Market Reforms and Trends in the Chinese Government

Since the 20thcentury, the People’s Republic of China (PRC) has transformed from a developing agrarian country to a second world economy. In 1978, Deng Xiaoping began reforms that contributed to the rapid development of the country, its prosperity, and overcoming poverty among the population. China’s policy is unique since, even though the market has a significant role, the state’s influence is still strong in its economy.

The beginning of the Communist Party’s governance, led by Mao Zedong, was unsuccessful economically. Attempts to industrialize the country or The Great Leap Forward led to hunger (Harrison & Palumbo, 2019). Later, Deng Xiaoping came to power, and in 1978 began the Chinese economic reform, also known as the Opening of China. Without abandoning socialism or claiming to create a Western-type market economy, the government sought to make a unique system – socialism with Chinese characteristics or the socialist market economy. Owing to the reforms, the private sector’s share increased, the country received foreign investment, and state control, although it was present, was not total.

The country’s success was also facilitated by Hong Kong’s accession and entry to the World Trade Organization (WTO). From the 20th– to the beginning of the 21st century, an essential place in the economy was allocated to the export of goods, and China was also called the Workshop of the World (Harrison & Palumbo, 2019). Since most of the investment came through Hong Kong, which has retained its democratic freedoms, there is debate about whether the state’s influence contributes to or interferes with economic development.

In current conditions, the economic policy of the PRC is developing and changing. The growth rate observed after the start of reforms began to slow down in the 21st century. Experts’ opinions on what should be done to strengthen the economy diverged – liberals talked about the need for market development, and government control supporters – about subsidies and the protection of state-owned enterprises (Preen, 2019). At the Third Plenum of the government in 2013, a decision was made to further Deng’s reforms (Preen, 2019). Partially, the reforms increased the importance of the market for the country’s economy, but their incomplete implementation spoke of state control.

One of the most crucial points of the development plan from 2013 was easing restrictions on foreign direct investment, contributing to the development of the market-oriented economy. However, some government actions after the plenum indicated a desire for state control over the economy. For example, according to Preen (2019), planned reform of state-owned enterprises was not implemented, and, to the detriment of the private sector, continued to receive the necessary resources. The actions of the Chinese government are criticized by external economic partners, especially the United States.

The world coronavirus pandemic has also affected Chinese economic reforms. External uncertainty has contributed to more decisive action to strengthen the market. According to Xin et al. (2020), the PRC introduces new rules in the economic sphere, which will be guided by market laws. Due to these recent reforms, capital will flow into the most forward-looking areas. The new directive also promises to implement the already mentioned reform of state enterprises. Such liberalization can play an essential role in the future economic growth of the country.

Thus, the development of the modern Chinese economy began with Deng Xiaoping’s reforms, which opened the country to the world. The government sought to create a unique system combining state control and elements of a market economy. Such actions initially benefited the Chinese prosperity, but gradually the pace of development began to slow down. In 2013, however, the government decided to continue the reforms. These measures had two sides – they partially developed the market, but the avoidance of some changes retained substantial state control. In early 2020, the government announced that PRC should move forward with developing a market-oriented economy. According to Xin et al. (2020), liberalization is necessary for the Chinese economy to remain viable. In this way, the Communist Party gradually reduces the control of the economic sphere, opening up for the development of the market.


Harrison, V., & Palumbo, D. (2019). China anniversary: How the country became the world’s ‘economic miracle.’ BBC News. Web.

Preen, M. (2019). Economic reform in China: Current progress and future prospects. China Briefing. Web.

Xin, Z., Tang, F., & Wang, O. (2020). China vows to unleash deep market-oriented reforms in new policy directive as economic uncertainty grows. South China Morning Post. Web.

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