China's Government-Controlled Economy Leaves a Mark on the Machinery Market

Sometimes we forget that the U.S. economy has taken more than 200 years to develop into the system we have today.

Governments that try to pick winners and losers usually do a poor job.

After nearly 75 years of communist rule, the Soviet Union collapsed and converted to a market economy for a number of reasons, among which was the fact that its centrally controlled economic system couldn’t provide its citizens with the basics to survive, notably food and shelter. More recently we’ve seen The Peoples Republic of China adopt a market economy system for the same reasons. Central planning couldn’t keep up with supplying the needs of 1.3 billion people. The Chinese leadership realized if they didn’t change to a market economy, they would lose control of the country just as the Soviet politicians did 20 years before.

Market economies have proven to be the most efficient method of delivering goods and services.

But changing the economy of a huge country like China is not easy and it will be years before government officials will allow a complete transition. The current situation can best be described as a rough-and-tumble environment with huge bets won and lost on unpredictable government intervention. As the Chinese government settles those bets, we can expect more intervention similar to that in the Putzmeister and Volvo deal.