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Finance (China) - Essay Example

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The emergence of China as a global economic power represents the effectiveness of state capitalism model under which it has governed for so many years. One of the important features of state capitalism in China is the main role of state-owned enterprises which are considered as…
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Finance (China)
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Finance (China)

Download file to see previous pages... In China the model has achieved remarkable success and it has achieved a growth rate of almost 10% for the past 30 years. China Telecom, a state-capitalist company have come from nowhere to become mighty global companies. Similarly tens of thousands of state-owned enterprises (SOE) dominate half of the economic output of China and the Chinese government protects them by providing subsidizes to them. Any Foreign companies which try to threaten them are restricted by stringent government rules and are forced to share their technical expertise with the SEOs through joint venture and are also denied of any lucrative government business. Chinese government has made intervention in the entire financial system of China (the stock market, bond market and banking sector). But State capitalism has some flaws associated with it. Such a model will work until cheap resources are available. The economic growth of China is built on the back of cheap labour. Again state capitalist companies are less efficient and their private competitors. It is argued that state capitalism slowly but surely degenerates into crony capitalism as powerful political parties tries to extend their control over the economy. This report will discuss about the role of Chinese government in state capitalism and what were the interventions adopted by the Chinese government and how the Chinese financial systems responded to overcome the problem.
There are many advantages which China has incurred due to state interventions. For example in 2007, China faced shortage of polycrystalline silicon which is an important raw material for solar panels were creating problems for rising solar energy industry. Thus the prices of polysilicon soared and hit tenfold price in 2008. But Chinese government responded quickly by developing a domestic polysilicon suppliers (Dean, Browne and Oster, 2010, p. 1). Huge amounts of money were invested by banks and stationed enterprises. The local governments expedited ...Download file to see next pagesRead More
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