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Comprehensively Deepen Reform with the Focus on Economic Restructuring

Submit Time:24-12-2013 | Zoom In | Zoom Out

Author:Zhang Gaoli | Source:People’s Daily, November 20, 2013, p. 3.


  The Third Plenary Session of the Eighteenth CPC Central Committee was a very important meeting that was held as China entered the decisive stage of finish building a moderately prosperous society in all respects. The meeting held high the great banner of socialism with Chinese characteristics; took Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the important thought of Three Represents and the Scientific Outlook on Development as its guide; thoroughly implemented the guiding principles of the Eighteenth National Party Congress; and passed the Decision of the CPC Central Committee on Some Important Issues concerning Comprehensively Deepening Reform (the Decision). The Decision gives prominence to the theme of upholding and developing socialism with Chinese characteristics; adheres to the Party’s basic theory, line, program, experience and requirements; steadfastly emancipates the mind, seeks truth from facts, advances with the times and is realistic and pragmatic; fully embodies the firm resolution and great courage with which the Party Central Committee with Comrade Xi Jinping as general secretary is comprehensively deepening reform; and exemplifies the forethought and sense of responsibility it has for making the country prosperous and strong, revitalizing the nation and improving the people’s wellbeing. The Decision clearly sets forth the overall goal of improving and developing the system of socialism with Chinese characteristics and modernizing the country’s governance system and capacity; has comprehensive arrangements for reforming the economic, political, cultural, social and ecological systems and the system of Party building; gives prominent expression to the systematic, holistic and synergistic nature of reform; contains many new ideas, conclusions and initiatives; and has a new blueprint, vision and goals. It is another overall arrangement and mobilization for comprehensively deepening reform, a milestone in the course of our country’s modernization, and an action program for comprehensively giving impetus to the great cause of socialism with Chinese characteristics at a new historical starting point. The Decision emphasizes that economic restructuring is the focus of comprehensively deepening reform, and we must always accord prominence to the decisive role of the market in allocating resources in deepening economic restructuring. We need to correctly grasp the orientation, goals and main tasks of economic restructuring, and constantly deepen economic restructuring. We need to strive to finish building a moderately prosperous society in all respects; and then build a prosperous, powerful, democratic, cultural advanced and harmonious social modern country; and realize the Chinese Dream of the great revitalization of the Chinese nation.

  I. Fully Realizing the Great Significance of Economic Restructuring Being the Focus of Comprehensively Deepening Reform

  The Decision states, “Economic restructuring is the focus of comprehensively deepening reform.” This is the scientific conclusion and the important policy decision the Central Committee made on the basis of a comprehensive review of our experience in reform and opening up, a correct grasp of the domestic and international situations, and thorough consideration of overall five-in-one (economic, political, cultural, social and ecological) arrangements.

  1. Focusing on economic restructuring is an inevitable choice arising from taking our country’s basic conditions as our starting point and increasing its overall strength.

  Since the Third Plenary Session of the Eleventh Central Committee, we have energetically carried out reform and opening up with great political courage. From the countryside to the cities and from the coast to the interior, economic restructuring has always been the breakthrough point and main arena of comprehensively carrying out reform. Great theoretical and practical progress has constantly been made in economic restructuring that has greatly emancipated and developed the productive forces and spurred enormous successes in economic and social development that have attracted the world’s attention. The main reason our country was able to withstand the blows of the international financial crisis and the global economic downturn, overcome grave natural disasters, maintain rapid steady growth of the economy, and constantly improve people’s lives in recent years is because we have steadfastly deepened economic restructuring. At the same time, we have clearly realized that momentous changes are occurring in both domestic and international environments, and even though our country’s economy is already the world’s second largest, our per capita GDP is only about 60% of the world’s average, and our development faces a number of prominent difficulties and new challenges. There has been no change in our basic national condition that we are in and for a long time will remain in the primary stage of socialism, no change in the fact that our backward forms of social production cannot meet the people’s ever-increasing material and cultural demands, which is our country’s main social contradiction, and no change in our country’s international position as the world’s largest developing country. These three unchanged conditions determine that we must always put economic development first, and putting economic development first and focusing on economic restructuring are two sides of the same coin. This means that we must deepen economic restructuring in order to constantly liberate and develop the productive forces, increase our country’s overall strength and increase our international competitiveness.

