Rethinking Economic Theories

Abstract

There are two currents of deep dissatisfaction towards China’s current ownership structure in the academic field, but they flow to completely opposite directions. One current of thoughts sees the increasingly growing proportion of the non-public sector in China’s economy and believes that it has weakened the economic foundation of socialism and that we are drifting away from the right track of a socialist economy with a continuously widening gap between the rich and the poor. In complete contrast to these opinions, the other current of thoughts holds that the proportion of the public sector in gross domestic product (GDP), which is still too high with possession of too many resources to establish a highly efficient market economy, must be further reduced to below 10%. The two currents of thoughts were highlighted in a recent debate surrounding “guojin mintui” (GJMT, i.e., the state advances, the private sector retreats). It seems that the second current gained advantages in the debate. However, those opinions, although they might have lent a hand in advancing the reforms of state-owned enterprises (SOEs) in the 1990s, will have negative effects given the actual proportion of SOEs in the current economy. According to a new estimation, the proportion of SOEs in China’s GDP is approximately 19%, lower than that of SOEs in their “Golden Age” in France.