Factor markets in China

Comments on Yiping Huang “China: A sixty-year experiment with free markets”, 4/10/2009, http://www.eastasiaforum.org/2009/10/04/china-a-sixty-year-experiment-with-free-markets/

Yiping concluded the article by stating the following:
"China spent the first thirty years banning all free markets. It then spent the next thirty years freeing up the goods markets. Let us hope that the liberalization of factor markets will take less than thirty years."

It seems that the labour market has already undergone considerable liberalisation or deregulation. Although the household registration system is still in place, the huge number of people who are from rural areas have been employed in urban areas indicates that the constraint of that system is relaxing in terms of people's mobility and employment.

That is a very significant thing and reflects that the rapid urbanisation and industrialisation has allowed and afforded the opportunity to relax that system and possibly for its eventual abolition. Its tole in the Chinese society has substantially diminished.

The "regulation" of the capital market may also not be as severe as many people expected, especially when one considers the fact that the financial deregulations in some industrialised countries were done not long ago as compared to the long history of the existence of "free market".

One can probably reasonably expect that the development of capital market or the further deregulations of that market in China will not take too long to realise, given the extensive exchanges between China and the rest of the world and world integration and globalisation.

China has benefited greatly from its economic reforms in the past 30 years. It will not be too difficult for it to establish an efficient factor market for both labour and capital to facilitate its further economic transformation into a world class economy.

Important to have a truly unified national market

Comments on Dongfu’s comments on “The blurry line between public and private in China” by G.E. Anderson, 8/07/2009, http://www.eastasiaforum.org/2009/07/08/the-blurry-line-between-public-and-private-in-china/

Dongfu may be correct. Although China is a unitary country/system, it often suffers internal market divisions by various forces. That is not good for the country, including those protected regions themselves, just like trade protections between countries.

A truly unified national market will do great good to China, as well as to other trading partners. It will unleash much greater efficiency in resources allocation and enhance the national welfare. So I think centralisation is not enough in some areas in China and China will need to strengthen it.

Having said that, I think China has probably made considerable progress. It may be an issue of working progress. As China is further integrated into the world market system, any internal market barriers will also be removed.