  2. Focusing on economic restructuring is an urgent requirement for adapting to the changing situation and carrying out economic transformation and upgrading.

  From the international perspective, we see that global economic growth is slow, the economic structure is undergoing deep adjustments, international competition is heating up, the scientific revolution is gestating new breakthroughs, and the external environment of our country’s development is becoming increasingly complex and volatile. From the domestic perspective, our country’s development stands at a new historical starting point and possesses many beneficial conditions for maintaining sustained and sound economic development. At the same time, our economy is in a stage in which the pace of our economic development is shifting gears just when structural adjustments are experiencing pains; we face the serious challenge of overcoming the “middle-income gap”; development is not balanced and coordinated and it is difficult to maintain its sustainability; there are large latent risks in some areas, and it is hard to sustain our original mode of economic development. These problems have many causes, but the crux of the matter is that the socialist market economy is not yet mature and there are a lot of institutional obstacles to changing the mode of economic development. Deepening economic restructuring is both a precondition and guarantee for changing the mode of economic development. We must more resolutely, more boldly and more wisely accelerate the improvement of the socialist market economy in order to provide institutional assurances for economic transformation and upgrading and spur sustained sound economic development.

  3. Focusing on economic restructuring is an objective requirement for inducing reform in other areas and stimulating five-in-one development.

  The productive forces determine the relations of production, and the economic base determines the superstructure. This basic law of social development determines that economic restructuring must come first and play its leading role, and create the conditions and provide the motive force for deepening reform in other areas. Economic restructuring can spur restructuring in other areas like pulling a cow by the nose and thereby resolve deep-seated difficulties and coordinate the deepening of reforms in different areas. At the same time, once reform reaches a certain stage, further deepening of economic restructuring urgently requires carrying out correlative reforms in the political, cultural, social and ecological arenas so that economic, political, cultural, social and ecological restructuring are coordinated and mutually reinforcing. We must steadfastly take economic restructuring as our focus, coordinate it with restructuring in other areas, strive to create a situation in which reforms in one area spur reforms in others, and reform in all areas progresses in concert so as to create a powerful combined force of reform that comprehensively gives impetus to specifically Chinese socialist economic, political, cultural, social and ecological development.

  II. Correctly Handle the Relationship between the Government and the Market, Which Is the Central Problem of Economic Restructuring

  The Decision stresses that the central problem of economic restructuring is correctly handling the relationship between the government and the market so that the market plays the decisive role in the allocation of resources and the government better plays its role. This is a great theoretical breakthrough and a great practical innovation, and it has the distinctive characteristics of the times and points the way for deepening economic restructuring.

  1. Respecting the laws of the market and getting the market to fully play its decisive role in allocating resources

  An important and distinctive feature of the Decision is to give the market a decisive role in the allocation of resources. The Decision changes the wording of the role of the market from the former “basic role” to the present “decisive role.” This reflects a deepening of our Party’s understanding of the laws of the market. Since the Third Plenary Session of the Eleventh CPC Central Committee, our country’s economic reforms have been centered on adjusting the relations between the government and the market. From a planned economy to a planned commodity economy and then to a socialist market economy, the power of the market has been liberated step by step. As our understanding has deepened, we have in practice placed more emphasis on the role of the market and effectively spurred sustained rapid economic development. It is important for us to realize that the decisive role of the market in the allocation of resources is a characteristic of progressing with the times and possesses great practical relevance. For a period of time after the adoption of reform and opening up, our market system and mechanisms were still a work in progress. The market could not effectively allocate resources and required the implementation of progressive reforms. As the socialist market economy constantly improved, the ability of the market to allocate resources and the conditions for it doing so progressively appeared, and all areas of society acknowledged this. At present, there are still many problems: our market system still has flaws, market rules are not all consistent, the market order is not standardized, and market competition is still somewhat lacking. In addition the government has too much power over the market, the government approval process is too complex, and the government interferes too much and doesn’t exercise oversight adequately. All this affects the vitality of economic development and the effectiveness of resource allocation. We must not miss the opportunity to intensify reforms, adhere to the orientation of carrying out socialist market economic reform, and give greater respect in our thinking to the general law of the market economy that the market plays the decisive role in the allocation of resources. In our actions, we must greatly reduce the government’s direct allocation of resources; promote the allocation of resources on the basis of market principles, market prices and market competition; genuinely change the mode of economic development; and strive to have resources allocated most efficiently and beneficially.

