Question

In: Economics

How does China's legal system benefit and hinder their economic growth?

How does China's legal system benefit and hinder their economic growth?

Solutions

Expert Solution

China's legal system has been quite weak and it has not hindered but only benefitted the Chinese economy. Legal framework that manages the laws and regulations has not caused any serious distortions in factor markets. Because of a weak systematic legal and institutional reform there has been a constant effort to liberate the market.

This includes factor market, financial market and goods market which implies that the prices of factors, goods and services and capital have been allowed to set accordiing to the relative scarcities and social preferences. This tendency has led to the creation of an unbalanced economy which has somehow helped in triggering the economic growth. With respect to the environmental degradation such as the so called pollution levels of Beijing, the economic growth has somehow slowed down with thousands of plants have been shut down to curb the pollutuion levels. Still the legal system is not strict and this has allowed the economy to prosper.


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