Socialist Market Economic System of China Essay

September 9, 2022 by Essay Writer


Socialism with Chinese features differs from the socialism that emerged on the basis of developed Capitalism that was assumed by Marx and Engels. The two focused on socialism that evolved from the Soviet Model and from the ‘triumphal stage” socialism in past China.

The habit of socialism with Chinese Characteristic is focused in its habit in historical beginning, peculiar development system, and peculiar dual relationship. Features or the characteristic of socialism was an aspect that was embraced by Deng Xiaoping.

It is under the umbrella of setting up socialism with Chinese Characteristic that socialism enhances incredible dynamism and vitality in China. In this respect, this paper shall therefore succinctly discuss the economic system of socialist market economy in China, its features, and the extent of its capitalism.

Socialism with Chinese Characteristic

According to the past history, socialism with Chinese Characteristic was an aspect that developed in a semi-colonial and semi-feudal society. Maxist Classical authors assert that, the beginning of development of socialist society is the development of Capitalism.

Having known this, China is still in progress on the socialist road on the platform of a semi-colonial and semi-feudal society. In this respect, the perspective that China undertakes is predominantly different from what Maxism believes in. It is the tremendous difference between Maxism and China as a country that results to Socialism acquiring typical features of the underdeveloped countries (Dillon 63).

At the outset, the basis on which Chinese Socialism was sprout is distinct from the matrix which gestates socialism as passed on by its founders. The forerunner of Chinese Socialism is a diffident semi-colonial and semi-feudal society as a substitute of developed capitalistic society (Beck and Levine 428).

Secondly, socialism formulated on the basis of a backward economy culture in the Chinese Society has to essentially go through a transition period from the incompetent to the competent. A competent socialism in this case may be thought to uphold a better and superior position than capitalism itself; in essence, it is a socialism that is assumed by Marx.

In the development stage of the society, and in realizing a complete transition, it has to undergo a process from the incompetent to competent transition. This is an experience that takes a fairly long transition period, or in other words this is the primary stage (Chen 466).

The third feature is that Socialism that emerges from a backward economy and culture will encounter a lot of difficulties and problems. In its development stage at the production point, Socialism has held up developed capitalistic countries inadequately.

Due to this fact and also under the socialist background, China has an obligation to fulfill the responsibilities of industrialization, commercialization, socialization, and modernization, which other countries have been able to fulfill through capitalism and enhanced the well developed production power that socialism should have (Johnson et al. 141).

Therefore, we can find out that socialism that evolves on the basis of backward economy and culture is very abnormal. It varies from socialism that is referred to by Marx and Engels at a reserve of a period of sound developed capitalism.

The two persons emerge from different backgrounds, and they represent differences of quality or developmental level. They also present differences of quality between them. As an outcome of this, Chinese Socialism and socialism that is represented by the two are definitely not of the same level.

In an economic pattern perspective, socialism with Chinese Characteristic is a kind of socialism that combines public ownership and distinct economy. In a socialist development history, the ideology developed by setting up public ownership against the product economy has been in existence for a long period of time.

However, the concept has resolved that sheer planned economy will hold back the development of the production power. Since establishing public ownership against the product economy may hold back the development of the production capability, after setting up the socialistic public ownership, it becomes uncertain the kind of economic system that ought to be built to speed up the development of the production capability (Wu and Zhao 311).

To efficiently deal with the historical question on socialism when in the process of practicing of the transformation of China, the Chinese society emphasized on improvement of the road and distinguished market system. Undeniably, the most profound features of socialist market economy in China rest on its inclination on the dominance of public ownership and pre-eminence of the market economy.

The practice, since its improvement has assured that merging public ownership and market economy and taking the socialist as a necessary alternative for discharge and development of productivity within China (Alesina 30)..

Moreover, it also becomes an unavoidable choice that is meant to bring to realizing a gradual social equality to the Chinese society. However, the merging of the two aspects (public ownership and market economy) does not merely mean that there are no disagreements, not contradictions that coexist between the two.

