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China's Socialist Economy

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on 12 July 2015

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Transcript of China's Socialist Economy

China
China's Socialist Market Economy
China is ranked as one of the world's top countries in terms of its influence and economic strength.

Population: 1,393,783,836

GDP Growth (2014): 7.5%
China's Communist State
Definition of communism: a theory or system of social organization in which all property is owned by the community and each person contributes and receives according to their ability and needs

The Communist Party of China was formed in 1921, and was under Mao Zedong's control in 1927.

They followed the example of the soviet model of development through heavy industry with surpluses extracted from peasants. Consumer goods were left to secondary importance.

The current constitution was created in 1982 and been continually revised since. The constitution includes many civil rights: free speech, press, worship, the right to trial, and the right to own private property.
China's Economy
China's Economy: Socialist or Capitalist?
Controversy: although China is a communist state, is the socialist market economy she has a adopted beneficial to her own economic growth?
Capitalist Economy
: an economy in which each person has the right to invest money, to work in business, and to buy and sell, with no restrictions from the state

Socialist Economy
: A national financial system based on the public or cooperative ownership and administration of primary production capabilities.
In a socialist economy, production involves the goal of creating useful services or goods of value. Such economic systems typically employ central planning and use accounting systems based on the labor hours expended in production.

Socialist market economy: t
he economic model employed by the People's Republic of China, based on the dominance of the state-owned sector and an open-market economy, and has its origins in the Chinese economic reforms introduced under Deng Xiaoping.
So, what's the conclusion?
China's
Socialist Market Economy
Definition: an economic system in which industry and commerce are run by
private enterprise
within
limits set by the government
to ensure
equality of opportunity
and social and environmental responsibility.
The socialist market economy, developed through economic reforms that started in 1978 is the economic model employed by China.
Socialist Aspect
The Socialist Economy
: financial system based on the
public or cooperative ownership
of production where goods and services are produced based on usage value, subject to the needs of the society, hence
preventing underproduction and overproduction
and discouraging private ownership.

It
discourages accumulation
, which is assumed as the root cause of wealth imbalance across the society.
Free Market Aspect
Since initiating market reforms in 1978, China has shifted from a
centrally planned
to a
market based economy
and experienced rapid economic and social development.

GDP growth averaging about 10 percent a year has lifted more than 500 million people out of poverty.
Lacking?
Although the GDP of China has
increased
, the
welfare
of the people have been
neglected
dramatic increase in income inequality due to the implementation of economic reforms.

Although it has virtually eliminated poverty in urban areas and reduced poverty in rural ones, raising living standards, the
Gini coefficient of China is estimated to be above 0.45
Chong Xin Jie (04)
Lee Shi Yin (10)
15S7E

Support
successfully strike a balance between the “collective” and “capitalist” approach

Policies allow entrepreneurs and investors to take profits, but within state control.

State still wields power through the allocation of state resources and control of large-scale state-owned enterprises, which continue to dominate key sectors of the economy.

Currently, state-owned and state holding enterprises account for roughly half of all urban investment in fixed assets.
Thomas G Rawski
"The Rise Of China's Economy" June 2011

China’s economic boom demonstrates
capability
of Chinese society to produce individuals who operate effectively in
market systems
Thank You!
Although China is still a communist state, its economy is governed under the socialist market system.
demand curve for the perfectly competitive market, including all firms, is downward sloping
demand curve for individual firms is flat or perfectly elastic, as the it takes the market price, P.

This perfectly competitive market represents the
capitalist
economy, whereby freedom is given to private firms, showing that the capitalist economy would encourage the flexible changes in supply production
proportionate change in demand and supply of goods.

prices in socialist economy exceeding marginal cost shows violation of basic economic efficiency conditions

consumers confront prices with equal marginal costs

The private firm faces the same demand curve, whereby deriving its marginal revenue curve.

maximizes profit at lower output Qm and charges higher price Pm than in capitalist economies
Although the
socialist
system allows government intervention and income equity, the
capitalist
economy would however maximise profits, encouraging economic prosperity.
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