China's Economic System

-Tarini Gandhi

China, a communist nation in East Asia, is the world’s most populous country. Its vast landscape encompasses grassland, desert, mountain ranges, lakes, rivers and 14,500km of coastline.

China has a 'socialist market economy'. This type of economy presents a mix of the distinctive attributes of both market and planning economies- it is based on the dominance of the state-owned sector and an open-market economy. 

Since 1949, the Chinese Government has been planning and managing the country's economy. In 1978, Deng Xiaoping introduced certain capitalist market concepts and consequently, the Chinese economy began to show massive growth, averaging 10% GDP growth over the last 10 years. China's economy is influenced by market forces, and capitalists are involved, but China's Communist Party does not believe that capitalists run their economy. 

History of the Economy

Economic reforms started with the target of focalising on agricultural activities in the country. During 1970-1980 Chinese leaders tried to change the focus of the agriculture from farming to household activities. Reforms also included the gradual liberalisation of prices and fiscal decentralisation. As per the reforms, more independence was granted to business enterprises owned by the state government. Soon, several private enterprises were established within the service sector. As the banking system diversified the Chinese stock markets started to develop too. Dang Xiaoping invited foreign investment in Chinese industries. 

Today

Under Xi Jinping (Communist Party Secretary General), China has voiced the need for economic rebalancing and a shift of power from state-owned or local enterprises to the household sector. Reforms to improve labour mobility have sadly gained to traction. Xi Jinping began his term pledging to take steps against corruption, although corruption is still rampant. 

Economic Challenges Faced by the Chinese Government

(a) reducing its high domestic savings rate and correspondingly low domestic demand
(b) sustaining requisite job growth for millions of migrants and new work force recruits
(c) curbing corruption and other economic violations
(d) reducing environmental damage and social strife caused by the rapidly growing economy

Although China has several pressing economic issues to address, China's economic system can be described as interesting at the least. It has made a successful transition towards a semi-market economy since 1978. It has a remarkable economic growth rate and has grown at 10% per annum for more than 3 decades. Rising incomes have taken more than 300 million people out of ‘dollar a day’ poverty which is extremely impressive and commendable. 

Works Cited

http://www.heritage.org/index/country/china#

http://www.china.org.cn/english/features/38200.htm

http://www.globaltenders.com/economy-china.htm

http://www.fsmitha.com/h2/ch37-econ6.htm

http://www.forbes.com/sites/realspin/2014/10/02/what-drives-chinas-success/

http://www.bankpedia.org/index.php/en/126-english/s/23712-socialist-market-economy

http://www.economywatch.com/world_economy/china/structure-of-economy.html