Socialist Market Economy of China Shift Toward Capitalism Research Paper

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Updated: Feb 22nd, 2024

Introduction

China has constantly experienced high growth and development rate that is equivalent to 9.70%. The growth rate materialized since the fiscal 1970 when China instigated to lay emphasis on the open door policies and national reforms.

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In fact, this growth rate is not an upshot from the Chinese stringent adherence to the socialist principles. Nonetheless, the Chinese possible future comportment and economy maintenance will result from the fact that the state has abandoned the use of Leninism standards.

The scenario is mirrored in the progression realized in privatization of state owned corporations and the development of secluded firms. Thus, China is at the juncture where it is hardly regarded as Marxist nation.

Conversely, China appears to be in the primary phase of Marxism as formally referred to by the Chinese government. The economy is actually coming nearer to the primitive stages of capitalism as the creation of both bourgeoisie and proletariat took place at the same period.

Consequently, there is no doubt that an advanced platform of capitalism is the aim of China rather than a mature communist stage1. The Chinese government economic development benchmark is strategized based on the overall and moderately prosperous society.

The strategy is a scheme for rectifying the inequalities amid the underprivileged and the opulent through income redistribution. Moreover, the scheme presumes the rule of law and democracy rather than the rule of men and autocracy apart from presuming the private ownership and marketplace economy.

In general, China might plunge into the ploy of crony capitalism if the government disregards building such organizations. The Chinese confederacy with other states will be a reality in case China moves to an egalitarian political system from the tyranny of one party, the Leninist Party.

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Indeed, it is forecasted that China will continuously attain higher growth rates than other developed nations due to the benefits it exploits by embracing capitalism. With respect to GDP, China will probably supplant the United States of America as the leading global fiscal influence before the FY 2050.

It will be a great success for China bearing in mind the resilient probability of future increase in Yuan value against major coinages2. This research paper examines aspects that could make China to be either successful or not in the future as the country shifts from socialism towards capitalism.

Why and why not China will be prosperous in the future

The economy of China grew quickly from the fiscal 1980s resulting into a standard yearly real Gross Domestic Product growth rate of nearly 10.0%.

In fact, the United States is currently the largest world economy though it could be surpassed by the second biggest global economy of China by the financial year 2015 in terms of the PPP (purchasing power parity).

Despite these remarkable achievements, in the recent years, China has amassed numerous ecological, social, and economic contradictions that make the modern capitalism model adopted by this nation to be improbable feasible in the subsequent 10 to 15 years or past the medium term.

Furthermore, to attain the premeditated financial development rate, the republic of China robustly sells nearly all commodities to the overseas souks, anchors on the abnormally elevated rates of business ventures, and exploits a pool of its economical workforce.

Thus, while most world capitalist economies continuously struggle to overcome economic downturn and stagnations, exports from China are likely to realize excellent but slow growth rates in the years to come.

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On the other hand, from the annual growth domestic product reported by China, 50.0% accrues from the growth in investments.

The portion of principal proceeds plummet as a result of the surplus reserves and this may subvert the monetary scheme of China given that various types of amount overdue including depository mortgages were utilized in financing most of the Chinese business ventures.

Perhaps, the most sustainable investment levels could be approximately 30.0% of the total gross domestic product. Nevertheless, in order for the investments to be lowered by nearly 20.0% of the real GDP, there must be an increase in the domestic expenditure by an equivalent amount.

Many families rely on salaries as the major income supply. Therefore, for the domestic expenditure to increase by that amount (20.0%), nearly 15.0%-20.0% of the national income ought to be reallocated to the workforce from the capitalists3.

From this, it is apparent that the republic of China could encounter the capitalists’ group strong resistance.

Amongst the societies of China, various collective advocates as well as scholars have consistently argued that the republic of China should reorganize the market-founded financial restructuring.

For instance, the control of the communal manufacturing modes must be revitalized whereas the assets and revenues ought to be reallocated to the underprivileged from the affluent so that collective permanence could be improved. The ‘new left’ refers to such activists and scholars.

