“Few countries have become rich through free-trade, free-market policies, and few ever will.”
— Ha-Joon Chang
This has been a pivotal point for the Chinese economy in the modern history. They revisit some of the extraordinary developments of the economy on the occasion of their 40-year anniversary of reforms and opening. The greater challenge put forward to them is to look forward to 2050 and see the aspirational goals of the Chinese Communist Party and its leadership.
These have been called China’s New Era. Gazing around three decades into the future has always been a leap of faith, but never more so when the United States, China’s most important trade partner has thrown the gauntlet of a potential trade war.
How does free market economy work?
A free market economy is a type of economy in which the allocation of resources is set solely by the supply and demand in the market. There is no intervention of the superior powers akin to government management in any of their activities within the market.
In other words, the free market is a type of the economy in which buyers and sellers are allowed to interact freely. The transactions between the parties are supported by mutual agreement on value while there is state involvement in the form of taxes, subsidies or regulation. While supporting the values and ways of the economy, there have been many models developed which individuals perceive and use to analyze the financial system.
Market areas in which the trade takes place are free to trade areas. They are not managed by the government’s ministry.
A renowned economist Mr. Smith had a novel describing the economic process as an “invisible hand” that would guide market economies. The invisible hand represented the responsibility of the assembly of products and services, and what they were priced at, within the economy. This was able to guide shoppers to participate and trade goods within the market freely.
Consumer freedom states that the economy is sensible. However, the elementary theory has a very important role. Shoppers wish to choose totally different merchandise and services that suit them within the economy, thus giving the producers an ability to expand or begin a business in conditions that suit them. During this phase, the employees opt for what they are doing akin to doing their job. For example, taking part in unions or organizations as long as they’re permissible by the law or amendment.
The government plays a tiny role as the driving force of market economies, they need intervention akin to subsidies of trade, license quotas and also the fixing of commodities to their lowest.
China growth model and its implications
China has delivered outstanding economic progress the globe has seen within the past period of time. Not only has it successfully raised its gross domestic product per person over 20-fold and upraised countless people out of impoverishment since it launched its reform-and-opening policy some four decades past, China has conjointly managed to become a worldwide leader in new technologies like Big Data, Artificial Intelligence, and mobile web applications.
It looks inevitable that a lot of countries and world leaders can dialogue whether or not China has established a brand new model of economic development.
Some individuals attribute China’s successful growth to its in-depth geographic area and therefore the homogeneity of its language, culture, and values—assets that are contributory in forming a large domestic market which propels its economic process. However, this doesn’t justify why China’s economy featured mammoth challenges before the launch of the reform-and-opening policy through the late Seventies. Although most people agree that this policy has played an important role in the delivery of China’s growth miracle, opinions diverge on that aspect of the policy they have put to test.
The prevailing perception before 2000 was that China’s success in the mainstay resulted from the encouragement it gave on promoting balancing forces. beginning within the agricultural sector, the allocation of labor step by step became determined by the market instead of government central planners. This transition place the proper individuals into the proper jobs, unleashed entrepreneurial initiative and created staff a lot of product. Once initial success with labor reform, alternative necessary inputs like land and capital were added step by step to promote economic growth. This inspired China’s economy to perform a lot better than comparable economies.
China’s plans may be to become the global leaders in terms of market control for tomorrow. But, it may pose a threat to the global economics and free-market system. The growth model of China has been considered as inherited from the cultures and value and the geographic location long prevailing with the nation. But, if the government policies are such that the buyer-seller interaction becomes hindered then, there is a possibility that the buyer and seller may become reluctant to trade in the nation which would impact the trading mechanism that they follow in other nations as well. It is to be seen if Beijing could take care of the growth model that could go hand in hand for the development of the entire region if not contributing to the world economics and market.