China's Transition Economy Essay examples

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China's transition from a planned economy to a market economy began at the end of 1978. When China started the process, the government did not have a well-designed ‘blueprint’, and so the approach to reform can be characterized as experimental. The process of reform has been gradual and incremental in nature and is still incomplete. In fact, China can’t be treated as a full market economy nor can it be treated as a centrally planned economy in which the Government substantially influences prices of goods or monopolises international trade. It is somewhere in between.

Reform measures:
1) The introduction of enterprise taxation.
2) The new wage system which linked with the productivity of workers (this would give workers incentive to
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Trade was monopolised by centrally controlled Foreign Trade Corporations, under the control of the central Government ministries. Other trade was not permitted.

Also, exports had state controlled prices set by the Foreign Trade Corporations under the foreign trade plan. Similarly, imports were sold to domestic firms and consumers at state controlled prices.

Fortunately, the trade regime has been significantly liberalised. China’s Open Door policy has dramatically reversed the ‘self-sufficient’ position of pre-1978, welcoming foreign investment and trade. Increasingly, China’s imports and exports are being determined by market forces. The ratio of imports and exports to Gross Domestic Product is 42:100 and China is now the 10th largest trading nation.

Formal trade planning has been abolished, but a number of central foreign trade corporations and large state-owned enterprises have been given selective monopoly powers to export and import strategic commodities (important resources that China had to ensure a steady supply of). This process has been termed as ‘canalisation’ by the World Bank (1994).

These commodities, shown in the table, represented approximately 4.6% of China’s exports and 19.4% of imports in
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