Which leaves the speculation if China will stay where it is currently in its reform or go more liberal with their policies or even more conservative.
Monday, August 30, 2010
China "Reversing reform"
The Chinese government, since 1978 has experienced a rather planned economy which, has been moving towards a more of a capitalist approach in recent years. China has always made sure that they had a majority share of the firms which are established in their country. This article is addressing how China, now, is contemplating wether to get more government control in the economy once more. One problem is for companies who wish to enter the market have to compete against government run firms, which is rather challenging for a company facing bias from the government. Chinese companies who have the benefit of being state-run also as the, "third danger: the growth of a wealthy, state-supported oligarchy creates a powerful constituency against reform."
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3 comments:
So is this recent government intervention going to be temporary? Or considering China's previous economic system will government intervention continue?
Seeing that the government easily intervenes, will private firms be motivated to stick around, when state-owned firms benefit largely from on and off intervention?
Interesting comment especially about the actions of private companies. I was more interested in how this policy would hamper innovation because that would result in reduction of long term growth rate. This lack of new ideas is what Paul Romer mentions in his interview. However, I must recognize that it depends on if the state owed companies do not produce innovative ideas and strategies themselves. After all it was Schumpeter who said that market power will result in the death of capitalism but he was wrong.
I would also question whether the Chinese gov't would be able to significantly reverse it's economic path. China's rapid growth has been able for the most part to pacify its populace about their limited political freedoms, but should they being to infringe on their newly found economic rights and their ability to improve their situation in life, it would not be at all surprising if there was severe political backlash that would make such a reversal unsustainable.
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