The country retained control over the banking system in particular, and has exerted strong control over key elements of the macroeconomic environment.
Financial reform in the 1990s restructured the banking industry. These reforms increased the role of the central bank, and divided banks into commercial banks, policy banks and cooperative banks, each with its own function in the economy. There are four major commercial banks in the Chinese system. Later reforms separated state enterprises from commercial banks. The close links between these two sets of entities had been a component of earlier market reform, but those links have become weakened (Fernandez, n.d.).
The Chinese government has also gradually ceded its role in the production and marketing of goods and services to the private sector. As a result, the Chinese economy has become increasingly entrepreneurial over the past couple of decades. The government still plays a strong role in infrastructure...
More recently, the country has begun to open its borders more to trade, by joining the World Trade Organization. China has also taken advantage of taking over Hong Kong with its sophisticated banking system, and this has helped it to gain more capital inflows. Today, China still exerts strong central control over the economy at the regulatory level and the banking level, but allows entrepreneurial activity and has worked hard to encourage more foreign investment. As a result, the Chinese economy has some characteristics of a market economy, but also retains strong Communist elements.
Works Cited:
Fernandez, J. (no date). The Chinese economic reform. CEIBS. Retrieved May 22, 2012 from http://www.ceibs.edu/ase/Documents/reform.htm
Harms, W. (1996). China's great leap forward. University of Chicago Chronicle. Retrieved May 22, 2012 from http://chronicle.uchicago.edu/960314/china.shtml
