Market-oriented Reform and Efficiency of Industrial Resource Allocation: Evidence from China

This article examines how China’s market-oriented reform affected the efficiency of industrial resource allocation from 1999 to 2007. Results indicate that marketisation significantly improves allocation efficiency, primarily by optimising government–market relations. Regional marketisation also boosts local resource allocation efficiency, with the strongest effects observed in central China and the weakest in western China. Further analysis identifies a double threshold effect of marketisation level on optimal industrial resource allocation, indicating that when marketisation reaches a certain level, efficiency no longer continues to increase but instead reverts to a “steady state” level. These findings offer policy implications for advancing China’s market-oriented reforms.