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Apply a New Vision of Development, Develop a Modernized Economy

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Author:Wang Lanjun | Source:Guangming Daily (November 28, 2017)

Abstract:

The report to the 19th National Congress of the Communist Party of China sets forth arrangements for economic development of socialism with Chinese characteristics for a new era. How to study and comprehend the intrinsic relations among socialism with Chinese characteristics entering a new era, the evolution of the principal contradiction facing society, application of a new vision of development and development of a modernized economy, how to fully and accurately understand the rich connotations and core essentials of a modernized economy and how to apply a new vision of development, accelerate development of a modernized economy, further unleash and develop productive forces, inspire creativity and vitality throughout society and strive to achieve better quality, more efficient, fairer, and more sustainable development are theoretical and practical issues that we must understand, comprehend and practice to study and publicize the spirit of the 19th National Congress of the Communist Party of China and embark on a journey to develop a modernized economy. 

To enter a new era, socialism with Chinese characteristics needs to develop a modernized economy. 

As socialism with Chinese characteristics has entered a new era, the principal contradiction facing Chinese society has evolved. Economic development is transitioning from a phase of rapid growth to a stage of high-quality development. To get through this critical transition, we need to develop a modernized economy. 

Socialism with Chinese characteristics has entered a new era. In the early days of reform and opening up, the Party made a clarion call for us to take a path of our own and build socialism with Chinese characteristics. Since that time, the Party has united and led all the Chinese people in a tireless struggle, propelling China into a leading position in terms of economic and technological strength, defense capabilities, and composite national strength after nearly 40 years of efforts for reform and opening up, especially the epoch-making struggle in the five years after the 18th National Congress of the Communist Party of China. China’s international standing has risen as never before. Our Party, our country, our people, our forces, and our nation have changed in ways without precedent. The Chinese nation, with an entirely new posture, now stands tall and firm in the East, propelling socialism with Chinese characteristics to enter a new era. This is a new historic juncture in China’s development with major historical significance. This is what socialism with Chinese characteristics entering a new era means: The Chinese nation, which since modern times began had endured so much for so long, has achieved a tremendous transformation—it has stood up, grown rich, and become strong; and it now embraces the brilliant prospects of rejuvenation. It means that scientific socialism is full of vitality in 21st century China, and that the banner of socialism with Chinese characteristics is now flying high and proud for all to see. It means that the path, the theory, the system, and the culture of socialism with Chinese characteristics have kept developing, blazing a new trail for other developing countries to achieve modernization. It offers a new option for other countries and nations who want to speed up their development while preserving their independence; and it offers Chinese wisdom and a Chinese approach to solving the problems facing mankind. 

As socialism with Chinese characteristics has entered a new era, the principal contradiction facing Chinese society has evolved profoundly. As China has entered a new era of socialism with Chinese characteristics, the principal contradiction facing Chinese society has evolved. What we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life. After nearly 40 years of development, China’s overall productive forces have significantly improved and in many areas our production capacity leads the world. China has seen the basic needs of over a billion people met, has basically made it possible for people to live decent lives, and will soon bring the building of a moderately prosperous society to a successful completion; at present, the needs to be met for the people to live a better life are increasingly broad. Not only have their material and cultural needs grown; their demands for democracy, rule of law, fairness and justice, security, and a better environment are increasing. Our problem is that our development is unbalanced and inadequate. This has become the main constraining factor in meeting the people’s increasing needs for a better life. Meanwhile, we must recognize that the evolution of the principal contradiction facing Chinese society does not change the present stage of socialism in China. The basic dimension of the Chinese context—that our country is still and will long remain in the primary stage of socialism—has not changed. China’s international status as the world’s largest developing country has not changed. Therefore, the whole Party must be completely clear about this fundamental dimension of our national context, and must base our work on this most important reality—the primary stage of socialism. We must remain fully committed to the Party’s basic line as the source that keeps the Party and the country going and that brings happiness to the people. We must lead and unite the Chinese people of all ethnic groups in fulfilling the central task of economic development. We must uphold the Four Cardinal Principles, continue to reform and open up, be self-reliant, hardworking, and enterprising, and strive to build China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful. 

