economy, an ideological and moral vacuum and unsupervised power, corruption is rampant.
Pei starts the book with a list of international rankings that you won't see in mainland media.
In a 1998 World Bank study of "quality of governance", China scrapes along in the bottom third alongside Cameroon, Honduras and Nigeria. A similar study from the same source ranked China 116 out of 199 in terms of "regulatory quality", alongside Papua New Guinea, Mali and others. This last ranking was significantly better than China's spot in a "voice and accountability" survey in which the country came it at 186 of 199, comparable to Belarus, Saudi Arabia and Afghanistan.
These and other government deficits will prove inseparable from China's economic fate, Pei says.
The policy aim is to increase prosperity but in a way that profits those with political power or those whose support the powerful need to keep their jobs. The state then becomes a vehicle for competitive profiteering. By preserving these distortions, gradualism creates the rents that grow alongside the economy.
Those distortions within the economy threaten to ultimately derail it and cause a political crisis. Behind impressive growth figures, the infrastructure of the state is thus growing increasingly unstable, brittle and volatile.
Growth no guarantee
"Contrary to the assumption that high economic growth can create favourable conditions for political opening, rising prosperity can actually remove the pressure for democratization," Pei writes.
Those who disagree might point to South Korea, Taiwan and others, while to Pei the nature of the originating autocracy distinguishes China from such examples. In China the focus on increasing wealth levels and the obvious success in partially doing so brings its own risks.
Pei delivers a well-argued and consistent critique of a trap in which China's economic reform process is increasingly stuck. Many substantial and interesting developments are examined.
Taking one as an example, he outlines how rural areas were the focus in the first stage of reform while cities and their chronically-inefficient state-owned enterprises continued to receive subsidies until the mid-1990s.
Urban residents kept their relatively superior health care, education and jobs while the emergence of a quasi-underclass of rural workers in China's thriving cities and their lower standard of living illustrates the destabilising distortions Pei writes about.
Another example, again to the detriment of the rural population, is the seizures of land with little or no compensation. Such instability can be seen as inevitable in a neo-capitalist system without enforceable property rights and decisions in the hands of unstable power centers, in which Pei sees the "trapped transition" conundrum.
Perhaps one major weakness of the book is the time span it covers. It extends only rarely beyond 2002. Much water has passed under the bridge since then, not least a further surge in economic growth. This is most evident in the several sectors he analyses in depth, particularly telecom and banking, both of which have accelerated in the last few years.
This leaves the door open for an update of Pei's acute and insightful examination of China's ongoing transition.
China's Trapped Transition by Minxin Pei, Harvard University Press, 2006, US$45.00
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