Phil’s Blog

This article discusses the shift in the economic philosophy of the Chinese government. The Chinese leaders are ready to move from having a command economy to a mixed economy. To progress towards that objective, the government is promoting entrepreneurship. This is a follow up of a constitutional amendment passed a few months before that favored private-property rights. In an effort to level the playing field for private businesses the Chinese government will give the same treatment it grants to state businesses, easier access to bank loans, lower taxation, and the removal of other restrictions. Another factor that affected the shift is the recognition of China as a member of the World Trade Organization. Also, in the new global economy China needs to be more competitive, and the creation of private businesses will help the growth of the economy by creating millions of jobs. China’s Premier Wen Jiabao stated that the government will “encourage, support and guide” private businesses.
Since the acquisition of Hong Kong by mainland China, the Chinese government established the concept of “one country, two systems”, meaning that the government is still centralized, however the economic system will become more capitalist. As we have learned in class, capitalism is an economic system in which the factor of production and distribution are owned and operated by private businesses; in contrast communism is an economic system in which the government decides what is produced and how it will be distributed. Furthermore, under capitalism individuals have some basic rights, the right to private property, the right to make a profit and keep it, the right to fair competition, and the right to choose how they will run their lives, the Chinese government must work harder towards respecting civil and human rights, it must grant freedom of expression so that ideas may flow freely in the pursuit of economic development.
For China to turn to a more capitalist or free-market enterprise is a great shift, it is a necessary step if China wants to become more competitive; however much more must be done about the respect of civil rights. But the move to permit entrepreneurship is a major step towards economic growth, as we have learned; entrepreneurs create jobs, and wealth. And if China hopes to become a major competitor in the global market it must learns how to utilize its great labor force efficiently.
How this article does relate to our field of study? First it presents the concept of economics, which is the study of how a society produces goods and services, and how it distributes those goods and services, two economic systems are defined, communism and capitalism. Secondly, the article talks about entrepreneurship, which is accepting the risk of starting and running a business. It also emphasizes the idea that entrepreneurs create jobs and by such help the growth of the economy. As we have learned this point relates to the idea of the “invisible hand” a theory advanced by Adam Smith, which describes the process by which self-directed gains are turned into social and economic benefits for the rest of the community. Furthermore, the article presents the concept of the mixed economy, which is an economic system that has the benefits created by a free market, such as the creation of wealth, and the benefits of a socialist or communist system, such as greater equality among its people.
The article emphasizes the importance for China to move towards a free market economy so as to become more competitive in the global market. It also shows that the Chinese government understands the need to develop a strong economy, not only at the national level but also at the international level. It also shows that the Chinese government is ready to change the way it had run its economy, and starts helping entrepreneurs in the development of businesses. We learned that not long ago investing in China was too risky; this was due mainly by the fact that China had a command economy; however, it is now a focus for investments from U.S. companies. Furthermore, the acceptance of China as a member of the World Trade Organization (WTO) brought China to the forefront in global trade. It is up to the Chinese government to take its place in the global economy.