China's State-Directed Capitalism

China is a capitalist economy. The key difference is that the market does not direct activity - the government does. In studying China in class and by keeping up on the latest news about China, it is clear that the government plays the role of Adam Smith's proverbial "invisible hand." It regulates the market and keeps it in "equibilbrium." 

China's form of capitalism has clearly worked for this communist country, but the jury is still out as to whether it will work in the long-term. Today China has experienced unprecidented foreign investment. According to Bloomberg, China received $105.7B in foreign direct investment (FDI) in 2010. This FDI has permited unprecedented investments in infrastructure, capital, and job training. All of these impacts from FDI will have a long-tail and impact China for years to come. Additionally, China and Chinese families have continued to emphasize education, resulting in an education-focused urban community. 

China's unique form of capitalism has catapulted the company ahead because the government is able to create purposeful policies that greatly aligment capital and government. This can only work in a non-democratic country such as China as in places like the United States partisan bickering and stalemate prevents many meaningful policies that could boost our economy from passing. Similarly, India, a hyper-democratic country with far more than two primary political parties, struggles to align policy and capital. In fact, the misaligned policies are one of the reasons China continues to outperform India. 

In the end, the United State, India, and many other democratic countries have their individual freedoms, while China has skyrocketting incomes and is bringing millions out of poverty every year. No one model is right or wrong; they simply have tradeoffs. The real challenge for China will be to make its deployment of capital more efficient - fewer examples of destroying adequate infrastructure only to build slightly newer infrastructure for the sake of creating jobs - and to balance its people's interest to self-express and to freely consume information with its interest to maintain control of information. 

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