  2. Comprehensively carrying out scientific management and getting the government to better play its role

  Getting the market to fully play its decisive role in allocating resources absolutely does not mean that there is nothing for the government to do; rather, we must insist that there are things it should do and things it shouldn’t. In particular, it should focus on raising the level of its macro-control and scientific management. In responding to the shock of the recent international financial crisis, the governments of all countries reached a new understanding of the role of government, and we too deepened our understanding through experience. To properly plays its role, the government must be adept at bottom-line thinking, deliberate issues from a broad perspective, and thoroughly study major initiatives and problems of a global, strategic and futuristic nature. It must genuinely resolve problems of overstepping its bounds, leaving responsibilities unfulfilled and handling matters that aren’t its concern by focusing on building law-based and service-oriented government. The government needs to ensure its macro policies are stable, micro policies are flexible and social policies guarantee people’s basic living conditions. It needs to effectively strengthen and improve macro-controls to dampen cyclical economic fluctuations, maintain the stability of the macro economy and spur sustainable development. It needs to provide more outstanding public services and maintain and raise people’s living standards so that the vast majority of the people enjoy the fruits of reform and development and share in common prosperity. It needs to pay more attention to ensuring fair competition, strengthening market supervision and preserving market order; create the conditions and environment in which market mechanisms can play their proper role; and enable market players to have more vitality and more room to create wealth, develop the economy and enrich the people.

  3. Strengthening coordination so that the roles of the government and market work together like a person’s two hands

  In a modern market economy, the hand of the market is invisible yet it plays the decisive role in the allocation of resources, and the hand of the government is visible and its main role is to compensate for market failure. Both in getting the market to play its decisive role in the allocation of resources and getting the government to better play its role, we need to make sure the two work together like a person’s two hands. The roles of the government and the market are not in opposition to each other, but rather are complementary. It is not a simple question of increasing the role of the market and reducing the role of the government; rather, it is a matter of viewing them as a unitary whole, making full use of their complementary advantages, integrating them organically and creating a collaborative force. We need to clearly demarcate the boundary between the government and the market. The government needs to yield control over everything that is properly a function of the market, give the market a free hand and support it, and refrain from interfering. The government should step in and fill the void in all matters for which the role of the market is ineffective; it should firmly manage what it should manage, and manage it in a proper and effective way so as to avoid problems. The government should be adept at the “negative list” approach to management; that is, it should confine itself to telling the market what it cannot do, and as to what it can or should do, market players should make those decisions on the basis of market changes. The government needs to correctly identify the best point of convergence for market functions and government action, genuinely get the market and the government to make full use of their strengths, and getter a better grasp of the characteristics and advantages of the socialist market economy.

  III. Correctly Identify the Major Tasks in Deepening Economic Restructuring

  According to the Decision, we need to deepen economic restructuring with the focus on having the market play the decisive role in allocating resources; adhere to and improve the basic economic system; more quickly improve the modern market system, macro-control system and open economic system; accelerate the transformation of the mode of economic growth; more quickly make China an innovative country; and make economic development more efficient, fair and sustainable.

