| Abstract | Based on the model of the general equilibrium with incomplete markets, this paper has drawn a few conclusions about the general equilibrium of China’s economy with incomplete markets. First, there are severe finance constraints on the general equilibrium allocation in China’s economy. Second, that agents from the public sector take part in market activities causes the heterogeneity of agents’ preferences in the market system. The third, as a consequence of the above two, the welfare state of China’s economy is Pareto (or constrained) inefficiency. The paper thus argues that the proper choice of roadmap to the future for China’s economy is to restart the market-oriented reform. |