How successful has China been in managing its environmental pollution today?

How successful has China been in managing its environmental pollution today?

With economic reforms by Deng XiaoPing after 1978, China had since seen tremendous growth in its economy whereby its GDP grew on average 10% each year for more than a decade until 2015. However, this growth did not come without sacrifices. With China’s maxim of ‘development first, environment second’, Chinese leaders are now well aware of the cost of economic growth in terms of environmental degradation. Despite China’s attempts in implementing new environmental laws, it has not succeeded in tackling its energy and environmental problems due to continuing air and water pollution problems, and also due to lack of viable clean energy resources to replace coal. Therefore, I disagree to a large extent that China has not been successful in tacking its environmental pollution.

 

  • Air pollution

China’s air pollution shows that China have not been successful in managing its environmental pollution today. As of 2014, only 3 out of 74 Chinese cities met air quality standards and annual average levels of PM2.5 reached 106 micro-grams which was more than 10 times the World Health Organization’s (WHO) safety limit of 10. As the world’s largest source of carbon emissions, China is responsible for 1/3 of the earth’s greenhouse gas output. Furthermore, with Beijing recently issued its first pollution “red light” in 2014, it shows the severity of this environmental pollution. Despite China pledging to spend $76 billion to improve their air quality in 2014, the air pollution continues to persist up till today. Therefore, China has not succeeded in tackling its environmental pollution today.

 

  • Lack of viable clean energy sources to replace coal

Similarly, China has not succeeded in tackling its environmental pollution due to uncontrolled building of coal-fired electric power plants and local industries have been building their own in-house diesel generators in order to attract investments and secure high GDP without proper authorization from central authorities. China’s coal-fired power plants are the main cause of the rapid increase in greenhouse gases and emissions, the world’s largest after the US. Central government officials acknowledge that out of the 440 gigawatts of generating capacity in place at the beginning of 2005, 110 were illegal power plants that never received construction approval by the responsible central government agency. As such, this poses as a large problem as the given the large number of coal plants that are unregulated. Although China has imposed new laws to close down any coal factories which exceeds the amount of harmful pollutants into the air, up till today many coal factories are still up and running. Therefore, China’s energy policy is incoherent which shows that China has not succeeded in tackling its environmental problems.

 

  • Water pollution

China has not succeeded in tackling its energy and environmental problems due to water pollution. China’s shrinking water sources have been polluted by industrial and agricultural waste. As of 2016, 4/5 of China’s water from wells are deemed “unsafe because of pollution”. The number of rivers with significant attachment areas has fallen from more than 50,000 in the 1950s to 23,000 today. Although the Ministry of Environmental Protection of China issued a plan to cut down the polluting of underground water resources in 2011 by the end of the decade, little success have been seen with the water crisis turning China’s arable lands into deserts, claiming around 27.5% of China’s total land mass. Thus China has not succeeded in tackling its environmental pollution.

 

  • Efforts in Clean Energy reform

However, some energy reform is taking place. The National Development and Reform Commission, the government’s power economic planner is promising substantial increases in clean energy capacity and pricing reform to drive changes in the use of conventional fuels. Political, economic and environmental interests increasingly aligned around the search for cleaner energy. In 2013, the NDRC promised a 52 gigawatt increase in installed capacity for clean energy as compared to 36 in 2012. Furthermore, in 2016, the CCP issued a major policy announcement “Document 625” on renewable energy, aimed at reducing the high levels of curtailment of energy from wind, solar, hydro and other renewable resources. Therefore, showing that some energy reforms being carried out by the government but it is too soon to tell whether it is successful or not.

  • Implementation of more environmental policies

In addition, the government has mapped out ambitious environmental initiatives in the recent Five-Year Plans. Since 2014, the CCP has required 15,000 factories, including large State Owned Enterprises (SOEs) to publicly report real time figures on their emissions and water discharges, with the government pledging to spend $275 billion over the next five years to clean up the air. Furthermore, China’s legislature also amended China’s Environmental Protection Law to allow for stricter punishment against companies or individuals caught polluting the environment whereby those who cause environmental damage may also be held “criminally responsible”. This law has led to the closing of several steel and nickel pig iron factories in China, a sign that environmental reforms are taking place, however it may be too soon to tell if it is successful.