Most of these groups dubbed ‘the Maoists’ offer considerate perception regarding the Marxist history of the Chinese Maoist. The Maoist societal foundation in the year 2000 was restricted to the elderly national sector employees that were compelled to suffer in the 1990s privatization.

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The mounting social and economic inequalities in the past years show that the Maoist got support from the new working class and urban middle class stemming in China4.

Bo Xilai endeavored to moderate the communal restructuring program and this was partially supported by the Maoism mounting pressure.

Actually, Bo Xilai concentrated on the promotion of the private and state owned enterprises concurrent developments, increased the level of public housing investments, and eradicated the local capitalists’ linkages with organized crimes instead of encouraging the outright privatization embraced by most Chinese.

Thus, there is much political significance attached to current Bo Xilai’s purge. The purge implies that the Marxist party was dedicated towards pushing on with the liberated souk-oriented fiscal restructuring devoid of the critical societal developments.

In the short run, the path could be beneficial to the Chinese capitalists. However, the course could apparently step up the numerous contradictions faced by China and probably set up an environment that encourages the overall societal outburst in the budding future.

Past experiences from Poland, South Korea, and Brazil suggest that when there is an increment of over 70.0% of the entire workforce working in the nation’s non-agricultural sector, then the lower class could possibly materialize as the most influential social and political force.

Hence, these classes will demand for the political democracy, social welfare, as well as higher wage rates. From the current statistics, the non-agricultural employees found in China now make up nearly 60.0% of the entire workforce while the yearly growth rate share is approximately 1.0%.

When it continues at the current rate, then the workforce shares in the non-agricultural sector may surpass the decisive 70.0% threshold by the financial year 2020.

In case the existing capitalists systems embraced by China become unsuccessful in accommodating the demands placed by China workforces by 2020, the probability of political and economic crisis could be possible5.

The development of the Chinese capitalism occurred at the expense of immense ecological degradation. In fact, based on report filed by the living planet, the environmental track in China materializes to be above two times the bio-capacity owned by China.

This implies that, compared to other capitalist states, China hosts most of the globally contaminated metropolis while nearly 40.0% of the lands within the Chinese territories are currently degraded.

Besides, the Water Resources Group reported that China was in the verge of facing water deficits amounting to 25.0% of the estimated water requirements in China by fiscal 2030.

Therefore, within the subsequent two decades or even one decade, the environmental, social, as well as the economic catastrophes would probably merge in China causing the existing capitalist model to collapse.

The manner in which the state will resolve such catastrophes will immensely influence the whole world, not mere influencing the future of China as a state6.

Chinese shift to capitalism from socialism

China is pushing forward with capitalism whereas it has temporarily upheld its cover in socialism. It is subsequent to the proposed efforts towards modernization that China introduced the open-door procedures and reforms during the Third Plenary Conference, which occurred in the fiscal 1978.

The realities in an economy have wafted progressively outside the authentic ideologies of socialism. Further, the secluded corporations have presupposed the leading role in economy in preference to the state owned enterprises to foster future success in China.

Fresh elucidations have been fashioned to vindicate a solitary party rule of the Communist Party in order to match the situations of economic epochs. Thus, China is in the initial stages of capitalism that will ensure victory according to the verdicts of proletariat and bourgeoisie.

The whither social democracy

The old-style socialism is established on public ownership centered on state owned enterprises, resource allocation built on planning, and income distribution. Success is paramount in the prospective China as this runs counter to capitalism features.

The characteristics of capitalism in China are eminent and are based on private ownership, resource allocation derived from the principles of marketplace, as well as income distribution centered on the production factors.

The conduit of regular switching and reforming one at a time the three pillars of communism with those of capitalism will help China achieve its economic success in future. The Chinese government has re-distributed proceeds and authority through the execution of reforms to lower level corporations and administrations.

As a result, China currently centers on denationalization by way of ownership reforms and gets on board to introduce the mechanism of the flea market to improve the national economy.

The initial reform was the steady desertion of income distribution amongst labor between the fiscal 1978 and 1992, which has kept on boosting the economy of China. In the sector for agriculture, schemes centered on domestic units were introduced while the collective plights of individuals split up.

