What means have been retained for government agencies and officials to run the Chinese economy - Essay Example

The SOE’s constitutes of capital intensive industries and therefore absorbs a huge share of the state’s financial resources through financing. Additionally, in the Chinese stock market, the shares offer price lacks a reflection of real relation amid the shares supply and demand. The government restrictions on decision making rights, prices, control rights and trade have made it more challenging for enterprises and firms to grow (OECD 2010, 1-40). According to Tubilewicz (2006, 120-134), the government is the prime mover of the economy and the regulatory government should therefore ensure that the societal welfare is maintained and business persons have a better working environment.

However, in China’s case, this has not yet been applicable. This clearly states that the government agencies and officials who have a major stake in Chinese economy should play a major role in boosting its performance and mitigating major economic challenges. In order to do this, it important to analyze ways through which the government officials can play their roles in the economy. By taking a look at the negative impacts that have resulted from the Chinese government paying extra attention to the SOE’s and overlooking other business enterprises, one gets clear picture of the negative economical impact caused by Chinese government excessive control on the economy.

Around 1979, China’s government introduce their own profit retention mechanisms, mandatory planning reduction, production responsibility systems and profit tax reform thereby taking autonomous SOE’s managerial control in order to increase the SOE’s efficiency. However, the reforms which were inducted under the traditional state socialism allowed no room for ownership structure changes and hence, the state bore the SOE’s losses. The contracted managerial responsibility system made most managers maximize