  1. Adhering to and improving the basic economic system and strengthening the important foundation for our country’s economic and social development

  The basic economic system under which public ownership is primary and all the various forms of ownership develop together is an important pillar of socialism with Chinese characteristics and the foundation of the socialist market economy. The public and non-public sectors of the economy are both important components of our socialist market economy and an important foundation for our country’s economic and social development. Their property rights cannot be infringed upon, and they both should, in accordance with the law, have equal access to production factors, openly, fairly and impartially participate in market competition, and equally receive the protection of the law. In accordance with the requirements of the Decision, it is necessary to improve the modern property rights system under which ownership is clear, rights and responsibilities are definite, protections are rigorous and transfer of ownership is unhindered; and the property and legitimate rights and interests of all economic entities of all types of ownership are protected. A mixed-ownership system is an important manifestation of our basic system. Non-public capital should be permitted to buy shares in projects financed by state capital, and employees of enterprises in the mixed-ownership economy should be allowed to be shareholders. The reform of SOEs should be deepened and corporate governance should be improved, with the focus on standardizing business decisions, preserving and increasing assets, fairly participating in competition, increasing enterprise efficiency, invigorating enterprises and assuming social responsibilities. We need to make sure that there is equality in rights, opportunities and rules; unreasonable regulations of all kinds concerning the non-public sector need to be scrapped, and hidden barriers of all kinds need to be eliminated. We need to formulate specific methods by which non-publicly owned enterprises can enter areas of franchise operations, and stimulate the vitality and creativity of the non-public sector.

  2. More quickly improving the modern market system and creating a development environment of fair competition

  Establishing a unified, open, competitive orderly market system is the foundation for the market to play the decisive role in the allocation of resources. Since our country adopted the socialist market economic system, great successes have been achieved in establishing a market economy, but in some areas, market mechanisms need to be improved and the market for factors of production is still immature. To develop the socialist market economy we must set up a platform that enables market mechanisms to fully play their role, allows enterprises to run their own business and compete equally, allows consumers to choose freely and spend their money however they want, and allows merchandise and factors of production to circulate freely and be exchanged on the basis of equality. The Decision states that fair, open and transparent market rules need to be established, a unified system of market entry needs to be carried out, and a negative list needs to be drawn up so that all kinds of market entities can equally and in accordance with the law enter those areas of the market not excluded by the list. We need to improve the mechanism whereby prices are determined mainly by the market, and the market should set prices in all cases where it is able to set them. Price reforms should be carried out in the areas of water, petroleum, natural gas, electric power, transport and telecommunications. Reforms need to be carried out in markets for important factors of production; a unified urban-rural land market for construction needs to be established; the financial market system needs to be improved, and market guiding mechanisms for technological innovation need to be improved. It especially needs to be stressed that finance is the heart of a modern economy, and we need to open the financial sector further both domestically and internationally, improve the multi-level market system, improve the mechanism for marketizing the RMB exchange rate, more quickly marketize interest rates, more quickly make the RMB convertible under capital accounts, resolutely prevent all risks, and effectively guarantee the safe and efficient operation and overall stability of the financial market. These important initiatives are all well targeted, are beneficial for eliminating market barriers, and speed up the establishment of a sound, unified, nationwide modern market system.

  3. Accelerating the transformation of the government functions and raising the efficiency and level of government management

  Scientific macro-control and effective government governance are internal requirements for making full use of the advantages of the socialist market economy. On the one hand, it is necessary to focus on improving the macro-control system. Guided by state strategy and plans, and using fiscal policy and monetary policy as the principal means, we need to make the process of setting targets for macro-controls and using policy measures more institutionalized in order to constantly make macro-controls more future-oriented, targeted and coordinated. On the other hand, we need to fully and correctly carry out government functions, further decentralize government, decrease the central government’s management of microeconomic matters to the greatest possible extent, and firmly eliminate government approval requirements for all matters that market mechanisms can effectively regulate. Management of all economic and social matters that can be handled best at the local level should be turned over to local level governments to manage. We need to deepen reform of the investment system. Except for investment projects that affect national security or ecological security, or relate to state arrangements concerning major productive forces, the development of strategic resources or major public welfare projects, enterprises should be free to make their own investment decisions in accordance with the law. It especially needs to be stressed that the transformation of government functions should focus on coordinating decentralization and strengthening oversight. If powers are to be transferred downward, norms need to be clearly set forth and oversight needs to be put in place so that governance is strengthened, the government operates more efficiently, and law-based, service-oriented government takes shape. We need to optimize the setup of government bodies, configuration of government functions and flow of government work, and improve administrative operating mechanisms so that decision-making powers, executive powers and oversight powers restrain and complement each other.

