Home > China Guide >The planned economic system 

China Overview

  • Population: 1.3 billion
  • Currency: yuan
  • Internet users: 135 million
  • Number of chinese characters: over 56,000

The planned economic system

Planned economy is an economic system in which the state directs the economy. It is an economic system in which the central government controls industry such that it makes all decisions regarding the production and distribution of goods and services.

What are categories of the Planed Economy?



What are doubts on the planed economic system?

A fundamental problem with planned economies is that in a complex and changing economic system. Is it possible to plan for everything? For instance, planned economies usually suffer a shortage of spare parts, because no one plans for machines to break down. Secondary effects such as environmental impact are often ignored. Furthermore, planners do not have control of the purchase of goods, so they have to guess what consumers really want.

Inaccurate forecasts are amplified by a long planning cycle, causing chronic shortages and surpluses. Finally, individuals have little incentive to address these problems, because they are rewarded on meeting planned targets, not on improving the overall system.

What are differences between a planned economy and a market economy?


What are characteristic features of Command Economy?


What are advantages of economic planning?

Long-term infrastructure investment can be made without fear of a market downturn leading to abandonment of a project. This is especially important where returns are risky or where the return is diffuse.
Meeting collective objectives


appropriate productions in those different sets of goods is.

The government can harness land, labor, and capital to serve the economic objectives of the state. Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. The state can begin building a heavy industry at once in an underdeveloped economy without waiting years for capital to accumulate.

What are disadvantages of economic planning?

1) Inefficient resource distribution: surplus and shortage
2) Suppression of economic democracy and self-management
3) Economic planning versus the command economy
The planned economy stands thereby contrary to the free-market economy in which different participants in the economy without previous tuning produce goods with the goal of exchanging these on a market without the need for a property is determined exactly. China and former USSR and are perhaps two of the best instances of Command Economy. Though many countries now-a-days are switching off from Planned Economy to Market or Mixed Economy, yet nations like North Korea and Cuba are some countries where Planned Economy still exists in full form. 

HOTMost Popular Topics