In standard western economic textbooks, state planning and market competition are mutually exclusive. Thatcher and Reagan brought western capitalism into the neoliberal phase by claiming “Government is not the answer. Government is the problem”, putting market fundamentalism on the altar. On the other side, Soviet central planning proved rigid and wasteful, leading to the eventual collapse of USSR.
Observing and learning from others’ development path, China went through three distinct economic models in the past 70+ years –
- 1949 – 1978, emulation of Soviet central planning phase, which provided the country a heavy industrial foundation but failed to deliver an adequate standard of living
- 1978 – 2012, free-wheeling laissez faire full-on capitalist phase, which saw rapid economic growth, rising standard of living but also wealth disparity, environmental degradation, and low value-added industrialization
- 2012 – now, mixed state planning and market competition phase, which is featured by state-led industrial upgrade programs, intense market-based competition, rapid improvement in industrial sophistication, and hopefully rise above middle-income trap to become the leading industrial powerhouse
The current model is antithetical to western mainstream economic theories but has led to clear success stories like the Made-in-China 2025 program (https://huabinoliver.substack.com/p/revisiting-made-in-china-2025-mic25).
I thought it would be interesting to discuss the features of this unique China model and the implications.
The two parts of this model – state planning and market competition – form an integrated approach to national economic development.....
