Chapter 11: Anti-monopoly law and industry price self-discipline
China’s Constitution, after the 1993 amendment, states that ‘[t]he State implements the socialist market economy’. In other words, China was about to leave behind its planned economy system, with administrative management approaches, and replace it with a system of market allocation of resources. As the socialist market economy is a market economy, it must connect with competition and use competition to create a system of survival of the fittest. Competition eliminates inefficient companies, pushes out unreasonable production processes and low-quality products, advances the optimal allocation of resources, improves the relationship between supply and demand, and meets consumer demands through the price mechanism. Competition also pushes companies to improve their technology, products, management, and services and to reduce their costs and prices in order to produce the maximum output with the lowest cost. In conclusion, as a mechanism of adjusting the market, competition is the essence of a market economy. However, the experience of market economy countries shows us that the market itself is not able to maintain a system of free and fair competition. Quite the contrary, in order to reduce the pressures of competition and avoid risk, companies will try to use different methods to establish monopoly positions. In China’s currently immature market system, companies often work together to restrict competition, such as through agreements between competitors to fix prices, restrict output, allocate markets, and boycott competitors. Some industry associations and groups even become monopolies in their own right.
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