Reforms in the Economic System

In accordance with the requirements of the objective law that production relations must adapt to the nature of productivity, we have to reform the national economic management system and the management ways that do not adapt to the development of social productivity. China’s economic system reform, carried out in a planned, step-by-step, and orderly manner under the leadership of the Party, is the self-adjustment of certain aspects and certain links of production relations for the liberation and development of productive forces under the conditions of upholding socialism, is the self-improvement and development of the socialist system and is one of the most important contents of China’s Reform and Opening-up. Since its founding, our country, the People’s Republic of China, has been implementing a highly centralized planned economy gradually. This system played an important role in the planned and targeted promotion of China’s economic development in the early days of the founding of the People’s Republic of China. It concentrated the necessary human, material and financial resources to ensure the construction of key national projects, laid the preliminary foundation for industrialization and achieved a relatively well coordinated development of the national economy. With the completion of the initial tasks of socialist industrialization, the unfolding of large-scale economic development, the continuous improvement of the socialization of production and the increasingly complex economic relations, the highly centralized planned economy with mandatory plans as the core has increasingly exposed incompatibilities. For this reason, it is imperative to carry out fundamental reforms of the economic system. In December 1978, the Third Plenary Session of the Eleventh Central Committee of the Communist Party of China decided that the economic system reform was to be first carried out in the rural areas and it began to expand to the cities in 1984. During this period, the theory that “Planned economy plays a leading role, supplemented by market regulation” was proposed, which made market regulation gain a place in the economic system for the first time. In terms of practice, this period was mainly to implement reforms based on the household contract responsibility system in rural areas, and to implement reforms to expand autonomy in some industrial enterprises. In October 1984, the Third Plenary Session of the Twelfth Central Committee of the Communist Party of China passed the “Decision of the Central Committee of the Communist Party of China on Economic System Reform”, which broke the traditional concept of antagonizing planned economy and commodity economy for the first time, and formally proposed the idea that the socialist economy is planned commodity economy based on public ownership.

The “Decision” pointed out, “The full development of the commodity economy is an insurmountable stage of social and economic development.” In October 1987, the report of the 13th CPC National Congress carried out a new theoretical summary on the socialist market mechanism and proposed that “the system of a socialist planned commodity economy should be an inherently unified system of planning and market” and that “the government regulating the market and businesses responding to market signals” was a major development in planned commodity economy theory. In terms of practice, a comprehensive system reform centered on the city was implemented during this period. The content and scope of the reform involved almost all aspects of production relations and some superstructures. From January to February 1992, Deng Xiaoping clarified the basic content of the socialist market economy theory in his Southern Talks, that is, “More planning or more market are not the essential difference between socialism and capitalism. The planned economy is not equal to socialism, because capitalism has plans. The market economy is not equal to capitalism, because socialism has markets. Both planning and market are economic means.” According to a series of important statements in Deng Xiaoping’s Southern Talks, in October 1992, the report of the 14th CPC National Congress proposed that the goal of economic system reform is to establish a socialist market economy. The combination of market economy and the basic socialist system has become the basic goal of China’s economic reform.

In November 1993, the “Decision of the CPC Central Committee on Several Issues Concerning the Establishment of a Socialist Market Economy System” adopted by the Third Plenary Session of the 14th Central Committee of the Communist Party of China further proposed the basic framework of our country's socialist market economy. In practice, through the establishment of a modern enterprise system, enterprises become independent commodity producers and operators, fully participate in market competition, and become real market entities. In October, 2003, the “Decision of the CPC Central Committee on Several Issues Concerning the Improvement of the Socialist Market Economy System” adopted by the Third Plenary Session of the 16th Central Committee of the Communist Party of China made comprehensive arrangements for the establishment of a sound market economy. The main measures include: perfecting the basic economic system of the primary stage of socialism with public ownership playing a leading role and all forms of ownership growing side by side, establishing a system that is conducive to the gradual change of the dual economic structure of urban and rural areas, forming a mechanism to promote the coordinated development of regional economies, and building a unified, open, competitive and orderly modern market system, perfecting the macro-control system, administrative management system and economic and legal system, improving employment, income distribution and social security systems and establishing mechanisms to promote sustainable economic and social development, etc. In October, 2013, the Third Plenary Session of the Eighteenth Central Committee of the Communist Party of China adopted the “Decision of the Central Committee of the Communist Party of China on Several Major Issues of Comprehensively Deepening Reform”, which pointed out that the key to comprehensively deepening the reform is to further form a development environment of fair competition and further enhance the vigor of economic and social development, further improve government efficiency and effectiveness, further realize social fairness and justice, further promote social harmony and stability, and further improve the Party’s leadership and governance capabilities. To make the market play a decisive role in the allocation of resources and better give play to the role of the government was a major theoretical viewpoint put forward by the Decision of this plenary session. In view of the fact that the core issue of economic system reform is to properly handle the relationship between the government and the market, the “Decision” revised the “basic role” of the market in the allocation of resources to a “decisive role”, while emphasizing the better use of the government's role. The “Decision” also proposed that in order to adapt to the new situation of economic globalization, we should accelerate the construction of a new open economic system. Since the Third Plenary Session of the Eleventh Central Committee of the Communist Party of China, China’s economic system reform has adhered to the right direction, has become the main axis of China’s comprehensive Reform and Opening-up, has led to China’s comprehensive Reform and Opening-up and has achieved world-renowned achievements. The theory and practice of economic system reform proposed by China provide a model for the development of market economy under socialist conditions, which is a major development of Marxist political economics.