1. China's economic reform involves a mix of a government planning, intervention, and free market forces. Describe the major elements of these three factors and discuss if how they will likely interact in the future, specifically whether the current balance is sustainable or if one of the three will eventually become dominant over the other.
China seeks to modernize herself by focusing on three critical parameters; agriculture, energy resources and communication as well as education and science. The Communist Party of China, which is the ruling party, adopted socialism with Chinese characteristics (Socialist Market Economy) (Liu, 2016). It laid down an economic, social and political development project that was to alleviate poverty and promote the livelihood of the people of China. The party set to do this by establishing a solid ten years foundation beginning from 1981 and a rapid development period in the proceeding decade.
The state acquired small and medium sized enterprises but allowed private investments. All state-owned companies that do not require government monopoly should have a mixed share ownership. This strategy, however, has been unable to root out graft as the government has a lot of control of resource allocation.
The state established a five-year plan that focused on economic growth in 2011. This plan was the 12 from the inception of the economic and political reforms. The reforms have so far transformed the country alleviating poverty and improving the people’s livelihood. There is a problem though of sustainability as the country now faces the challenge of pollution, excessive consumption of energy and rapid depletion of resources.
In the plan, the state aims at establishing an economy that will depend on domestic consumption, protect the economy and use energy more efficiently. It seeks to achieve this by shifting from low-end manufacturers to higher value-added products. Government intervention will still be prominent interfering with the market forces considering that the state is focusing on domestic consumption.
2. Some state-owned enterprises are government monopolies and heavily controlled by the state, while others have become more private and allow for competition from private companies. Identify one company from each category (state monopoly versus semi-private) and discuss why they fall under in that category (e.g. national security concerns, avoiding waste, etc.).
China controls the state-owned enterprises through the State-Owned Assets Supervision and Administration Commission of the ruling State Council (SASAC). They are mostly in the mining and manufacturing as well as the financial and banking sectors.
China Petroleum & Chemical Corporation, Sinopec Group, is one of the state-controlled companies in China. Sinopec under the Sinopec group incorporated in the year 2000. The company deals with oil and gas exploration and production. It also deals with mining and extraction, oil refining, production, marketing, storage and pipeline transmission among other services. The company has a centralized management system controlled entirely by the state. The state owns about 76% of the 86.7 billion shares of Sinopec (Liu, 2016). The company is an integral element in China’s development considering China’s energy consumption.
Suning Commerce Group is a privately owned institution in China. It deals with household commodities, home appliances, baby care products and other general merchandise (Liu, 2016). The company has more than 1600 store spread across Mainland China. It has a total revenue of approximately 17 billion US dollars. The company’s line of business is not that which the government considers a national priority hence its private entity.
Exercise 1: Choose an industry, identify the leading state-owned enterprises in China that are involved in that field, and provide a quick overview of their flagship product. The industry you choose can range from weapons manufacturers to Internet technology.
The Beijing Science Park Development (Group) (BSD) is a development company responsible for many technological properties in China. It has so far developed more than 100,000 square kilometers of land and accumulated assets worth 15 billion Yuan. Among its projects include Zhongguancun Software Park and Qingdao Blue Bio-pharmacy Industrial Park (Huaxia, 2015). Currently, the company is involved in the building of a Sino-Canada low-carbon eco-area in the China-Singapore Suzhou Industrial Park. This project is among the largest technological projects the Chinese government is undertaking currently. It has attracted investment from about 90 companies listed in the Fortune 500.
References
Huaxia. (2015). Two Flagship projects that Witness Progress in China Singapore Cooperation.
Retrieved from http://news.xinhuanet.com/english/2015-10/13/c_134710162.htm
Liu, B. (2016). Contemporary logistics in China: Proliferation and internationalization.
Heidelberg: Springer, 2016. Print.
