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How China Did not Transform into a Market Economy

  • Jorge MirandaEmail author
Chapter

Abstract

China’s remarkable economic performance since the process of economic reforms began in 1978–79 is described by some as involving a transformation into a market economy. This characterization, while appealing, is inaccurate. What China did was to modernize its non-market economy by re-creating markets, abandoning central planning, and introducing some degree of privatization and opening to foreign trade and investment. Because China’s revitalized non-market economy is export-dependent, policies have been engineered to provide Chinese producers with artificial cost advantages consisting of heavily distorted factor, raw material and energy pricing. The Chinese Government also regulates industry conduct {regulation of industry conduct} to prevent “excessive competition” amongst Chinese producers. Finally, to assure that China’s industrial structure is sufficiently concentrated on high-value goods, the Chinese Government nurtures sectors, products and even production processes that it views as strategic or involving “cutting edge” technologies through development programs which result in further cost assistance, the regulation of market entry and scale of production, and even the provision of subsidies. So China has become an economic success story, but a market economy it is not.

Keywords

China Non-market economy Distortions Factors of production Regulation 

Supplementary material

Copyright information

© Springer Nature Singapore Pte Ltd. 2018

Authors and Affiliations

  1. 1.International Trade Group, King & Spalding LLPWashingtonUSA

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