China’s economy is transitioning from a phase of rapid growth to a stage of high-quality development. We have made major achievements in economic development since the beginning of reform and opening up, especially the 18th National Congress of the Communist Party of China. The economy has maintained a medium-high growth rate, making China a leader among the major economies. From 1979 to 2012, China’s average annual economic growth rate was 9.9 percent, and from 2013 to 2016, China’s average annual GDP growth rate was 7.2 percent, nearly three times the world’s average growth rate. With the gross domestic product rising from 54 trillion in 2013 to 80 trillion yuan, China has maintained its position as the world’s second largest economy and contributed more than 30 percent of global economic growth. The construction of high-speed railways, highways, bridges, ports, airports, and other types of infrastructure has picked up pace in China. Agricultural modernization has steadily advanced, with annual grain production reaching 600 million metric tons. The level of urbanization has risen by an annual average of 1.2 percentage points, and more than 80 million people who have moved from rural to urban areas have gained permanent urban residency. Regional development has become more balanced; the Belt and Road Initiative, the coordinated development of the Beijing-Tianjin-Hebei region, and the development of the Yangtze Economic Belt have all made notable progress. Through devoting great energy to implementing the innovation-driven development strategy, we have seen much accomplished toward making China a country of innovators, with major advances made in science and technology, including the successful launch of Tiangong-2 space lab, the commissioning of the deep-sea manned submersible Jiaolong and of the five-hundred-meter aperture spherical telescope (FAST) Tianyan, the launch of the dark matter probe satellite Wukong and the quantum science satellite Mozi, and the test flight of the airliner C919. The new institutions of the open economy have been steadily improved. China now leads the world in trade, outbound investment, and foreign exchange reserves. However, the Chinese economy’s characteristics of “big but not strong” and “fast but not fine” are very obvious. There is a still a huge gap between China and developed countries in terms of key and core technologies in many fields, quality of important products and services, unit labor productivity, total factor productivity, etc. Most of the products and services that can be supplied by China’s current economy can only meet needs for medium and low ends, low prices and low quality. Besides, medium- and low-end production capacity is quite excessive, and high-end production capacity is severely insufficient. Therefore, some important raw materials, key parts, core integrated circuit chips, plane and car engines, high-end numerically controlled machine tools, other high-end products, equipment and technologies rely on imports. Chinese people even prefer to buy higher-quality toilet covers with automatic cleaning devices, electric cookers, frying pans and baby milk powder from Germany, the United States, Japan and Australia. This shows that though China’s economic development is fast, the quality of development is yet to be improved. Therefore, China’s economy must transition from a phase of rapid growth to a stage of high-quality development. This is a pivotal stage for transforming our growth model, improving our economic structure, and fostering new drivers of growth. It is imperative that we develop a modernized economy. This is both an urgent requirement for getting us smoothly through this critical transition and a strategic goal for China’s development. 

We should fully and accurately understand the modernized economy. 

The report to the 19th National Congress of the Communist Party of China points out: We must put quality first and give priority to performance. We should pursue supply-side structural reform as our main task, and work hard for better quality, higher efficiency, and more robust drivers of economic growth through reform. We need to raise total factor productivity and accelerate the building of an industrial system that promotes coordinated development of the real economy with technological innovation, modern finance, and human resources. We should endeavor to develop an economy with more effective market mechanisms, dynamic micro-entities, and sound macro-regulation. This will steadily strengthen the innovation capacity and competitiveness of China’s economy. 

The exposition on “a modernized economy” in the report to the 19th National Congress of the Communist Party of China contains rich connotations and profound meanings. Its core essentials can be summarized as an industrial system featuring one goal, one main thrust, two principles, three changes, three components of the economy, and coordinated development of four aspects. “One goal” refers to “steadily strengthen the innovation capacity and competitiveness of China’s economy”; “two principles” refers to “we must put quality first and give priority to performance”; “three changes” refers to “work hard for better quality, higher efficiency, and more robust drivers of economic growth”; “three components of the economy” refers to “endeavor to develop an economy with more effective market mechanisms, dynamic micro-entities, and sound macro-regulation”; “coordinated development of four aspects” refers to “accelerate the building of an industrial system that promotes coordinated development of the real economy with technological innovation, modern finance, and human resources”. 

We should adopt multiple measures to accelerate development of a modernized economy. 

Applying a new vision of development and developing a modernized economy is a complex systematic project requiring multiple measures, long-term efforts and perseverance. The report to the 19th National Congress of the Communist Party of China sets forth systematic arrangements for this. 

First, we should further supply-side structural reform and make China a country of innovators to build a modernized industrial system. 

To further supply-side structural reform, we must focus on the real economy and enhance our economy’s strength in terms of quality. First, we will work faster to build China into a manufacturer of quality. We will develop advanced manufacturing, promote further integration of the internet, big data, and artificial intelligence with the real economy, and foster new growth areas and drivers of growth in medium-high end consumption, innovation-driven development, the green and low-carbon economy, the sharing economy, modern supply chains, and human capital services. We will support traditional industries in upgrading themselves and accelerate development of modern service industries to elevate them to international standards. We will move Chinese industries up to the medium-high end of the global value chain, and foster a number of world-class advanced manufacturing clusters. Second, we will strengthen infrastructure networks for water conservancy, railways, highways, waterways, aviation, pipelines, power grids, information, and logistics. Third, we will continue efforts to cut overcapacity, reduce excess inventory, deleverage, lower costs, and strengthen areas of weakness, and work to achieve a dynamic balance between supply and demand by improving the allocation of available resources and increasing high-quality supply. Fourth, we will inspire and protect entrepreneurship, and encourage more entities to make innovations and start businesses. We will build an educated, skilled, and innovative workforce, foster respect for model workers, promote quality workmanship, and see that taking pride in labor becomes a social norm and seeking excellence is valued as a good work ethic. 

