China’s Command Economy – Surprising factors
China’s Command Economy
A centrally planned economy is one where the government plans everything related to the economy of the nation. In a very loosely centrally planned economy, this will include the government becoming a partner of the key businesses in the country. In a very tightly centralized economy, each’s occupation is chosen by the government. The question we will answer in this article is; can a person become successful in a country whose government centrally plans the economy?
The way the Soviet Union operated was it controlled everything and all the workers in the country, entirely. Not only did the government manage all business activities, but it also led people to the point where it told them what jobs they would fill. In this system, no one was allowed to have any aspirations. It is easy to see. A tightly controlled centralized economy does not permit ordinary folk freedom of any kind.
Another type of similar government is fascism. In fascism, the government controls all industry. In other words, the government is the corporations, and the dictators of the government are the CEOs of these companies. In a non-fascist, loosely controlled centrally planned economy, businesses do exist, but the government oversees them and persuades them to do what it wants them to do by giving them tax breaks and punishing them if they do not follow certain regulations. In a tightly controlled centralized economy, the government controls business simply by using brute force.
The most important thing to realize about tightly controlled economies is they leave no room for individual freedom. If individuals were free, they could potentially cause a problem for the government because they may assemble and voice their grievances against the government. The government would have to shut these people up or risk losing control over the entire population.
An economy where individuals are free to invest and strive for success is called a free market economy. Only in a free market economy are all people not only allowed but encouraged to become successful. In such an economy, an individual is authorized to succeed or fail without government interference. If a person fails, he or she can try again. In this system, having the right to fail is part of living in a free nation.
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Chinese government policy does not allow direct investment in foreign markets. Therefore, they are unable to repatriate, on an individual basis, their dollars for foreign stock and bond holdings. The Chinese population has been putting their money to work by investing locally in property, precious metals and the Chinese stock market in an attempt to cover the spread between the 2.5% Chinese banks offer on savings versus their inflation rate of 5.1%.
Living without freedom and the right to say how the government will treat its people is living under tyranny. Tyrannical governments and centrally controlled economies go hand-in-hand. In fact, a problem we all should be aware of is the fact oppression can spring up in any country. It can start when the government tries to control some of its industry, even if it does so without using the threat of force. Another sign would be if the country’s leaders openly voiced objection to any group or faction of law abiding citizens.
China’s economy is expected to go up, in world rankings in the next two years. It is currently at the sixth largest but will likely to move up second largest by 2030. Recently China has had an annual GDP (gross domestic product) rate of six percent. Economists believe that it is likely that they will come in after the United States to get the second place position as the largest economy in the world.
Such an economy sets to present exciting business and capital market openings to foreigners over the next ten years or so, commented one of senior economist.
China’s economy throughout the precedent thirty years has transformed from a centrally designed system that was mainly closed to trading internationally to a more market-oriented economy that has a fast increasing private business and is a key player in the global economy.
As early as the 1970s, when collectivized farming ended, increased self-government for state projects, a foundation of branched out the banking system, stock markets’ increase, enlargement of the non-state subdivision, and the opening to foreign trade and investment. Yearly inflows of foreign direct asset went up to almost $108 billion back in 2008. China has applied reform in a slow but sure or piecemeal fashion.
The government promised to persist improving the economy and highlighted the need to augment domestic expenditure so as to make China less reliant on foreign exports for GDP increase in the future. As the US continues to struggle and recover from the global financial crisis, China has a head start to becoming the next superpower economy of the world.
Over the last 25 years, China’s economy has drastically changed. They went from a centrally planned system that relied heavily upon international trade, to a system that is now more market oriented.
In 2005, China had the second largest economy in the world; being edged out only by the United States. During this time, economic development is taking place mostly in coastal areas as opposed to central cities.
Over the past couple of years, the government has struggled with a couple of issues that has held the economy down. The first problem came when there was mass lay off at state-owned enterprises. Unemployment rose, and the government had its hands full trying to stop corruption, and reduce other crimes related to business. Environmental damage has also presented a lot of problems. The rapid growth took off so quickly that the state of the environment has become compromised.