Most of the problems that are observed in the contemporary China are as the result of the conflicts between them. There is therefore a need to deal with the conflicts in a correct and proper manner. Since these aspects cannot be eliminated from either the social economy or the market economy, the chief principle that ought to be carried out in resolving the issues is to regulate those conflicts.

The regulation that ought to be carried out should be initiated using two aspects: one of the aspects is that, China should harbor all the ways and means to adjust public ownership and enable it to be in alignment with the principle requirements of the market economy (Wu and Zhao 315).

The other aspect is that China should be able to control the market economy and make it conform to the quintessence of public ownership. In other words, the two aspects should be compatible to each other, because if there are contradictions between the two, resolving the dispute should be to enhance equilibrium between the two. On the contrary, the two aspects should be left to effectively adapt, conform, and cooperate on a mutual basis (Walder 965).

In a nut shell, the strong bond between socialism and capitalism is a pivotal aspect in the external relationship that socialist nations or societies face in development and construction.

The only problem that is hard to avoid in the social construction is the handling and dealing with the capitalistic relationship. Considering that China has already paved an avenue for both socialism and capitalism, this has therefore become one of the distinct features of Socialism with Chinese characteristic (Alesina 35).

The Extent to which China operates Capitalist System

China is considered to operate on a socialist market economy system. In this regard, not many analysts or studies have explicitly focused on the capitalism aspect of China. The experienced dynamic and massive socio-economic changes characteristic in China have little been linked to any capitalist transition in this country.

Explaining how much China is turning out to be a capitalist economy is based on how much the term capitalism is understood in this particular country. Capitalist economies are considered misnomer for the Chinese economy and political portfolio. This is because capitalist economies put much effort on the purposes of capital, over and above the ideology of institutions (Gamer 117).


Capitalist economic system is considered to be a social system that by greater extent allows the minority to be the owners of the means of production. The disadvantage of this process is that the majority of the population may be left to suffer exploitative conditions.

Fundamental aspects of the capitalist system is that market forces in the system are omnipotence and the private owned enterprises are important in addressing socio-economic problems in the economy. Private owners of the enterprises own the means of production in China as well (Gamer 129). In this regard, China is slowly turning to be a capitalist economy resulting from production processes.

Conceptions of Change

Transformation of China towards being a capitalist society has been partial and is consequently lacking depth in terms of analysis. However, dynamic transformations in the Chinese economy have been triggered by the aspect of capitalism.

The current economic system in China is perceived as a stepping stone towards achievement of capitalism. Capitalism should be purely analytical in China to consider the system fully operational in the country (Dillon 242).

Both the positive and negative attributes of the capitalistic system need to be put into consideration in the analysis of the system. This system though is not fully integrated into the operation ability of China’s economy, but it is slowly gaining momentum.

Asian Capitalism

Asian countries have consistently adopted capitalism into their economies and China is falling into the same path. This follows the fact that China’s neighbors are as well its business partners, and the need to operate uniform economies is essential to realize the full benefits of the trade relations. Considerably, Bailey argues that China is a big economy in the region and so are the variations between China and the rest of the region (601).


High growth and development experienced in China is constantly influencing integration of China into the world’s capitalist system. In this regard, globalization is integrating China into the global production networks.

The need to be competitive enough in the entire world market has prompted China to react towards capitalism because leading world producers operate a capitalist form of economy. By greater length of operation, China is adopting capitalism into its system and is consequently converting from social market system (Dillon 257).

Political Economy

General advancement in China has been short of complete transition into capitalism. However, China’s progress into being a capitalist economy is consistent, but at the same time faces considerable challenges. Effects of uncertainty in the legislation and institutional factors have been felt in the domestic political economy of the country.

This forces the private sector to act slowly on the realization and effectuation of the capitalist system in the economy of China. Even with this, the essence of capitalism in the country cannot be ignored because it is consistently taking root in the general operations of the country (Gamer, 295).

The legislative uncertainty in the economy has been attributed to the slow pick of capitalism in China, and the concept of the economy to continue evolving is subject to the political economy of the country.