  4. Deepening reform of fiscal and tax systems and establishing a modern fiscal system

  Finance is a foundation and important pillar of state governance, and scientific fiscal and tax systems provide an institutional guarantee for optimizing the allocation of resources, maintaining market unity, promoting social fairness and achieving long-term national stability. Reform of fiscal and tax systems is an important element of economic restructuring, and it has wide-ranging effects. Reform of fiscal and tax systems have been constantly deepened and achieved certain results in recent years, but there are still a number of problems remaining: there is an insufficiently clear demarcation between the powers and disbursement responsibilities of governments at different levels; the tax system is inequitable, and the budget management system needs to be improved. In addressing these problems, the Decision states that we need to improve the budget management system; implement a comprehensive, standardized, open, transparent budget system; clear up and standardize items whose major expenditures are tied with the increase of general revenues and expenditures or GDP (generally, they should not be linked); establish a standardized and reasonable mechanism for central and local government debt management and risk warning mechanism; improve the mechanism for increasing general transfer payments; clear up, integrate and standardize special transfer payment items; establish a system for coordinating powers and responsibilities; increase the central government’s powers and disbursement responsibilities to an appropriate degree; deepen reform of the tax system; improve the local tax system; progressively raise the proportion of direct taxes; and improve national and local tax collection systems.

  5. Improving institutions and mechanisms for integrating urban and rural development, and progressively closing the gap between cities and the countryside

  The dual urban-rural structure is the biggest structural problem in our country’s economic and social development and the main obstacle constraining the integration of urban and rural development. Our country’s agricultural foundation is still weak, and there are still significant disparities between cities and the countryside in the areas of employment, income, infrastructure and the level of public services. In finishing building a moderately prosoperous society in all respects, the most onerous and arduous tasks lie in the countryside. At the same time, we must realize that spurring the integration of urban and rural development and a new kind of urbanization will be a major impetus to future economic development and the biggest source for expanding domestic demand. The Decision stresses that we need to accelerate the establishment of a new kind of agricultural management system and keep family operations as the foundation of agriculture; grant farmers more property rights including the right to hold shares in collective assets, earn profits from them, receive payment for transferring them, mortgage them, use them as collaterals and inherit them; and safeguard farmers’ usufructuary right in their house sites; give impetus to the equal exchange of factors of production between cities and the countryside and balancing the distribution of public resources between them, protect farmers’ rights and interests in factors of production and ensure that they receive a fair share of the income from the increase of land values; and improve the institutions and mechanisms for ensuring the sound progress of urbanization, coordinate urbanization and the building of a new countryside, and register more eligible rural workers as permanent urban residents to progressively enable surplus agricultural laborers who meet basic conditions to become urban residents. These reform initiatives will effectively accelerate the creation of a new kind of industrial and agricultural relations and urban and rural relations in which industry spurs agriculture, cities bring along the countryside, industry and agriculture benefit each other, and cities and the countryside are integrated. They are also beneficial for enabling all rural residents to equally participate in modernization and share in its fruits.

