To what extent, should the Chinese government intervene in economic development and implement macroeconomic control?

Topics: Economics, Monetary policy, Macroeconomics Pages: 5 (1582 words) Published: September 10, 2014
To what extent, should the Chinese government intervene in economic development and implement macroeconomic control?
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Introduction

In recent years, the Chinese economy has developed rapidly. More attention has been paid to the intervention of the Chinese government in the economy. From the economic view, the function of the Chinese government in the economy is mainly to make use of economic law, administrative means and macroeconomic regulation and control. However, the Chinese government prefers to use large quantities of macroeconomic policies to control the economic market. Ding argues the Chinese government enjoys more macroeconomic control than any capitalist social democracy ever has (Ding, 2009, p.2). This is due to two main reasons. The Chinese market economy transformed from a long-term planned economy. The government's economic plans, like the five-year plan, are still in use. Moreover, China implements a one-party state and any economic decisions made by the Chinese communist party are compulsively implemented. Nevertheless, macroeconomic control should be properly used in China. The essay will first define Chinese macroeconomic control and reveal its extensive use in China. Secondly, it will also argue macroeconomic control has had positive influence on handling the economic crisis and inflation. Then, it will discuss risks and problems of the Chinese macroeconomic control in real estate. Finally, it will suggest the proper macroeconomic control and the free development of economy should be balanced in China. Definition

Macroeconomic control is policies and actions implemented by governments to control the operation of the market economy. In the market economy, supply and demand of goods and service is influenced by the law of value and the free market mechanism. However, it will also trigger inflation or economic recession. This periodic fluctuation has a significant effect on social resources and productivity. Thus, macroeconomic control focuses on the whole social economic operation and comprehensive measures are used to regulate supply and demand. In China, the main task of macroeconomic regulation and control is to restrain inflation, promote the optimization of the economic structure and realize steady economic growth. For instance, the three gorges hydropower station is the largest hydropower station in the world and it is an important part of the 11th five-year plan of the Chinese economy.The establishment and use of the hydropower station provides many economic benefits to the Chinese individuals, including financial investment, growth of employment, and production of electric power. However, this hydropower station implemented by the Chinese government is a controversial project. The investment in the project was more than 200 billion RMB and the project took over 10 years. There are many problems in the project such as the destruction of the environment and the migration of the local residents. While macroeconomic control plays a significant role in Chinese economic development, nobody can ensure macroeconomic control contributes to economic growth. In many western countries, economists disapprove of the government’s intervention in the economic development due to the importance of market regulation mechanism. In contrast to western countries, the Chinese government pays more attention to the function of macroeconomic control in economy.

The function of macroeconomic control during the financial crisis

Macroeconomic control leads to the healthy and orderly development of the economy and increases employment. In 2008, faced with the global financial crisis, the Chinese government implemented new macroeconomic control policies, including proactive fiscal policy and easing monetary policy. The Chinese government spent 118 million RMB so as to drive the social investment of 400 million RMB and promote consumption. The government also effectively controlled the fiscal expenditure to...

References: Ding, Xiaoqin (2009). The socialist market economy: China and the world. Science & Society, 73(2), 235-241
Zhang, Chengsi (2011). Inflation persistence, inflation expectations, and monetary policy in China. Economic Modelling, 28, 622-629
Yang, Jiawen (2011). China’s international coordination in policy response to the 2008 financial crisis. The Whitehead Journal of Diplomacy and International Relations,12(2), 73-88
Zhou, Jianli (2008). In the current real estate macroeconomic regulation and control should pay attention questions. Asian Social Science, 4(4), 114-117
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