Economic systems doesn’t remain static as they are always in transition. They are determined by history and culture of their people. A transition economy is an economy which is changing from a centrally planned economy to a free market. Transition economies undergo economic liberalization, where market forces set prices rather than a central planning organization. In addition to this trade barriers are removed, there is a push to privatize state-owned businesses and resources, and a financial sector is created to facilitate macroeconomic stabilization and the movement of private capital. The process has been applied in China as the country prepares for the once in a decade leadership transition within the ruling Communist Party. The world’s second biggest economy has undergone a massive transformation within the last 10 year. From rapid urbanization and economic growth to social and political development, China has marked many milestones and firsts in the past decade, highlighting its significance on the global stage.
Reasons for China’s economic transition
Citizens of China have been experiencing low economic growth due to government’s rigid long-range plans culminating in either vast shortages or surpluses. Furthermore, China was also falling behind Western economies which had adopted the free market economic system due to the slow technological advancements. The huge bureaucracy was inefficient causing individual workers lacking the profit incentive to do their best and increase their technological level to boost the output. Other than that, bureaucracy also caused the firms to be not profit-oriented can thus firms had no incentive to adopt innovative production methods or to produce good quality goods and services. These were some of the factors for China’s economic transition.
Effects of China Economic Transition
Riding the wave of rapid economic expansion, China’s growth engine has remained strong over the past decade....