The View | China’s plan to unify its domestic market will create cohesion, but at the expense of local needs
- While an integrated market with one set of rules will improve efficiency and connectivity, it could limit the ability of regions and cities to respond to local issues
- Centralisation is also likely to exacerbate the problems of smaller cities as business and people are drawn to megacities
This is not the first time in recent years that the central leadership has called for a “unified domestic market”. China has historically had a large domestic market which has made integration difficult, particularly given its vast territory and diversity in socioeconomic circumstances.
Until the early 20th century, there was no single currency that dominated the Chinese market. Each region circulated currencies of varying shape and weight. Even tax payments of different kinds involved different currency standards.
If some of these historical barriers were the result of a lack of government intervention, quite the opposite can be said today. Thanks to market-oriented reforms and continued state investment in hardware infrastructure, China has released much of its market potential.
What exactly is “local protectionism” in the Chinese context? In many cases, firms actively seek protection from the government and lobby for restrictions on access to the local market.
