Basic Economic System

In September 1997, the report of the 15th CPC National Congress first proposed the basic economic system, that is, “public ownership playing a leading role and all forms of ownership growing side by side.” The report of the 15th CPC National Congress has pointed out that according to our national conditions, China is and will be in the primary stage of socialism for a long time. Since the founding of the People’s Republic of China, especially the past two decades, our country’s productivity has greatly improved and various undertakings have made great progress. However, in general, the population is large, the foundation is weak, the regional development is uneven and the situation of underdeveloped productivity has not fundamentally changed. The fundamental task of socialism is to develop social productive forces. In the primary stage of socialism, it is especially necessary to put combining all efforts to develop social productive forces in the first place. To build a socialist economy with Chinese characteristics is to develop a market economy under socialist conditions and to continuously liberate and develop productive forces. This requires upholding and perfecting the basic economic system with public ownership playing a leading role and all forms of ownership growing side by side.

The establishment of the basic economic system is determined by the nature of socialism and the national conditions at the primary stage. Firstly, China is a socialist country and must adhere to public ownership as the foundation of the socialist economic system. Secondly, China is in the primary stage of socialism and needs to develop multiple forms of ownership with public ownership playing a leading role. Thirdly, all forms of ownership that conform to the “Three benefits” can and should be used to serve socialism. Since the Third Plenary Session of the Eleventh Central Committee of the Communist Party of China, the Communist Party of China has conscientiously summed up the past experience and lessons on the issue of ownership, formulated a policy of public ownership playing a leading role and all forms of economic components growing side by side, and gradually eliminated the fetters of irrational ownership structure on productivity, realizing the diversification of public ownership and the common development of multiple economic components. To continue to adjust and improve the ownership structure and further liberate and develop the productive forces is a major task of the economic system reform. The public sector of the economy includes not only the state-owned economy and the collective sector of the economy, but also the state-owned and collective components in the mixed ownership economy. The dominant position of public ownership is mainly reflected in that public assets dominate the total social assets; the state-owned economy controls the lifeline of the national economy and plays a leading role in economic development.

This is the general situation of the whole country, but some places and industries can be different. The dominant proportion of public assets is manifested in both quantitative advantages and, even more, quality improvement. Whether the state-owned economy is playing a leading role is mainly reflected in control. The state-owned economy must dominate the important industries and key areas that affect the lifeline of the national economy. In other areas, asset reorganization and structural adjustment can be used to strengthen the focus and improve the overall quality of state-owned assets. As long as the public ownership plays a leading role, the country controls the lifeline of the national economy and the control and competitiveness of the state-owned economy are enhanced, even if the proportion of the state-owned economy decreases a little, it will not affect the socialist nature of our country. Collective ownership economy is an important part of public ownership economy. The collective sector of the economy can embody the principle of common prosperity, can widely absorb socially dispersed funds, relieve employment pressure and increase public accumulation and national taxation. This is of great significance to the leading role of the public economy. Public ownership can and should be diversified. All business methods and organizational forms that reflect the laws of socialized production can be used boldly. The shareholding system is a form of capital organization of modern enterprises, which is conducive to the separation of ownership and management rights and is conducive to improving the operational efficiency of enterprises and capital. It can be used in capitalism and in socialism. We cannot say in general terms whether the shareholding system is public or private. It depends on who holds the controlling rights. State and collective holdings show obvious public ownership, which is conducive to expanding the scope of public capital control and enhancing the leading role of public ownership.

At present, the economy of diversified shareholding businesses that has emerged in large numbers in urban and rural areas is a new thing in the reform. It is necessary to support and guide it, constantly sum up the experience and gradually improve it. The collective sector of the economy based on the labor union of workers and the capital union of workers should be promoted and encouraged in particular. Non-public ownership economy involves self-employed businesses, private businesses, wholly foreign-owned businesses, non-public ownership economy component in mixed ownership economy, etc. The productivity and the unbalanced development in the primary stage of socialism have left a vast space for the non-public sector of the economy. The non-public ownership economy is an important force in promoting economic and social development. It plays an important role in supporting growth, promoting innovation, expanding employment and increasing taxation. It is an important part of our country's socialist market economy.

The practice of our country’s Reform and Opening-up and modernization has proved that the basic economic system is compatible with the current state of our country’s productivity and basic national conditions.

It organically unifies the essential requirements of socialism with the actual needs of the initial stage, giving play to the advantages of multiple ownership systems and fully mobilizing the enthusiasm of all parties, which is conducive to promoting the rapid development of economic society and consolidating and developing socialism.