In conclusion, despite China’s attempts to manage its environmental pollution with energy reforms and the implementation of more environmental policies, it is difficult to access the effectiveness of these actions by the Chinese government, Given China’s long adopted stance and belief with regards to its environment, it would take a long time before China successfully revert from its old ways and to manage its environmental pollution.

How far do you agree that the success of China’s economic growth since 1978 is due to its Open Door Policy?

How far do you agree that the success of China’s economic growth since 1978 is due to its Open Door Policy?

In China’s modern day economic history the Open Door Policy refers to the new policy announced by the late Chinese leader Deng Xiaoping in December 1978 to open the door to foreign businesses that wanted to set up in China. This policy adopted a stance to achieve economic growth through the active introduction of foreign capital and technology while maintaining its commitment to socialism. Since the implementation of this policy by Deng Xiaoping, is can be seen as a turning point in China economy where it was transformed from a previously failing economy whereby 60% percent of China’s 1 billion people survive on less that USD $1 a day which is the international poverty standards, to becoming one of the fastest growing economies in the 1980s. Thus, I agree that the success of China’s economic growth since 1978 is indeed due to its Open Door Policy as it paved the way for subsequent policies to be implemented by the Chinese government such as the Special Economic Zones (SEZ) and Foreign Direct Investments (FDI). At the same time, it must be noted that China’s phenomenal growth is only possible when governmental policies is able to release and harness China’s potentials towards achieving greater wealth for all.

 

  • Special Economic Zones (SEZs)

Special Economic Zones (SEZ) were set up in 1980 due to Deng Xiaoping’s belief that in order to modernize China’s industry and boost its economy, it needed to welcome Foreign Direct Investment. It was then that Chinese economic policy shifted to encouraging and supporting foreign trade and investment. SEZs were then  established in Shenzhen, Zhuhai and Shantou in Guangdong Province and Xiamen in Fujian Province and the entire province of Hainan and these areas were able to enjoy special privileges such as lower tax rates which aims to promote direct foreign investments, boosting its economy. With the success that these economic zones were having, it lead to China opening up even more economic zones that eventually had the same successes that the first SEZ had, improving the economic growth of China.

 

  • Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) is another manifestation of the Open Door Policy which too, ensued the success of the Chinese economy since 1978. Prior to the decades before 1979, FDI was literally nonexistent in China. It was only with the Open Door Policy, the Chinese government then actively promoted and encouraged FDI as it provided the bulk of financing for China’s financing sector. Initially in 1983, the flow of foreign investment was a mere U.S. $1.7 billion, it then increased to $5.3 billion in 1988, and to $11.4 billion in 1991. Eventually, it was known that China has surpassed the United States as the world’s largest recipient for foreign investments. With these influx of FDI into China, it proved to have benefited the country tremendously with the transfer of technology, capital and the opening up of overseas export markets for China. In addition, China was able to use the huge surplus gained through these investments to invest in infrastructural and public projects that further grew China’s economy.

 

  • Determination of the CCP

The authoritarian governance of the CCP and its commitment to develop its economic growth plays a crucial role in ensuring the success of China’s economic growth. This is so as the government realized that economic growth is required to continuously generate employment and revenue for China’s vast populace and that massive populace could result in socio-political instability as it releases pent up socio-political resentments against the party. In addition, continued economic growth could also ameliorate the development and income disparity within the country. This proved to be the perfect opportunity for the Chinese government to ensure their legitimacy as it is able to ensure social stability amongst the people. Hence it was through the sheer determination of the Chinese government that led to the success of China’s economic growth since 1978.

 

  • Ability to integrate into the global economic system

China’s ability to integrate into the global economic system was also another strategy that led to the success of China’s economic growth since 1978. By effectively integrating into the global economic system, China has become one of the world’s largest markets for natural resources and primary commodities, producing a wide range of industrial and manufactured products for the world. With China’s vast market, East Asian economies benefited greatly, whilst China’s exports flood markets of developed countries. As such, this allowed China to effectively assimilate into the global economic system as China was becoming increasing relevant with regards to global trade and business. Furthermore, more than half of China’s exports are handled by foreign invested enterprises, especially from Japan, Korea, Taiwan and Hong Kong. Thus, showing that China has indeed became the integrator of global and regional production networks which can be said to contribute to the success of China’s economic growth since 1978.

