In the current Chinese market, the socialist market economy refers to the practices of the government to maintain the market while still incorporating aspects of a socialist government. In this market, the use of both socialism and capitalism are incorporated, but not to the extent of a capitalistic ownership of the market. Resources are allocated and productivity of the labor market is dispersed to create a common prosperity amongst the people. The idea of public ownership remains predominant and is used to create and maintain a system for a market. Through using the socialist market system China is able to supplement the public market through private and non-state ownerships, yet still keeping a separation between the ownership of enterprises. In other words, China uses the smaller private markets as a means to supply the larger public market and thus maintain the party-state control over the market by resource allocation.
In post-Mao reform, considerable economic marketization has made progress, but the central planning system remains and plays an important role in the economic system of China’s market. Even with the current five-year plans in place, China will not move toward a capitalistic market, rather the plans are to merely strengthen and improve the current system. The objective of economic reform in China is to transform from the current central planning system to one where the market mechanics play a more important role.
The socialist market will still be a system controlled by the government, but the government will be able to more effectively predict development and control total demand and supply. With this system in place readjustment of industries and resources allocation of material will allow the government to pursue important projects. Unlike in a free market system where businesses have the freedom to enter and leave the market, invest in other business or industry, and to make changes to these choices based on market demand and supply; a socialist market system is planned, defined, and has its parameters set by the government.