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Towards a new economic order with Chinese characteristics

World Commerce Review
By Professor  

The process of adopting a conscious, gradualist approach in aligning economic incentives to maximize efficiency for better resource allocation, while protecting interests of the ruling political groups, remains one of the most difficult policy conundrums to resolve for any developing economy, except in the Chinese case.From President Xi’s 19th People’s Congress address, China seems to have embarked towards a ‘New Order’ or a new economic system that aims to abolish absolute poverty (by 2020), curb inequality to build a moderately prosperous Chinese society (by 2035) and become a Great Power by 2050.

To achieve these long-term goals, the political economy of reform in China (across legal, economic areas) is undertaking some key structural reforms, with the government attempting to deviate from its traditional state-led cohesive capitalist strategy (adopted since the late 1970s) towards a more private-friendly, market-oriented, contract- based economic system.

Since the late 1970s the Communist Party in China has successfully managed the operationalization of a market economy with socialist objectives, especially in the areas of agriculture, industrial production and infrastructural development. During this transitionary phase (up until the 1990s), China adopted a dual-track approach to create market-based incentives for producers (including farmers) while maintaining planned, public rationing schemes.This approach (reflected via reforms undertaken by the Party in China), was not only unique in its outlook and implementation style, but a win-win for the government-producer relationship in developing a product based economy, allowing the government agencies to meet its targeted planned goals while allowing producers to get more incentives to maximize production capacity.