ABSTRACT
Since more than 20 years of reform and opening up to the outside world, “Yiwu Model” has been a good example of regional economic development in China. This paper, applying modern theories of property rights, transaction costs and government regulation, analyses the course of the formation and development and the innovative measures taken by Yiwu local government to cultivate the market. The paper also figures out that Yiwu government has played a positive role in the protection and promotion of the market players, and in guide, adjustment, normalization of market development, in upgrade of commerce and trade competitiveness ability etc.
The paper proposes that recognition,protection of civilian property right and exploration of the imitativeness of the market players are the foundations of the construction of market,while in accordance with market development principle, aimed at promoting market development,reducing transaction costs,and exploiting market development rooms are the keys to the establishment of market,and to grasp the orientation of government functions,keeping a limited and effective role of government are the routes to improve market construction.
This paper also points out that in the course of market development, the limits of government's activeness and inactiveness are not fixed but changeable, so that the functions of government should be depended on the specific level of development of market economy, some functions might be declined or even totally retreat and some might be reinforced.
KEYWORDS:Economic system Yiwu model market cultivation transaction costs government regulation
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