 

  • Strong Manufacturing Base

By having a strong manufacturing base, China was able to ensure the success of its economic growth since 1978. China improved their industrial structure by upgrading from low-value-added agricultural sector to high-value-added industries such as manufacturing. By upgrading the industrial structure, it became more focused in the high-value added production sector by allocating its labour force in a more efficient manner. This was done by China having surplus labour and low wages, reducing the operation costs of manufacturing its goods. Hence, this made China a very ideal manufacturing hub.  In electronics and hardware, China is the manufacturing hub for companies like Siemens and Hitachi Global Systems. As such, this significantly contributed to the rapid growth of China economy, leading China to become the world’s manufacturing hub. China is not only the world’s largest exporter, surpassing Germany in 2009, it is also the world’s largest trading nation as measured by the sum of exports and imports, having replaced the United States for the first time in 2014. Hence, with the rapid shift to manufacturing higher end products and collaborations with reputable foreign companies, too, contributed to the success of China’s economic growth since 1978.

Upon analyzing the impact of China’s Open Door Policy on China’s economic growth since 1978, it can be observed that it has indeed improved its economic growth drastically, leading to the economic successes that we see today.

“Regional disparity poses a greater problem to stability than rural-urban migration” Discuss.

“Regional disparity poses a greater problem to stability than rural-urban migration” Discuss.

Regional disparities refer to the divide in economic growth and social well-being between the prosperous coastal regions and the land locked inland provinces. Because of these disparities, it inevitably led to the phenomenon of rural migration whereby rural residents migrate to urban centers to look for work. In a way, both can pose problems to stability. On one hand, regional disparity can pose as a threat to economic and social stability inside China whereas the estimated 25 million migrants pose distinct social integration and stability problems within China’s modern cities. Therefore, I disagree with the view that regional disparity poses a greater problem to stability as compared to rural-urban migration as both are equally as crucial.

 

  • Economic instability

Regional disparities can be a threat to economic stability as inland provinces are saddled by under development, corruption, pollution and bad debts. With a general lack of education, healthcare, infrastructure and technology, inland provinces could not develop as quickly as coastal ones. Furthermore, coupled with the fact that economic reforms such as the formation of Special Economic Zones (SEZs) by Deng in the coastal regions in order to attract Foreign Direct Investments (FDI) and encourage economic growth, it has only resulted in these coastal regions and urban cities to benefit more from investment and development opportunities which land locked inland provinces lack. Furthermore, regional disparities are also accentuated by China’s geography, whereby mountainous Guizhou’s GDP per capita is 10% of Shanghai’s GDP. In addition, inland provinces face the most severe pollution problems that slow economic growth. Although the government has rolled out massive national level policies like Western Development Programme (2000) and Revitalize Central China (2004) and the North East China Programme (2004) to push development inland, these massive projects are often prone to corruption and had led to excessive capacity with underutilized ports, factory towns and empty housing towns. This in turn resulted in less well-off provinces taking on debts in order to stimulate economic growth. As such, China’s government’s debt has been increasing over the years and as of 2015, China’s debts is 250% times its GDP. Therefore, it is crucial that China’s issue of regional disparities is handled well as it can lead to economic instability if not carefully dealt with.

 

  • Social unrest in rural areas

Furthermore, a growing regional divide has fueled countless riots and social unrest in rural areas, given the fact that the rural regions and the rural population have never truly caught up with the coastal provinces. Whether it is education or job opportunities, social welfare or medical services, all these amenities and services are all in favour of those living in urban cities, whereas those in rural areas struggle, given the lack of development in these areas due to the priority given to coastal regions with the establishment of Special Economic Zones (SEZs). As of 2015, The GINI Coefficient for national income was 0.462, one of the world’s worst. With this drastic income gap whereby the per capita income of urban households was 2.73 times of the rural households in 2016, social instability and unrest has becomes ever more likely whereby rural citizens are no longer able to cope with the rising costs of living, resulting in up to 300-500 protests are occurring in China each day as of 2014.

 

  • Social unrest affecting national unity

The riots and suicide attacks in Xinjiang and Tibet also shows that regional disparities and a mix of religious intolerance has led to rebellion which poses a direct challenge to national unity. In the 1990s, Tibet has enjoyed annual growth rates faster than other parts of China with the Go West policy. However, this prosperity was not shared by most Tibetans and Uyghurs as most of the wealth and jobs went to Han Chinese. With the completion of iconic projects like the Beijing to Tibet railway line, the Han influx worsened inflation and widened the rich-poor gap. Not only do Tibetans and Uyghurs lack job skills to be employed in the new economy, but they do not speak Mandarin as well. This coupled with religious extremism as well as harsh crackdown on religious and cultural practices by the CCP in recent years in the name of “terrorism”, has only led to a series of severe backlash. In 2014, a string of suicide slayings and bombings by Uyghur extremists have resulted in the 2014 Kunming Attack. Thus, this shows that should the government not manage regional disparities, it can lead to instability that affects the economy due to social instability in the country.

