A
transition economy or
transitional economy is an economy which is changing from a
centrally planned economy to a
market economy. Transition economies undergo a set of structural transformations intended to develop market-based institutions. These include
economic liberalization, where prices are set by market forces rather than by a central planning organization. In addition to this trade barriers are removed, there is a push to
privatize state-owned enterprises and resources, state and collectively run enterprises are
restructured as businesses, and a
financial sector is created to facilitate macroeconomic stabilization and the movement of private
capital. The process has been applied in
China, the former
Soviet Union and
Eastern bloc countries of
Europe and some
Third world countries, and detailed work has been undertaken on its economic and social effects.