Why the Chinese government plays a critical role in the national economy?

Though the economy reform and WTO framework have speeded up the China’s economic advancement in the new century in term of closer interaction with the global economy, the Chinese government is still playing a critical role in the national economy. And some of the reasons are listed below:

Firstly, while the activities of plan economy are largely reduced and controlled, the Chinese government still makes long-term plans to shape the national economic and social development in term of its five year economy plans. For example, most recent Twelfth Five-Year Plan was approved by the National People’s Congress on March 14, 2011 setting the economic directions of addressing rising inequality and making an environment for more sustainable growth by prioritizing more equitable wealth distribution, increased domestic consumption, and improved social infrastructure and social safety nets. The five-year-plan also come with detailed targets such as:

1. Urbanization rate reaching 51.5%,
2. Value-added output of emerging strategic industries accounting for 8% of GDP
3. Length of high-speed railways reaching 45,000 km
4. Length of highway networks reaching 83,000 km.

And one of the major economy planning activities that the government still insists on controlling is the construction of infrastructure such as roads, bridges, tunnels, water supply, sewers, electrical grids and etc. And the control of infrastructure is to ensure the effective and efficient implementation of the government plans. For example, the infrastructure construction and the industrial structure readjustment is a strategic direction of the government’s plan of “Development of the Western Part of China”.

Secondly, the Chinese government tends to have direct control of the key resources and industries by limiting the entry of the private or foreign enterprises.

Thirdly, without well developed economy regulation and national law system, the government needs to monitor the economy closely and even make interventions in the economy life in certain situations.

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