Chinas Transition to a Market-oriented Economy - Essay Example

This paper is one of the best examples of objective analysis of the macroeconomic situation in China through the recent years of macroeconomic transformation. Being the most populous country in the world, China set out to transform its economy from a centrally planned one to a market oriented one in 1978. This transformation came after the regime of Mao and is seen to take place in two stages: between 1979-1993 came the first stage and the second stage began in 1994 to presently. The two stages are primarily differentiated by the 1989 Student Movement.

Multinational Corporations developed interest in China and, since it presented unique marketing issues and challenges. These MNCs anticipate the growth and expansion of these economies and have thus endeavored to expand their operations to them. The greatest challenge facing China’s transition is structural impediment existent within the economy particularly with state-owned enterprises and state-owned banks; where both have interrelated problems that the state continues to intervene in their investment decisions and capital allocation.

The state sector has set up several state-owned enterprises with supposed policy loans from the state-owned banks to prevent bankruptcy. The Chinese government has directed large amounts of funds into infrastructure and other projects leaving the budget at deficit levels; all this in a bid to fuel economic growth. The transition has been riddled with corruption primarily in the central and regional governments as well as in the commercial sector. This has made it difficult to undertake relevant projects beneficial to the public and not specific individuals.

Beijing officials have attempted to end this by running public anti-corruption campaigns and holding trials of senior party officials in public. Nonetheless, it has continued to exist and this has made the public averse to social reforms. This has created the problem of rising inequality and in turn an overpowering middle class; which results in a shrinking workforce