Market Economy And Government Intervention

In market economy, market adjustment has its own drawbacks in function which cannot be mended by the market itself, that is, there exists "market failure". This provides theoretical proof for the government to interfere economy, adjust market operation, and offset market drawbacks. A correct comprehension and grasp of the relationship between market economy and government will be of great significance to the overall transition from plan economy to market economy in China, and to the government which is facing mighty challenges after China's entry into WTO. The article consists of three parts:Part one: Government intervention is the inner demand of market economy.At first, it looks back to the development process of the relationship between market economy and government intervention, demonstrating that market economy cannot be separated with government since its birth; secondly, it analyzes the inevitability of government in theory due to the existence of "market failure"; lastly, it illustrates the economic function of government in modern economy.Part two: Transition from plan economy to market economy is in greater demand of government intervention.In plan economy, government directly participates in production process, distributes resources and takes the place of the market. The direct control of government over economy will inevitably lead to drawbacks hi its function. Therefore, in the course of transition from plan economy to market economy, it is a long and arduous task to change the function of government. To adapt to the establishment of market economy, government must optimize its function, and interfere positively in the transitional period.Part Three: The reform of government intervention after China's entry into WTOChina's entry into WTO symbolizes that the reform and opening up in China has entered a new stage; manwhile, it also means that the government will face great challenges. The strategic change of government function is key to the success of our country's economic reform and its integration into the global market economy. Therefore, confronting with challenges of all kinds, a rational government must train all sorts of abilities in time, adapt to the globalization of market economy and international regulations, reform and adjust government function.