China’s “socialist market economy”, which mixes public ownership and state guidance with aspects of the market, has propelled the nation from an economic backwater into the global engine of growth in about four decades. But it is also an idea with inherent contradictions. In orthodox economic terms, being socialist requires that Beijing dominate the means of production, which can include land, machines, raw materials, capital and data. That contradicts the key pillar of a modern market economy: private ownership. This may stir theoretical questions, but in the real world they are largely irrelevant; the private economy has flourished in China since the late 1970s. There are smart ways to work around rigid Communist Party dogma. For instance, urban land may be publicly owned in China, but land use rights can be sold by municipal authorities to property developers. In reality, different levels of Chinese government, state-owned enterprises and public institutions control certain economic resources and act as normal market players. There’s a widely shared joke about this in China: every government agency acts like a commercial enterprise, while every commercial enterprise pretends to be a government agency. The system can be helpful in terms of delivering economic outcomes. A driver of China’s rapid economic growth is competition among government bodies and the mix of public and private efforts. But as the economy matures, disharmony between socialism and the market economy may become more pronounced. Private investors must remember socialism comes first. It means public interests trump commercial interests in any given project or state policy. Pony Ma ’s recent decision to adopt “sustainable social value” as a pillar of his Tencent empire is a smart adjustment. For some observers who have witnessed the economic boom since the 1980s, it is tempting to claim China has embraced a raw form of state capitalism or it has even become more capitalist than the West. It has not. Beijing still has authority to define the degree and scope of what constitutes a market economy in China, and it is backed by a powerful ideological and legal system. The socialist market economy is an artful phrase that does not clearly define how much weighting the socialist part should carry, when it should be applied or under what circumstances. But it’s probably a good time to point out that the socialist elements will be more visible in China’s market economy in the future.