The Foundation of China Mode and Economic Theory - Based on an Axiom System : Criticism of Mainstream Economic Theories

This article is the preface of the book “The Economic Foundation of China Mode”, which provides an overarching view on authors' key arguments towards the China Mode and its economic theories in a systematic manner. The Chinese version of the book is published by the Chinese People's Publishing House in early. The authors are currently looking for interested oversea publishing house for the publication of the book's English version.Authors build an axiom system of economics based on the supply-and-demand theory in the language of Western mainstream economics, and define the China Mode as “micro-expansion with macro-regulation”. Authors argue that rationality is not the invisible hand, but a necessary condition for the formation of the invisible hand. The best description for the invisible hand is the competition based on rationality. Prices in a competitive market are guided by the supply-demand elasticity. When the invisible hand does not working, the competition between companies and consumers on demand and the price elasticity of products will fail causing abnormal price fluctuation (e.g. hyperinflation). A market without effective management will therefore suffer from continues boom-and-burst cycle. Authors believe that China Mode's macro-regulation mechanism can help to calm the mismanaged market economy by restoring the functionality of invisible hand. Furthermore, authors claim that Giffen theory explains not only the microscopic phenomena of inflation and deflation, but also the necessity, possibility and universality of macro-regulation of China mode. The former lays a microscopic foundation for macroeconomics, and the latter uses the language of mainstream economics to lay a foundation for China Mode