In the meantime, the Chinese ruling classes embarked on disregarding the quest for proceeds in the business border. In reality, all units found in the financial system started pursuing earnings and in turn rejuvenated the market of china.

The marketplace forces and the leading Chinese economy performers were the economic planning and state owned enterprises.

However, the state owned financial institutions non-performing loans difficulties to the Chinese corporations were deteriorating7. The economies thus chipped in to acquire slow but sure a boost from such a situation.

Chinese change from Leninism to capitalism has enabled the nation to be made up of various classes. These classes are based on the ownership status of the cultural, economic, and political resources that relatively play part in the growth of the economy of China.

To be precise, the Chinese society comprises of five social rankings and ten social levels in the economy making. The social layers are classified such that 3.10% are partly or unemployed individuals, 44.0% farmers, 22.60% industrial employees,12.0% tertiary diligence workers, and 4.20% industrial personnel.

Furthermore, the set-up has 4.80% clericals, 5.10% are technical experts, 0.60% secluded entrepreneurs, 1.50% medium, and high corporate managers, and 2.10% encompass community and government frontrunners.

Conversely, top, medium top, medium middle, medium lower and bottom layers refer to the Chinese social ranking. For this reason, there is an anticipated growth of economy.

Equally, the medium lower strata social ranking of farmers and industrial workforces fall under that of corporate managers and secluded entrepreneurs8.

The East Asian states and Soviet Union have totally denied the conservative ideology of Marxism. Nonetheless, China will still grow economically over the coming years since it has not entirely repudiated its traditional Marxist principles.

In fact, China reviews this ideology bit by bit since the commencement of the year 1980 given that it is an ideal scheme for the distant future. Successful economy is evident in future as the primitive stage of capitalism is supposed to last for no less than one century.

China had to alter their philosophy to that levitating productivity to a high level when introducing open-door policies and reforms. Hence, it enabled the state to seek the worth of being at an advanced stage of Marxism as opposed to how it was in the earlier decades.

The basic idea augments productivity by dint of instituting capitalist elements. Hence, China allows for private ownership through the introduction of collectivist market economy to maintain the future development of the economy.

The evasion of the course to buddy capitalism

The other reform that will enable China to become successful economically in future is the evasion of conduit to crony capitalism. The hotbed for dishonesty was shaped through the government’s superfluous participation in business transactions and the distribution of economic resources.

This would change the future economic status since the control of resources will be contrary to how it appeared during the epoch of planned financial system. Thus, the political reforms in the Chinese government will see the economy of China being impressive in the near future.

While in the way to an advanced system of capitalism, China is moving towards economic triumph9.

In order to rectify the gaps amid the affluent and the underprivileged, the established type of entrepreneurship does not just assume the organizational provisions, but similarly the classified rights as well as the souk financial system.

These reforms along with democracy and the rule of law aim at redistributing economic resources.

China proceeds towards the advanced form of capitalism

Based on study reports, while trying to overcome the tribulations conveyed by the misguided equality during the period of planned economy, China employs a moderately general successful society that stresses justice.

Indeed, the collective equal allocation of assets has enabled the Chinese standards of living to keep on improving. However, success may be deterred by the widened gap between the deprived and the affluent, the alignment of conflict amongst east and west, as well as amid metropolises and rustic regions.

The appropriate growth and social stability of China might be endangered by the augmenting injustice observed in the social order. Therefore, China has presented a policy targeting an overall moderately prosperous society to ensure future sustainable development and economic stability10.

The other main purpose of the overall moderate prosperity objective was to speed up the growth of rural, western, and middle zones through creating harmonious society.

Consequently, a scientific insight of development guideline to develop the whole Chinese society in a balanced and sustainable manner with citizen’s desires was initiated. To make future economic growth certain, Chinese government has placed this guideline into five concords.

These encompassed harmonies in development between open-door policy and the domestic growth as well as improvement in harmony amid nature and the individuals.

Besides, China initiated harmony in the development concerning the society and economy, harmony in regional improvement, and the development in harmony stuck between rustic expanses and conurbations. Projections suggest that this scenario will help China develop more and more over a long period to come.

