Oligopoly: Optimal Choice For China's Market Structure

Market structure refers to the relationship of enterprises in a certain industry in quantity, share and size as well as the intra-industry rivalry set by these factors and the market organizational characteristics of price determination. The core issue of market structure is the relationship between competition and monopoly, while market structure is the underlying factor to determine the degree of monopoly and competition in an industry. Therefore, the major role of market structure is to judge exactly the degree of monopoly and competition in an industry and provide theoretical basis for coordination of the conflict between competition and scale economies as well as making reasonable industry policies.Oligopoly is a market structure in which few large enterprises control relatively high market share and most product supply in an industry or market. It can be seen in the global industry development that oligopoly ( economic integration monopoly) is the most common type of market structure in industry development adopted by current developed nations. Since 1990's, the resurgent international merger and acquisition activities further reinforce the status of oligopoly market structure and propel the internationalization of it. With this trend of market structure development as a background, what kind of market structure should we choose in order to strengthen the competitive advantage , especially international competitive advantage , of our enterprises? In my opinion, oligopoly structure surely will be the optimal choice.In an era of globalization of competition, highly scattered market structure is in a disadvantageous position and will not contribute to the increase of efficiency and performance of the enterprises. So the direction of china's market structure evolution is to the growing of large enterprises by market rather than bureaucratic force, and in the end to the formation of oligopoly market structure. With the development of our economy, many industries will gradually come to maturity. And in a mature industry, supply is over demand, profit will decline and inter-industry competition becomes more fierce. Under such circumstances, only those enterprises realizing scale economies can sustain. This will lead to further integration of market and production to large enterprises, which results in higher degree of integration and oligopoly. For the time being, the industries of medicine, car, real estate and finance etc are marching into the era of oligopoly. This is the result of market evolution and the choice of economy development.In recent years, anti monopoly practice in foreign countries takes the position of constraint and utilization toward oligopoly. On one hand, they reduce the negative influence of oligopoly, on the other hand, they fully promote the positive role. Some newly industrialized countries actively promote the establishment and development of oligopoly market structure by legal and political means. China's law on anti monopoly and market structure should make the optimal choice which best balances competition and monopoly on basis of principle of "efficiency foremost", the choice should allow china to fully enjoy the benefits of competition, whereas avoid the probable waste. Also the choice should allow china to take advantage of scale economies and powerful innovation ability of monopoly enterprises as well as stimulate the motivation of increasing efficiency and upgrading technologies. Meanwhile, china's law of anti monopoly should be in accordance with the international trend to reduce regulation on monopoly status while emphasize regulation on monopoly behavior, which may help to creat good market order and competition environment for domestic enterprises.