 

  • Rural-urban migration

However, rural urban migration presents a unique threat to stability in the cities given that 250 million migrants now reside in these urban areas. The escape the poverty of the inland provinces has resulted in approximately 250 million rural migrants moving into cities to search for a better living. In most cases, these rural migrants end up forming the low wage labour force that keeps the Chinese economy growing. But at the same time, this huge influx of migrants poses as a challenge to the government in managing and policing them in cities as urban cities simply do not have the resources to provide for the huge influx of migrants. In Beijing, rural migrant takes up 1/3 of its population. Furthermore, the restriction of access to urban services imposed on these migrants by the Hukou system makes life extremely difficult for those rural migrant workers living in urban areas. This creates social tension between the migrants, locals as well as with the local authorities. In Beijing, the police has imposed walled-in villages in some places where migrants live. Harsh treatment of rural migrants by the police or urban security guards have often led to bloody riots. In 2014, five urban security guards were beaten to death by mobs for killing a street vendor believed to be a migrant worker. During times of financial crisis such as in 2008 when factories closed, rural migrants have also turned to rioting. Therefore, in such cases, the influx of rural migrants have created a volatile situation in many Chinese cities.

 

  • Lack of Hukou reforms

Similarly, the lack of Hukou reforms worsens the plight of these rural migrants and elevates the social tension. Deprived of urban Hukou rights, they remain a permanent underclass in the cities whereby they are not allowed to enjoy any urban services such as housing and education in the city that local folks have. As of 2015, approximately 40% of the primary school children in Beijing lack city Hukou with the barring of migrant children from local schools in urban cities, the estimated 50 million children living in urban cities today are denied access to education and would have to travel back to their rural province to be able to attend schools. However, even those children that remain in rural provinces do not fare that well either socially or in education. Furthermore, even if the migrant children had a university education, they have a smaller range of jobs to choose from given that some are reserved for locals. As a result, many remain jobless and join the ant tribe – workers who cannot afford housing that is becoming too expensive, but have to stay in a small rental space and travel long distance. The slow pace of Hukou reform and the general sense of injustice and discrimination felt by rural migrants have heighten the insecurity of rural migrants and causes social instability.

 

Both regional disparities and rural migration pose a threat to economic and social stability. Rural migrant problems can be said to be more pertinent as 250 million reside in the many urban cities and they become a force to contend with. If we see regional disparity as the cause for rural migration, then we can say that regional disparity is a longer term threat to disparity. Given the vastness of China, Beijing cannot solve the problems on both fronts simultaneously given that it does not have the resources to pay for urban cities’ Hukou expenses. At the same time, the development of inland provinces will take many generations and in the long run, as inland provinces develop and regional disparity diminishes, rural urban migration might become less necessary. Therefore, rural migration presents a clear and immediate threat to stability more than regional disparities.

“China’s economic development is most threatened by its regional disparities”. How far do you agree?

“China’s economic development is most threatened by its regional disparities”. How far do you agree? (Challenges to China’s economic development)

 

Since the start of reforms in 1978, spectacular economic growth and poverty reduction in China have been accompanied by sharp rises in inequality and increasingly frequent manifestations of social tension through unrest of various types. In response to these rising inequalities, an explicit objective of “harmonious development” was adopted by Chinese governments in 2005, with a key dimension of harmonious development being a balanced development across regions. Hence, it could be seen that regional disparities, if not resolved, could pose a major threat in slowing the country’s economic growth rate is also threatened by other equally important factors such as the sustainability of its cheap labour, ageing population, its property bubble and its bad debts.

