The Economic Systems in Transition

The economic system of any nation is the mechanism that brings together natural resources, labour, technology, and the necessary managerial talents. Anticipating and then meeting human needs through the production and distribution of goods and services is the end purpose of every economic system. While the type of economic system applied by a nation is politically decided, it is also to a larger extent the result of historical experience, which over time becomes the national culture. The PRC had uneasily followed its Soviet antecedents for a long time, before it eventually decided to abandon this system and economically open up to the outside world in the late 1970s. Since then, great strides toward the market economic system have been achieved by China. In brief, the institutional evolution in the Chinese economy since 1978 has demonstrated a gradual process and may be outlined by six phases as below: 1. centrally planned economy (before 1978); 2. economy regulated mainly by planning and supplementally by market (1979–84); 3. commodity economy with a plan (1985–87); 4. socialist commodity economy (1988–89); 5. combination of planned and market economy (1989–91); 6. socialist market economy (since 1992).