Market Cultivation And Government Regulation

Since more than 20 years of reform and opening up to the outside world, "Yiwu Model" has been a good example of regional economic development in China. This paper, applying modern theories of property rights, transaction costs and government regulation, analyses the course of the formation and development and the innovative measures taken by Yiwu local government to cultivate the market. The paper also figures out that Yiwu government has played a positive role in the protection and promotion of the market players, and in guide, adjustment, normalization of market development, in upgrade of commerce and trade competitiveness ability etc.The paper proposes that recognition, protection of civilian property right and exploration of the imitativeness of the market players are the foundations of the construction of market, while in accordance with market development principle, aimed at promoting market development, reducing transaction costs, and exploiting market development rooms are the keys to the establishment of market, and to grasp the orientation of government functions, keeping a limited and effective role of government are the routes to improve market construction.This paper also points out that in the course of market development, the limits of government's activeness and inactiveness are not fixed but changeable, so that the functions of government should be depended on the specific level of the development of market economy, some functions might be declined or even totally retreat, and some might be reinforced.Notably the paper has established a model to the demarcation of government and market based on the maximum efficiency principle. From the point of efficiency, the interferences of government to economy cannot be done as it pleases, government and market both have their own advantageous efficient ranges, once over passing the ranges, the interference of government and market mechanism will cause loses of efficiency. The settlement of the issue are to define a boundary between the behaviors of government and market according to the maximum efficiency principle, and to formulate rules of government behavior in order to regulate the government itself.At the end of the paper, analyses on the new backgrounds of the development of Yiwu Small Commodity Market are made, and the emphasis of regulation of market by Yiwu local government are discussed.