Country Analysis: China Inches Toward Capitalism

by | Apr 24, 2004 | WORLD

The constitutional protection of property in China is a continuation of reforms I’ve observed following China’s investment environment over the past ten years. Currently, the Chinese economy is a mixture of heavily regulated or government controlled industries, and segments of near anarchy, with competing government factions. For over a decade China has set aside areas […]

The constitutional protection of property in China is a continuation of reforms I’ve observed following China’s investment environment over the past ten years.
Currently, the Chinese economy is a mixture of heavily regulated or government controlled industries, and segments of near anarchy, with competing government factions. For over a decade China has set aside areas with a legal structure friendly to foreign investment, and superior (for China) property protection, from which much of its economic and export growth has come.

There are some who think that China is still an orthodox Marxist state or that its exports are principally made by prison labor. Not so, as the economy has long been a mixed one. Simultaneously, I’ve seen libertarian types and investment promoters claiming that China is more capitalist than the U.S., because they misidentify elements of anarchy as being “capitalist,” the same mistake made among mid-90s Russia observers who misidentified massive corruption as “Wild-West Capitalism”.

The Chinese have moved from Collectivist-Marxist, to Collectivist-Nationalist-Pragmatist philosophy over twenty years. The move from Marxism to Pragmatism was an improvement, but China will suffer from Pragmatism’s problems.

There are some Chinese policy-makers who would like all of the economic benefits that they understand that markets bring. At the same time, the ruling Communist Party cares primarily about perpetuating its control and power over the country. I think it would be willing to allow as much economic freedom as a country like South Korea (a collectivist/nationalist culture with plenty of structural economic flaws and a mixed economy that nevertheless was able to reach second-class industrial power status.) I think the best potential outcome for China would be development along the lines of S. Korea, or Taiwan. Mixed-economies can still progress surprisingly far economically relative to doctrinaire socialism.

My wife, from China, commented further: There has been some de- facto private property for some people for the past 20 years, and this has gradually improved. However, any major accumulation of property or wealth in China will involve some corruption, due to the continued intermingling of government and economics. Thus nearly all properties could be charged as being improperly acquired, and left unprotected by the constitution. Business law has improved, but is much more arbitrary than in the West.

Andrew West is a Contributing Economics Editor for Capitalism Magazine. In 1997 he received the Chartered Financial Analyst designation from the Association for Investment Management and Research.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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