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Abstract The Chinese economy is attempting to undergo a critical transition, shifting from a growth model driven by the intensive exploitation of traditional production factors to one centered on high-quality economic development. This new stage prioritizes regional coordination, environmental sustainability, trade and investment openness, and income redistribution to enhance the economy’s potential for innovation. This study argues that specific features of China’s socialist system endow state-owned enterprises with the institutional capacity to effectively address structural barriers that could hinder this transition. The findings indicate that the growth of state-owned industrial capital significantly contributes to reducing regional disparities, promoting environmental sustainability, fostering international openness, and mitigating social inequalities. Furthermore, the combined growth of state-owned and private industrial capital has a long-term positive impact on innovation capacity. These results suggest that market socialism effectively allocates resources to support the development of productive forces in economies navigating the challenges of transitioning beyond middle-income status.
Macheda et al. (Wed,) studied this question.