  6. Building a new open economic system and accelerating the cultivation of new advantages for participating in and leading international economic cooperation and competition

  The international financial crisis had deep and far-reaching effects; the world order has undergone profound adjustments, and international and domestic situations are undergoing profound changes. Objective conditions require us to consider domestic and international situations together, make full use of both domestic and international markets and resources, simultaneously open up further both domestically and internationally and better coordinate inward and outward flows, spur the orderly flow of factors of production and efficient allocation of resources internationally and domestically, and deepen integration of international and domestic markets. The Decision states it is necessary to relax investment access; unify regulations pertaining to domestic and foreign capital; keep our policies concerning foreign capital stable, transparent and predictable; expand investment abroad by enterprises and individuals; and place enterprises and individuals in the dominant position in overseas investing. It also states we need to continue to engage in bilateral and multilateral as well as regional and subregional open cooperation, and implement a free-trade zone strategy taking neighboring countries as the foundation; expand opening up along our borders; allow key ports, border cities and economic cooperation zones to implement special procedures and policies in the areas of personnel exchanges, processing logistics and tourism; accelerate cooperative infrastructure construction with neighboring countries and the region; carry out the construction of a Silk Road economic zone and the building of a maritime Silk Road; and create a comprehensive multi-level pattern of opening up.

  7. Spurring reform and innovation of social undertakings and solving problems the people are most concerned about and that most directly affect their interests

  We need to steadfastly carry out reform and development that benefits the people and relies on them, and see that the people receive more of the benefits of reform and development in a more equitable way. We need to steadfastly carry our economic restructuring and reform in the social arena in a coordinated way, put great effort into changing the pattern of fast economic development and slow social development, accelerate the pace of social development focused on maintaining and improving people’s wellbeing, constantly find ways to benefit the people and solve their problems, and better promote the development of a harmonious society. The Decision states that it is necessary to spur reform and innovation of social undertakings, deepen comprehensive educational reform, improve institutions and mechanisms for increasing employment and starting businesses, create a rational and orderly income distribution pattern, build a more equitable and sustainable social security system, deepen reform of the medicine and medical and health care system, and establish the most rigorous possible security oversight system covering the entire food and medicine production and distribution process. Reform and innovation of social undertakings needs to ensure that the government fully and effectively carries out its responsibilities while enabling market mechanisms to fully play their role, and also provide diversified services to society and better satisfy the multi-level demands of the people.

  8. Accelerating the creation of ecological culture and making development more sustainable

  Building ecological culture is important for the wellbeing of our people and the future of our nation. At present, our country suffers from a scarcity of resources, severe environmental pollution and ecological degradation. This spring, Beijing, Tianjin, Hebei and surrounding areas suffered prolonged intense air pollution and haze over a large area, and this autumn, the three northeastern provinces also experienced intense air pollution and haze. These events alert us that reversing ecological degradation is an urgent matter that cannot be postponed. Our ecological problems are attributable to the extensive mode of economic development China has followed for a long time. We must give prominence to building an ecological culture, properly handle the relation between economic development and ecological improvement, promote positive interaction between ecological reform and economic restructuring, and strive to build a beautiful China and achieve the sustainable development of the Chinese nation. The Decision states that we must build a systematic and complete ecological culture system, implement the strictest possible source protection system, loss compensation system and accountability system, improve the environment governance and ecological restoration system, improve the natural resources property rights system and use control system, draw ecological protection red lines, implement a system of payment for resource use and an ecological compensation system, and reform the environmental protection management system. These reform measures are of great significance for accelerating the transformation of the mode of economic development and creating a new pattern in our country’s modernization for the harmonious development of man and nature.

  Deepening economic restructuring is a momentous task, but it is of great importance for making the country prosperous and strong, improving people’s wellbeing and keeping society harmonious and stable. Under the firm leadership of the Party Central Committee with Comrade Xi Jinping as general secretary we need to resolutely implement all requirements set forth in the Decision, comprehensively deepen reform, improve institutions and mechanisms, focus on working hard and getting results, write a new chapter in the history of the great cause of reform and opening up, strive mightily to finish building a moderately prosperous society in all respects, constantly win new victories in socialism with Chinese characteristics, and achieve the Chinese Dream of the great rejuvenation of the Chinese nation.


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