China has been a remarkably successful economy since its adaptation of market-oriented reforms in 1978. The country's real GDP growth has averaged about 9% each year from 1979 to the present (Naughton, 1995). Vietnam has also gone through a terrific economic development after the country's transition process from centrally-planned economy to a market economy and it also gone from a poor to a middle-income country in just 20 years. .
.
Over the past five decades, East Asia has emerged as a region with several spectacular stories (i.e. Hong Kong, Singapore, Taiwan) of catch-up development. Both China and Vietnam have achieved remarkable economic growth since their economic reforms. Scholars (i.e. Popov, 2007) argue that the transformation of these two countries was caused by the adverse supply shock that resulted from deregulation of prices and change in relative price ratios that created the need for reallocation of resources in order to correct the industrial structure inherited from centrally planned economy. The end of Cultural Revolution in China in 1976 revived the two competing forces of institutional centralization and accelerated growth, which in contrast requires decentralization (Riskin, 1987). Two years later, in 1978, a plan of reform was adopted to deal with the imbalances in the economy. The transition strategy undertaken by China is termed a 'dual track'' reform path because there is both a planned and a market part of the economy. In this dual track path, there was not only one single reform attempted at one time, but different programs were also tried simultaneously until the new reform measure could replace the old system. In the case of big-bang reform, the old system is usually destroyed before the new system takes place. .
Vietnam has gone through a similar transformation over the past 20 years and shifted its economy from a centrally planned economy to a Socialist-oriented market economy.