Rectification of the Economy

Third Plenary Session of the 13th Central Committee of the CPC which convened in September 1988, deliberated and established “the Policy of Improving the Economic Environment, Rectifying the Economic Order and Deepening of Reforms”.

From 1984 to 1988, China's economy experienced a period of rapid development, however, in the process of accelerating development, there also occurred some problems, such as high price fluctuation, aggravation of inflation, serious duplication of construction, overheating of economic development, and so on. In the summer of 1988, when the chaos in the economic order, especially the chaos in the circulation displayed itself, this situation could not be reversed, even the government mistakenly decided to carry out "breakthrough in the price reform", and allowed the liberalization of the prices. This decision failed to properly consider the interests of the state, enterprises and the masses especially lack of buying power among the masses, which led to a nationwide rush to buy, negatively affecting social stability.

Under this situation, in order to reverse the severe economic situation, the Third Plenary Session of the 13th Central Committee of the CPC in September 1988 put forward the policy of improving the economic environment, rectifying the economic order and comprehensively deepening the reform.

Improvement of the economic environment mainly aimed to reduce the total social demand and curb inflation; that is to say, the scale of investment and purchasing power of social groups should be put under control, the issuance of currency should be strictly controlled thus the phenomenon of economic overheating would be overcome.

To rectify the economic order, we should mainly rectify all kinds of chaotic phenomena in the economic life at that time, especially in the field of circulation, and do a good job in four spheres such as stopping the chaotic situation of rising price trend, re-organizing and rectifying the state enterprises, and establishing order in the circulation of important products and strengthening the macro-control and supervision system; deepening the reform and especially carry out comprehensive measures to support economic reforms.

Starting with the normalization and rationalization of prices, we should also pay special attention to deepening the reform of large and medium-sized state-owned enterprises.

On October 3, by following the spirit of the Third Plenary Session of the 13th Central Committee, the Central Committee of the CPC and the State Council jointly made the “Decision on Cleaning up and Rectifying Companies”. And on October 6, the State Council made the “Decision on Strictly Controlling the Purchasing Power of Social Groups”.

In the same year, on October 24, the State Council made the “Decision on Strengthening Price Management and Strictly Controlling Price Rises”. Between November 28 to December 5, the State Council held two conferences simultaneously: a national planning conference and a national economic system reform working conference in Beijing to discuss the arrangement of the national economic and social development plan for the year 1989 and the second meeting which discussed the deployment of the economic system reform work for 1989. These two meetings resolutely carried out the spirit of the Third Plenary Session of the 13th Central Committee.

In November 1989, the Fifth Plenary Session of the 13th Central Committee of the CPC adopted the “Decision of the Central Committee of the CPC on Further Improving the Economic Environment, Rectifying the Economic Order and Deepening of Reforms”. After three years of persistent efforts, by the end of 1991, the situation of double inflation comprising of investment and consumption demand was alleviated, inflation was put under control, chaos in the circulation sphere was rectified, and economic order was rehabilitated. In fact, these achievements were the result of the three policies which were put forward by the Third Plenary Session of the 13th Central Committee of the CPC, and China had encountered a three-year stage of improvement and rectification.

In March 1992, the Fifth Session of the Seventh National People's Congress declared that the main task of improvement, rectification and consolidation of the economy was basically completed ahead of schedule. As a specific stage of economic development, the improvement and rectification policies implemented in this period not only addressed and partially reformed the institutional problems accumulated in the previous decade, but also adjusted the structural imbalances which had occurred as a result of the rapid economic development, thus stabilized and prepared the foundation for the reform and development after 1992.