 

  • Regional Disparity

Regional disparities pose a major threat to China’s growing economy as protests and unhappiness among the citizens may cripple the economic development. With location advantages, the increased investment and tax breaks made the coastal regions more attractive to both foreign and domestic companies. In less than 2 decades, China has become the largest recipient of FDI among developing countries from a virtually closed economy in the late 1970s. As a result, the coastal regions experienced much more rapid growth, widening the coastal-inland gap in the reform period since the 1970s. Since China’s economic growth success is not equally shared among its huge population, the rise in food and China’s property prices has made life very difficult for China’s poor and in turn, has resulted in increased social tension and protests against the government whereby up to 300-500 protests are occurring in China each day as of 2014. Therefore, the problems stemmed from regional disparities could act as obstacles to continuous economic growth which the Chinese government needs to observe closely.

 

  • Sustainability of Cheap Labour Costs

Nonetheless, other equally important factors such as the sustainability of cheap labour cost, could also pose a great threat to the economic development in China. For decades, China’s economy has prospered tremendously, being termed as the “manufacturing hub” of the world. However, a large part of China’s successful growth is because of a massive supply of cheap labour, with workers from rural parts of the country migrating to the cities to find employment and also attracted many multinational corporations such as Apple and Microsoft to move manufacturing operations to China. However, China’s sustainability of cheap labour costs proved to be short lived whereby many foreign manufacturers are downsizing or leaving the country due to an increase in the supply of low cost/low quality products as well as the increase in labour costs in China in recent years. For instance, Microsoft have been shutting down its factories in China, and with plant closures in Beijing and Dongguan, resulted in 9,000 job losses that made up half of the 18,000 announced in 2014. However, this is not a surprise as in any developing economy where the supply of cheap surplus labour starts to fall and the bargaining power of workers rises.

 

  • Ageing population

Another potential great threat to China’s economic development is that the ageing population may hinder the economic progress significantly. Over the past 30 years, China’s total fertility rate has fallen from 2.6%, well above the rate needed to hold a population steady, to 1.55% as of 2015. On top of fewer children being born, China is ageing rapidly, with 10.5% of its population being over 65. This means that China is likely to grow old before it grows rich, making it the first major economy to encounter such a problem. Furthermore, an ageing population would also mean that the number of people coming towards the end of their working lives would significantly increase, reducing China’s manpower which affects its economy. Hence, with an ageing population, the reduced working population in China could slow down economic development significantly.

 

  • Bad debts by local governments

Bad debts that is held by local government is also a major threat to the country’s economy. Over the years, the debts accumulated by local governments were built up to fund public works, which were supposed to be funded by the central government before the financial crisis struck in 2008. However, after this crisis, the Chinese government went on an unprecedented borrowing binge and has been struggling to clean it up ever since. As of 2015, China’s debt to GDP ratio had reached record high, with it being 250% of its total GDP. This ultimately poses as a huge threat as should its debt not be reduced, it would only result in fatal consequences such as derailing state-owned banks, triggering a systemic crisis as banks are closely linked to the government.  As such, the debt by the local governments poses a major threat to China’s future economy. If it does explode, the central government will have to step in and help.

 

  • Property Bubble

Inflated by high end speculation and the flow of cheap money, China’s property bubble seems to keep on growing and now it’s nearing its popping point which could cause a collapse in its economy. Chinese huge property bubble continues to expand spectacularly and remains central to its economy, accounting for some 10% of its total GDP as of 2013. As such, the government must, once again balance the need to cool the market, clamping down on speculative activities, while not damaging economic growth. Hence, the possible imminent property bubble burst could threaten the country’s economic development.

 

In conclusion, upon analyzing the various possible factors that could affect the economic development of China, it can be observed that although regional disparities poses a major threat to the country’s economy,  the combination of a smaller workforce and a rapidly ageing population further pose a double whammy to China’s economy.

China has successfully moved to a Market Economy. Discuss this view.

China has successfully moved to a Market Economy. Discuss this view.

In a relative short span of three decades, the Chinese economy under the CCP has managed to open up its economy, embracing capitalism and most of its practices. It is rapidly becoming the world’s largest economy, beating the developed economies in their own game. Chinese economic transformation has been therefore largely successful. However, given the politically conservative nature and authoritarian framework of the communist regime, Chinese economic transformation remains incomplete. Therefore, I disagree with the view that China has successfully moved to a market economy.

