Economic and business stories have dominated Western press attention to China in 2005, perhaps more so than in any previous year. Perceptions of a dynamic "rising China" have burst into American consciousness in an unprecedented fashion. Ironically, however, leadership decision making on economic policy in China seems to be sliding back toward a more bureaucratically dominated and less imaginative pattern. From a policymaking standpoint, there has been little significant innovation during 2005. This article reviews developments in four areas: currency revaluation, share conversion, consolidation of firms, and the new industrial policy for the steel industry. Taken together, the trends in these areas suggest a move toward cautious, incremental, and bureaucrat-dominated policymaking as well as an effort to step up the pace of corporate restructuring.

Standing apart from the many recent reports of rural instability is an account of a different nature: It singles out a township in a region of Zhejiang Province known nationally for its flourishing market-based prosperity, where innovative reforms have been implemented to enhance popular participation in political decisions. Although these reforms are intended to strengthen the rule of the Chinese Communist Party in local affairs and not as a step toward democratic transition, they do suggest that the growth of "social capital" at the local level is bringing about greater public roles in policymaking, improving local governance, and perhaps even changing, albeit to a limited degree, the way the party operates at the local level.

How doing business with strangers creates the extraordinary web that is the modern economy. By Russell Roberts.