On the other hand, the inevitable political reforms have surfaced in China to steer the nation towards an advanced form of capitalism. The degree of separation of economics and politics including free economy and political autocracy is coming to its bounds.

The conservative socialist ideology encouraging class struggle has lost its petition. The appeal is lost in regard to the societal interests and diversifying principles with the Chinese evolving financial system.

Hence, the marketplace and economic growth is transforming the Chinese society into a contemporary industrial status a part from raising living standards. The Chinese citizens have shifted their values and demands from the participation that is more political to their changing lifestyles.

As a result, they form diverse interest factions that increase growth in the economy of the nation. Generally, China keeps on developing economically over time because Leninist Party cannot cling on to control devoid of the backing from the escalating social forces of capitalists that has fully-fledged.

Future success

In the opening half of the twenty first century, rather than attaining advanced socialism stage, China continued to evolve towards attaining mature capitalism. Based on these procedures, the Chinese chronological actions are still anticipated to take place sequentially by the end of the fiscal 2050.

First, China is set to surpass the United States to emerge the global biggest economic influence with respect to the gross domestic product. Second, the Leninist party autocracy eminent under the one-party system ended paving way for capitalism. Third, the mainland was to be peacefully unified with Taiwan.

China is set to surpass the United States to emerge the global biggest economic influence

China is set to unite with Taiwan after the state democratized its administration. In fact, this could be the last decisive moment for China as the country gears towards succeeding the United States with respect to GDP.

However, the timing of this action rely mostly on the fluctuations of the Yuan rate measured against the US dollar and the prospective real growth rates variations amid the two states. The GDP for China in the financial year 2004 was just 1.93 trillion dollars.

This value was equal to the United States 16.40% of the total eleven point seven four trillion dollars level. In case, the yearly development rates were 3.0% and 7.0% for the USA and China respectively, the magnitude of these states’ economies can hardly be overturned until the fiscal 205211.

However, it is likely that that the China Yuan could considerably appreciate against the United States of America dollar before the projected time elapses.

The mainland to be peacefully unified with Taiwan

Capitalism in China could be viable depending on the mode used to unite Taiwan and China. Basically, the matter includes whether the strategy to be used hardly incorporates or incorporates the armed forces.

Provided the communist rule ends while the mainland emerges to be additionally powerful, then the passive merger could emerge as veracity.

To be successful, the country’s (China) communist party targets three key aims. For instance, to unite with Taiwan, maintain elevated economic development rate, as well as the one party dictatorship, yet such aims could hardly be realized concurrently. That is, each aim ought to be forfeited to realize the remaining aims.

The prospective cross strait correlations may pursue a single scenario from the available scenarios namely, the peaceful union, unification via the armed force, and abandoning the merger to maintain the status quo. Out of the possible scenarios, China could pursue the peaceful merger and this will enhance capitalism.

The Chinese financial systems

In the fiscal 2013, there are various powerful and resourceful institutions in China including the regulatory commission and the central bank. China thus has powers to ensure that regional states banks with negative influences are exempted.

Furthermore, China effectively attended to the political loans subject that blew up in the financial years 1980s and 1990s. The institutions acted in double ways in the fiscal 2003 and 1998 whereby it created bad banks and recapitalized other financial institutions or banks.

From this time, the regulatory commission (CBRC) assumed the challenging sensible capitalization principles (Basel III) whereas various states such as the USA declined to implement them.

Moreover, the financial systems enable the family units to have privileges to acquire loans based on strict rules, which make considerable individual down payments12. Thus, no credits were offered to the households that wanted to obtain successive acquisitions.

China prohibits households from acquiring more than three assets. This allows the country of China to stabilize prices of properties situated in bigger metropolis. However, the energy, country land, capital, and the labor force prices ought to be liberalized while the capital markets should be utterly changed.

Most countries from the west lack the means of acting in support of the market efficiency dogmas. In fact, the government of China managed to retain the long-standing strategic visions via controlling the monetary and financial policies, as well as economic planning13.

Conclusion

The type of impacts imposed by the recent transformations in the Chinese political regimes alongside the recent economic development should hardly be overlooked.

