The China Horizon by Weiwei Zhang

Author:Weiwei Zhang
Language: eng
Format: epub
ISBN: 9781938134753
Publisher: World Scientific Publishing Company
Published: 2016-11-15T00:00:00+00:00

Fourthly, the mixed economy as an institution. China’s present socialist market economy is essentially a mixed economy, i.e. a mixture of “the invisible hand” and “the visible hand”, of the market force and state power, of the modern market economy and traditional humanistic economy, and of the state sector and the non-state sector. It aims to achieve the optimal allocation of resources through the market economy while ensuring macro stability and social justice through socialism. Despite some of its weaknesses, this institutional arrangement is on the whole a success and has produced the miracle of China’s dramatic rise. True, it has its share of problems, some of which are serious, yet overall, such an institutional arrangement has performed better than the Washington consensus. It is the Western countries, not China, that are experiencing the financial crisis, debt crisis and economic crisis. And it is in most Western countries, not China, where people’s real income has stagnated or even fallen over the past two decades.

The “mixed economy” has continued and further developed China’s traditional notion of the renben jingji (people’s livelihood-oriented economy or humanistic economy), a key feature of China’s traditional economic system, i.e. economic development should essentially aim at promoting people’s livelihood. The state’s role in this kind of economy was prominent, which could be traced back to On Salt and Iron (Yan Tie Lun), the famous book of the early Han dynasty (202 BC to AD 220), and to the legendary story of harnessing the Yellow River by Emperor Yu of the Xia Dynasty (or about the 21st century BC).

Throughout the long history of China, it was proven that if the state failed to develop economy and improve people’s livelihood and was unable to handle properly and competently natural disasters or other catastrophes, it would lose the “mandate of heaven”. Nevertheless, if China had continued the minben jingji without embracing the modern market economy, it would not be able to compete with other economies in this fiercely competitive world. It is for this reason that over the past three decades, China has on the one hand embraced the modern market economy, and on the other hand, continued with its age-old tradition of the minben jingji by focusing on improving people’s livelihood in all possible dimensions.

As a civilizational state with a super-large population and super-vast territory, the central and local governments are the two engines driving the growth of the economy. And such a dynamic interaction between the central and the local governments can be traced back to the prefecture and county system of the Qin dynasty (221–206 BC) and the Han dynasty (201 BC to AD 220), well over two millennium ago, to the reform initiated by Wang Anshi (AD 1021–1086) in the northern Song dynasty (AD 960–1279) and to Chairman Mao’s policy of “walking on two legs”. Undoubtedly, the role of the state in economic development is essential part of China’s core competitiveness, although more efforts should be made now to better define the role of the state

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