1/11/2024 0 Comments Government monopoly examplesIt is recommended that the government keep prices within monopolized sectors at a reasonable standard. It is unfair to the monopolizer, who has often contributed greatly to infrastructure construction in its industry. Opening up the service will rub salt on the wound because competitors will drive prices down further. Their rejection of competitors is not just for fat profits but because they need stable prices to recover costs.įor example, China Telecom, the largest telephone operator in China, has reported a deficit in its local phone service. In fact, state-run monopolies have invested an astronomical amount of money in building the infrastructure in their sectors. It is still difficult for competitors to enter these sectors because monopolizers naturally try to push them out and defend their own positions, the article noted. However, restructuring will not be a panacea for complete change. While giving enterprises more leverage on prices, the government should strengthen its supervision of the market to oversee and deal with drastic price changes, said the article.Ĭurrently, several major monopolies, including telecommunications, power and aviation, are planning large-scale restructuring to remove the monopolies. The vicious competition in the domestic household electric appliance industry, where enterprises sell products at below-cost prices to undercut each other, has set an alarming example. It means numerous enterprises are deprived of a most effective tool for competition.īut a complete freeing-up of prices is by no means easy. Introducing an effective competitive mechanism is the key to removing monopolies in some sectors.Īs a first step, the government can deregulate price control in some competitive sectors, the article suggested.Īlthough the government has made great efforts in recent years to free up the market, competition in many sectors is still immature.Ī major reason is that prices in these sectors are decided or controlled by governmental departments. Having monopolies can even hamper the progress of the whole economy, warned the article. However, monopolies will throttle the creativity of enterprises in these sectors and increase the burden of consumers, despite the huge profits brought to monopolizers. Some are even calling for more protection for monopolistic industries on the grounds that they need to grow bigger to compete with powerful foreign rivals. There is concern that harsh anti-monopoly measures will sap the profitability of many sectors and erode competitiveness. This will stimulate enterprises in these sectors to improve their services and benefit consumers, said the article. These sectors should also undergo restructuring to reduce monopolies and give market access to potential competitors. They have to be controlled by state-run enterprises because few individual entrepreneurs could afford the colossal investment needed to enter these sectors. It is worth mentioning that monopolies in some domestic sectors, such as telecommunications and railways, are neither economic nor administrative. It will be a long and tough job, the article pointed out. It just remains to be seen whether law enforcers can restrict the administrative powers in these sectors. But can it bear any fruit when faced with powerful governmental departments which control most monopolized sectors? That was a question the article asked. The law would help to curb monopolies and encourage competition. The government's monopolies in the tobacco and grain sectors are typical examples.Īlready there are calls for an anti-trust law to prevent monopolies pushing out competitors and impairing consumers' interests. The former are a result of fair competition in which the winner gains a lion's share of the market, while the latter are a result of the government's intervention in business operations.Īdministrative monopolies play a major role in China's monopolistic sectors, said the article. Generally speaking, there are economic monopolies and administrative monopolies in the market. The government must also phase out its own monopolies in some competitive sectors, Wang said. Wang Qishan, minister of the office for restructuring economic system under the State Council, urged recently that if any sectors or conglomerates operate in a manner which is against competition, they must restructure. The monopolies in some sectors have drawn increasing concerns in recent years and been listed on the government's reform agenda. It is time for the government to take effective measures to smash monopolies and build a fairer market, urged an article in the China Economic Times. While sectors such as the TV industry are involved in big price wars to undercut competitors, some sectors like telecommunications and civil aviation are enjoying huge profits thanks to their being monopolies. The contrast between different industrial sectors in China is dramatic.
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