Thursday, October 22, 2015

Chinese Economic System

The People’s Republic of China is a mixed economy that leans towards being more centrally planned, but has been changing in becoming more of a free market. The government has set legislation in which impedes the free flow of information throughout the country and outside world, most notably censorship on the Internet through what is commonly called the Great Firewall. A lack of information has the potential to influence an economic decision had the appropriate information been present. Another aspect of the Chinese economy that reflects its bias towards being more centrally planned is that a wealth of Chinese companies are owned by the state, rather than privately. These range from the transportation, construction, banking, health, shipping, energy, and agricultural sectors. Compared to other industrial powerhouses, China has only recently allowed for entrepreneurship on more visible scales in the last thirty or so years, officially recognizing the need for the private sector to supplement its state sector in 1987. China’s currency, the renminbi, also called the Chinese Yuan, was largely lifted of regulation on exchange rates in 1994, allowing for it to become valued by the market, albeit with limited control. Three years later, the Chinese government passed the Price Law, allowing for prices to be set by the market, but still with light management. Since the start of the 1980s China set up various special economic zones and development areas. The subsequent regions of China enjoyed greater economic free compared to the rest of the country. These zones include most notably Shenzhen, Shanghai Pudong, Tianjin, and Guangzhou, as well as fifteen others. Over the years, the Chinese government has reformed to allow the opening of markets to investors, lessen trading restrictions, and the increased protection of private property. Recently, China has been strengthening its fiscal policy to further boost its economy. This has been achieved through tax system reforms and government spending on projects such as infrastructure and has been in response to slowing economic growth and related concerns. As the Chinese economy continues to slow, the Communist Party will continue to make efforts to maintain its reputation on the global economic stage. 

"Still, the deceleration has been faster than expected by the Chinese leadership, which at times has fumbled as it tries to restructure the economy to rely more on consumer spending and services. That effort, which economists say is key to nurturing long-term growth, is making headway. But Beijing’s appetite for overhauls appears to be slowing as it moves to shore up the economy near term.

A major challenge is demand, both at home and for exports. Xiang Yili, general manager of Wenzhou Topteam International Trade Co., which exports stationery products, said sales at the closely held company fell 10% in the third quarter year to year and will probably do the same in the fourth quarter. The company, based in China’s Zhejiang province, has bought more automation equipment to cut costs but the outlook remains difficult, she said." - Wall Street Journal

Chinese GPA Growth Rate

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