In fact, up to the fiscal 2020, the number of employed Chinese will continue to be high despite the presence of young individuals aged from fifteen to twenty-four years.

Despite attaining the Lewis turning point, the decline in the employees’ influence could be ongoing and will instigate from the highest level possible. Besides, China seems to have various reformation leeways for reacting willingly.

From the economic growth rate perspective, China is set to surpass the United States. However, the level of inequalities coupled with the mounting level of impunities and environmental degradation make China to appear ill prepared for capitalism. It is worth noting that China could be triumphant in the future.

Bibliography

Coase, Ronald and Wang, Ning. How China Became Capitalist. London, UK: Palgrave Macmillan, 2012.

Das, Mitali and N’Diaye, Papa. Chronicle of a Decline Foretold: Has China Reached the Lewis Turning Point? IMF Working Paper, 2013.

Hung, Ho-fung. China and the Transformation of Global Capitalism. Baltimore, Maryland: JHU Press, 2009.

Hutton, Will. The Writing on the Wall: China and the West in the 21st Century. New York City, NY: Little, Brown Book Group Publishers, 2008.

Li, Minqi. The Rise of China and the Demise of the Capitalist World Economy. New York, NY: Monthly Review Press, 2009.

Redding, Gordon and Witt, Michael. The Future of Chinese Capitalism: Choices and Chances. London, UK: Oxford University Press, 2007.

Redding, Gordon. The Spirit of Chinese Capitalism. Berlin, Germany. Walter de Gruyter, 1993.

Tselichtchev, Ivan. China versus the West: The Global Power Shift of the 21st Century. Hoboken, New Jersey: John Wiley & Sons, 2011.

Walter, Carl and Howie, Fraser. Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise. Hoboken, New Jersey: John Wiley & Sons, 2012.

Yeung, Henry. Chinese Capitalism in a Global Era: Towards a Hybrid Capitalism. London, UK: Routledge, 2003.

Footnotes

1 Walter, Carl and Howie, Fraser. Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise (Hoboken, New Jersey: John Wiley & Sons), 2012.

2 Redding, Gordon and Witt, Michael. The Future of Chinese Capitalism: Choices and Chances (London, UK: Oxford University Press), 2007.

3 Redding, Gordon. The Spirit of Chinese Capitalism (Berlin, Germany. Walter de Gruyter), 1993.

4Li, Minqi. The Rise of China and the Demise of the Capitalist World Economy (New York, NY: Monthly Review Press), 2009.

5 Tselichtchev, Ivan. China versus the West: The Global Power Shift of the 21st Century (Hoboken, New Jersey: John Wiley & Sons), 2011.

6 Hung, Ho-fung. China and the Transformation of Global Capitalism (Baltimore, Maryland: JHU Press), 2009.

7 Hung, Ho-fung. China and the Transformation of Global Capitalism (Baltimore, Maryland: JHU Press), 2009.

8 Redding, Gordon and Witt, Michael. The Future of Chinese Capitalism: Choices and Chances (London, UK: Oxford University Press), 2007.

9 Hutton, Will. The Writing on the Wall: China and the West in the 21st Century (New York City, NY: Little, Brown Book Group Publishers), 2008.

10 Yeung, Henry. Chinese Capitalism in a Global Era: Towards a Hybrid Capitalism (London, UK: Routledge), 2003.

11 Coase, Ronald and Wang, Ning. How China Became Capitalist (London, UK: Palgrave Macmillan), 2012.

12 Coase, Ronald and Wang, Ning. How China Became Capitalist (London, UK: Palgrave Macmillan), 2012

13 Das, Mitali and N’Diaye, Papa. Chronicle of a Decline Foretold: Has China Reached the Lewis Turning Point? IMF Working Paper, 2013.

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IvyPanda. 2024. "Socialist Market Economy of China Shift Toward Capitalism." February 22, 2024. https://ivypanda.com/essays/socialist-market-economy-of-china-shift-toward-capitalism/.

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IvyPanda. "Socialist Market Economy of China Shift Toward Capitalism." February 22, 2024. https://ivypanda.com/essays/socialist-market-economy-of-china-shift-toward-capitalism/.

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