Production based on capitalist activities is prevalent internationally, Chinese operations included. Capitalism is well stretched in this region, being evident from New York to Singapore.

Large amounts of capital and heavy business operations that are accompanied by building of competitive institutions are the key drivers towards realization of a capitalist economy (Dillon 261). China is not left behind in this process and that is the reason why it is in a considerable pace taking a transition from socialism to capitalism over time.

Basing this argument on historical events can further show that at some point, capitalist operations, and consequently as a means of an economic system originated in China. At a time regarded as the Republican era, production by the means of capitalist operations was evident in the country, especially in the Eastern Seaboard.

Amass Capital in China

Economic growth and development in China is not traced to follow any predetermined economic strategy at the height of its intense and broad changes. Induced reforms have been significant of the economic changes in China, giving it the upward movement realized in the series of changes characteristic of its economic system.

Transition from social market system to capitalism has gradually been realized over time based on amass capital China. Fundamental reforms in the country were amid rising prices of agricultural products. To account for this challenge, the country introduced household responsibility system that in that period replaced the concept of high-cost agricultural products.

Amass capital in China was as a result driven by the households. Farmers at that time sharply increased their saving propensity, thereby acting as catalysts to drive amass capital in the country. The households consequently invested in private enterprises, which were small-scale in nature.

Private production constitutes a greater percentage of attaining capitalist economies. In this regard, the contribution of such enterprises in the Chinese economy cannot be ignored. This fact therefore shows that as much as China is considered to operate a socialist economy, the extent to which capitalist activities in the country are prevalent is worth noting.

Considering that increase in the partiality to save resulted in increased savings, it is also important to consider that these deposits were taken into government-owned financial institutions, which consequently meant that the investment decisions were still at the authority of village governments and township governance.

This may have consequently delayed the process of actualizing capitalism in China, but in real-time analysis, capitalist activities have seemingly taken over the socialism that saw the control of households’ deposits (Xie and Lei 34).


Capitalist system can be distinguished from the social system based on the series of events and activities that capitalist system involves. In a capitalist system, capital must be in a position to grow and expand in a consistent and a continuous investment process.

Re-investment and further extraction of capital follows this system to exploit the full benefits that come with it. Dynamism of the capitalism depends on the need to observe and consequently extract wealth from the activities of the society in form of capital.

For China, a transition better suits the economic system in the country because aspects of both capitalist and socialist systems are evident. Their magnitude however differs based on differences in the factors that influence each particular system.

Works Cited

Alesina, Rodrik. “Distribution, Political Conflict, and Economic Growth.” Political Economy, Growth and Business Cycles. Eds. Cukierman, A., Hercowitz, Z., and Leiderman, L. Cambridge: MIT Press, 1992: 23-50. Print.

Bailey, Michael. “Accounting in Transition in the Transitional Economy.” The European Accounting Review 4.4 (1995): 595-623. Print.

Beck, Thurston, and Ross Levine. “Stock Markets, Banks, and Growth: Panel Evidence.” Journal of Banking and Finance 28 (2004): 423-442. Print.

Chen, Zhiwu. “Capital Markets and Legal Development: The China Case. China.” Economic Review 14 (2003): 451-472. Print.

Dillon, Mike. Contemporary China: An Introduction. California: Routledge, 2009. Print.

Gamer, Robert. Understanding Contemporary China. Michigan: Lynne Rienner, 2008. Print.

Johnson, Simon, Peter Boone, Alasdair Breach, and Eric Friedman. “Corporate

Governance in the Asian Financial Crisis 1997-98.” Journal of Financial Economics 58 (2000): 141. Print.

Walder, Andrew. “China’s Transitional Economy: Interpreting its Significance.” The China Quarterly, 144 (Dec, 1995): 963-979, Print.

Wu, Jinglian and Renwei Zhao. “The Dual Pricing System in China’s Industry.” Journal of Comparative Economics 11 (1987): 309-318. Print.

Xie, Ping and Lu Lei. The Economics of Corruption in China’s Financial Institutions: Behavior and Mechanism Design. Beijing: People’s Bank of China, 2003.

Read more