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A socialist market economy is an economic form that is practiced in the People's Republic of China, where it is called socialism with Chinese characteristics as well as in Vietnam. In this economic form, major industries are owned by state entities, but compete with each other within a pricing system set by the market. In contrast with market socialism where the government does not routinely intervene in the setting of prices nor does it attempt to favor state owned enterprises over private ones.
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The socialist market economy is a market economy that combines substantial state ownership of large industries with private enterprise, where both forms of ownership operate in a free-pricing market environment. It is the economic system that has supplemented the centrally planned economy in the People's Republic of China, and has been attributed to the high growth rates in GDP in the past decades. In contrast to the market socialist proposal put forth by Oskar Lange in the early 20th century, prices are not set by a government central planning board.
The transition to a socialist market economy began in 1978 when Deng Xiaoping introduced his program of "Socialism with Chinese characteristics". Since the introduction of the socialist market economy, China's GDP rose from some 150 billion USD to more than 1.6 trillion USD, with an annual increase of 9.4 percent.[1] As of 2004, 50% of the state-owned enterprises have been transformed into joint-stock companies, which generate one-third of the national GDP.[2]
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