  • Market Reforms /Embrace Capitalism

China can be argued to have successfully moved to a market economy with its market reforms. After 1978, China has gradually successfully opened itself up to the forces of capitalism. Deng’s “Socialism with Chinese Characteristics” justified the establishment of capitalism within communist China. With the establishment of the four Special Economic Zones (SEZs) in Southeastern Chinese provinces, more trading cities have emerged along the banks of the Yangtze River to facilitate international businesses into China. These SEZs are areas in which foreign and domestic companies can trade and invest without the same control and regulations from Beijing and other parts of China. Since 1982, China’s SEZs have all been developing at an incredible speed. For instance, Shenzhen itself have been especially successful in 1992 as it attracted 14% of China’s total foreign investments and the city is now one of China’s main import – export hubs as well as a leading manufacturing base. It was due to these successes that led to the Chinese government sanctioning more foreign trade areas to cities such as Shanghai today. Therefore, it can be argued that China has successfully moved to a market economy as evident from how it has opened up the forces of capitalism.

 

  • Introduction of Privatization

Secondly, the introduction of privatization has been introduced to increase the efficiency of China’s agricultural and industrial productions. In the agricultural sector, the Household Responsibility System was introduced to encourage greater productivity as peasants could now sell their surplus on the open market. Town Village Enterprises (TVEs) were later established so that surplus labour in the countryside could earn extra income, through employment in low skilled manufacturing industries. By 2008, the government allowed the more profitable farms to enjoy greater economies of scale as they could now lease land from the smaller farmers. In addition, farmers in Yunnan could also collaborate with foreign firms such as Nescafe to cultivate modern cash crops. Monetary incentives are also introduced to improve the process and productivity of SOEs. To make the SOEs internationally competitive, they were restructured and reformed along the managerial model of foreign-owned MNCs. At the same time, leaders of SOEs were better tutored in the capitalist ways by the government. Therefore, it can be argued that China has successfully moved to a market economy as evident from how privatization has been introduced to improve agricultural and industrial productivity.

  • Lack of international recognition

On the other hand, the fact that international organizations and bodies such as the World Trade Organization (WTO) considers China as a ‘non-market economy’ shows that China failed to successfully move to a market economy. Although China has become the leading producer of steel, aluminum, cement and other industrial materials as of 2016, the European Union (EU) and other global organizations still refuses to debate whether China is deserving of the Market Economy Status, whereby costs and prices are determined by the market, rather than by the intervening hand of the state which is what China’s government is currently doing. As such, this allows China to export and offer its products much more cheaply to many of its trading partners, affecting the competition between its trading partners. Therefore, China fails to successfully qualify as a market economy given that its economic practices does not meet the requirements of a market economy.

 

  • Failure to adhere to economic laws

Similarly, the great influence wielded by the governmental officials in the initiation and execution polices also resulted in the Chinese economy being structurally top-down, and unresponsive to market needs. Furthermore, official dominance in national and regional commerce has made China’s market economy a farce. The intellectual circle, entertainment and information industries are often stifled by pervasive political censorship. As such, dependence on personal connections or ‘guanxi’ with the authorities and bribery have become important factors for business success and without them, large scale ventures are often impossible unless with the partnership of local authorities. Given the vast influence of the officials, the market economy system is often left unchecked. At the same time, infringement of intellectual property rights and poor quality control are rampant, with many foreign companies in operating in China often complaining that China views the appropriation of foreign innovations as a part of a policy mix aimed at developing domestic technology. Therefore, China has not totally moved to a market economy as evident from the failure to adhere to the rule of law when conducting businesses.

 

  • Ineffective SOEs

Lastly, most private enterprises in China are overshadowed by the overwhelming and often inefficient SOEs. With SOEs receiving the bulk of governmental attention, support and resources for their development, private enterprises often end up losing out. The SOEs employed millions and are not transported to their operations. The accumulated bad debts held by the state banks are often due to unprofitable SOEs which continues to receive aid from the government. As such, China undertook a first round of drastic reforms of its State-Owned Companies in the 1990s in order to cope with its massive losses, with mass closures of its weakest firms, and stock market listing for many of the highest which made them run a bit more like private companies. Although it was initially able to pay dividends, SOE’s return on assets, a gauge of their productivity rose from barely higher than a 0 in 1998 to merely 7% in 2008. Therefore, it can be argued that China has not totally moved into a market economy as evident from the inefficiency of the SOEs.

In conclusion, despite China’s market reforms, some characteristics of the politically entrenched socialist system still continues to plague the efficiency of its market practices. However, as the Chinese economic transformation is still young and ongoing, with time, this may change so long as the Chinese government and its business-minded officials continue to lead and facilitate China’s economic accomplishment.