THE ROLE OF THE STATE AND THE PLANNED-MARKET SYSTEM IN MAINLAND CHINA

The economic structural reform advocated by Teng Hsiao-p'ing (Deng Xiaoping) in 1978, which appears to be a pragmatic method of economic development, is fundamentally different from Mao's centralized planning model. The most important of the differences in Teng's strategy is the change in the role of the state in mainland China's economic development. Through reform, governmental institutions have given industrial enterprises greater power overproduction and income distribution in order to increase efficiency. Detailed decision-making power has gradually been entrusted to production units, thus decreasing the role of centralized planning while emphasizing market mechanisms. Peking (Beijing) has created a new development model which can be called a ''planned-market'' system. In this new system, the introduction of market mechanisms has, however, not entirely ruled out the role of state planning in the economy. Instead, the new system is a mixture of state planning and market mechanisms with the market taking precedence. Despite the fact that Peking has labeled its new system a ''socialist market economy, '' this paper generalizes the new planned-market model as a ''third way of development, '' distinguishable from the ''socialist way'' or ''capitalist way'' of development.