What type of economy does China have? China’s economic system is so complex that you may not attribute a single form of system to it; some consider it as a mixed economy while other authors see it as a socialist state with some market economy features. China started as a pure socialist country in 1949 when it was founded but has changed to an economic system with features of a market economy that is centrally planned. This system is not a mixed economy because it doesn’t qualify to be considered a mixed economy, nor is it a capitalist system. The government of China describes its economy as “Socialism with Chinese characteristics”. So what kind of economy does China have?
What type of economy does China have?
China operates an economic system known as a Socialist Market Economy. This economic system is not exactly the same as a mixed economy because the government controls the means of production while the allocation of resources is determined by the market. In a mixed economy, the government and private individuals may own some businesses with the government intervening and regulating the market occasionally to prevent market failure or prevent economic instability.
A socialist market economy is a system in which the means of production are owned by the state but the allocation of resources is determined by the market. This type of economy has been advocated by some communists as an alternative to the traditional centrally planned economy.
The basic idea behind China’s socialist market economy is that the state would own the means of production, but decisions about what to produce and how to produce it would be made through the interaction of consumers and producers in the marketplace. Prices would be determined by supply and demand, and businesses would compete with each other to produce goods and services that people want to buy.
In this China’s type of economy, the government also undertakes business and commercial activities. Private individuals are allowed to own businesses as well and sometimes, the government and private individuals run the businesses together. However, the factors of production such as land, labor, and capital are largely controlled by the government, this characteristic of a socialist market economy differentiates it from a mixed economy (in which the means of production are not controlled by the government).
Is the socialist market economy in China the same as a mixed economy?
China’s economic system is best considered a socialist market economy and it is different from a mixed economy. The type of economy in China is often regarded as a form of state capitalism. In state capitalism, the government also owns businesses for profit but factors of production are nationalized as state-owned enterprises.
This type of economy in China also involves the government dominating some publicly listed corporations, where the government has controlling shares. This means the Chinese economy maintains a large state sector in which the state-owned enterprises operate like private-sector firms and retain all profits.
What are the benefits of China’s socialist market economy?
Since China’s economy has dominant state-owned enterprises existing in parallel with market capitalism and private ownership, it has helped the economy to expand and boom. Private businesses in China now produce more than half of China’s GDP, employ more people than state-owned enterprises, and also contribute to most of China’s exports.