A Theory of Non-market Failure and China's Process of Market Economy

With the practice of China's transition from a traditional planned economy to a socialist market economy as the background, the fact of China's non-market failure, especially the issues such as rent-seeking, corruption, and power economy, is analyzed. Under the enlightement of the theory of market failure, the article comes to the conclusion that China's reform is largely influenced by the non-market failure. The non-market failure indicates the low efficiency, i.e., the non-Pareto efficiency of resources allocation caused by the non-market factors which consist of internalities, private goods and distribution injustice.