Could coronavirus threaten China’s shift towards market economy?
- Forum in Beijing told that the state has taken on an enhanced role in the economy in the wake of the Covid-19 pandemic
- Government adviser Peng Sen warns that this shift could see the country drifting back towards a planned economy
The Chinese state’s increased role in economic activity in the wake of the Covid-19 pandemic is threatening the country’s move towards a market-oriented economy, a government adviser has warned.
Peng Sen, a former deputy head at the National Development and Reform Commission, told a forum hosted by Renmin University in Beijing that China is only halfway to creating a market-based economic system, adding that the coronavirus and tensions with the United States are pushing the government back towards a command economy.
Peng said China’s use of state directives to mobilise resources has increased the perception that “the state’s hand is more effective, more powerful and more reliable [than the market]”.
“As a result, government intervention in economic activities has been enhanced, there are myths about the advantages of a ‘whole country’ approach and the market system has been belittled,” Peng, who is now the president of the China Society of Economic Reform think tank, said.
Meanwhile the rivalry with the US has prompted certain government departments to turn back to the planned economy – which is what they are “used to”.
“Some government departments are now insisting on China’s ownership of the value chain from top to toe, pinning their hopes on industrial policies or subsidies,” Peng continued.