An Analysis of the Chinese Economic System

What is the economic system of China? The economy of China is based on a mixed socialist-oriented market economy. The country’s economic system combines elements of a market economy and a planned economy, but the country even when claimed not to have achieved socialism or communism is building and working toward the establishment of socialism in its territory.

In China, the economy is composed of a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of specific goods and services. No country is purely capitalist or purely communist.

What do the freedom indexes tell about the economic system of China?

Now, to determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2026 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, China is ranked 154th globally and 34th in Asia-Pacific with a score of 48.3/100, indicating that the country has a repressed economy.

In a similar way, the 2026 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections. China gets a score of 9/100, which qualifies it as Not Free. China is a country where the government controls what people do for political reasons, and people have limited freedom to choose (what, how much and how to produce, whether to buy or not, selling price, etc.)

The Link Between Public Sector Employment and the Economic System of China

An indicator of the extent to which the State is involved in the economy is the number of public sector employees. In China, according to ILOSTAT, the number of public sector employees as a percentage of the total workforce is 28.0% (2012). Mixed socialist-oriented economies are characterized by central planning and state control over most economic activity. In such economies, the government tends to be the largest employer, and the number of public sector employees as a percentage of the total workforce is higher.

What does the biggest company in China say about the country’s economic system?

The biggest company in China should also be looked at, as well as whether it is a state-owned or private company. In this case, State Grid Corporation of China is the largest company in China by revenue, with revenues of approximately $546 billion (FY2023, per Fortune Global 500 #3). State Grid is a state-owned enterprise responsible for electricity transmission and distribution across most of China. Its dominance reflects the significant role of state ownership in China’s mixed socialist-oriented economy.

More: Top 10 Biggest companies by revenue in China

The historical factors that have influenced the economic system of China

China’s mixed economy system is a result of the nation’s rapid economic growth and reform in the last century. The Chinese government has implemented various reforms to promote economic growth and development, including the liberalization of its foreign trade, the privatization of state-owned enterprises, and the introduction of market-based reforms. These reforms have allowed for the emergence of private businesses, increased foreign investment, and the establishment of a more open and competitive market system. But there is still a predominance of public ownership and state-owned enterprises.

The socialist market economy of China represents a preliminary or “primary stage” of developing socialism.

Sources

• List of countries by the public sector size
• ILOSTAT — China
• 2026 Index of Economic Freedom — China
• Freedom in the World 2026 — China
• Socialist market economy
• State Grid Corporation of China

Last updated: June 20, 2026