Making China a country of innovators is the strategic underpinning for building a modernized economy. We should aim to reach frontier areas of science and technology, strengthen basic research, and make major breakthroughs in pioneering basic research and path-breaking and original innovations. We will strengthen basic research in applied sciences, launch major national science and technology projects, and prioritize innovation in key generic technologies, cutting-edge frontier technologies, modern engineering technologies, and disruptive technologies. These efforts will provide powerful support for building China’s strength in science and technology, product quality, aerospace, cyberspace, and transportation; and for building a digital China and a smart society. We will improve our national innovation system and boost our strategic scientific and technological strength. We will further reform the management system for science and technology, and develop a market-oriented system for technological innovation in which enterprises are the main players and synergy is created through the joint efforts of enterprises, universities, and research institutes. We will support innovation by small and medium-sized enterprises and encourage the application of advances in science and technology. We will foster a culture of innovation, and strengthen the creation, protection, and application of intellectual property. We should cultivate a large number of world-class scientists and technologists in strategically important fields, scientific and technological leaders, and young scientists and engineers, as well as high-performing innovation teams. 

Second, we should accelerate efforts to improve the socialist market economy and make new ground in pursuing opening up on all fronts to build a modernized economy. 

We should accelerate efforts to improve the socialist market economy. We must concentrate on improving the property rights system and ensuring the market-based allocation of factors of production, so that property rights act as effective incentives, and we should ensure free flows of factors, flexible prices, fair and orderly competition, and that business survival is determined by competition. First, we will improve the systems for managing different types of state assets, and reform the system of authorized operation of state capital. In the state-owned sector, we will step up improved distribution, structural adjustment, and strategic reorganization. We will work to see that state assets maintain and increase their value; we will support state capital in becoming stronger, doing better, and growing bigger, and take effective measures to prevent the loss of state assets. Second, we will further reform of state-owned enterprises, develop mixed-ownership economic entities, and turn Chinese enterprises into world-class, globally competitive firms. Third, we will introduce a negative list for market access nationwide, sort through and do away with regulations and practices that impede the development of a unified market and fair competition, support the growth of private businesses, and stimulate the vitality of various market entities. Fourth, we will deepen reforms in the business sector, break administrative monopolies, preclude the forming of market monopolies, speed up the reform of market-based pricing of factors of production, relax control over market access in the service sector, and improve market oversight mechanisms. Fifth, we will develop new methods to improve macro-regulation, give full play to the strategic guidance of national development plans, and improve mechanisms for coordinating fiscal, monetary, industrial, regional, and other economic policies. Sixth, we will improve systems and mechanisms for stimulating consumer spending, and leverage the fundamental role of consumption in promoting economic growth. Seventh, we will deepen reform of the investment and financing systems, and enable investment to play a crucial role in improving the supply structure. Eighth, we will expedite the creation of a modern public finance system, and establish a fiscal relationship between the central and local governments built upon clearly defined powers and responsibilities, appropriate financial resource allocation, and greater balance between regions. We will put in place a comprehensive, procedure-based, transparent budget system that uses well-conceived standards and imposes effective constraints; and we will implement performance-based management nationwide. Ninth, we will deepen reform of the taxation system, and improve the local tax system. Tenth, we will deepen institutional reform in the financial sector and make it better serve the real economy. 

We should make new ground in pursuing opening up on all fronts. First, we should pursue the Belt and Road Initiative as a priority, give equal emphasis to “bringing in” and “going global”, follow the principle of achieving shared growth through discussion and collaboration, and increase openness and cooperation in building innovation capacity. With these efforts, we hope to make new ground in opening China further through links running eastward and westward, across land and over sea. Second, we will expand foreign trade, develop new models and new forms of trade, and turn China into a trader of quality. Third, we will adopt policies to promote high-standard liberalization and facilitation of trade and investment; we will implement the system of pre-establishment national treatment plus a negative list across the board, significantly ease market access, further open the service sector, and protect the legitimate rights and interests of foreign investors. Fourth, we will improve the balance in opening our different regions, and open the western region wider. Fifth, we will grant more powers to pilot free trade zones to conduct reform, and explore the opening of free trade ports. Sixth, we will develop new ways of making outbound investments, promote international cooperation on production capacity, and build up our strengths for international economic cooperation and competition. 

Third, we should pursue a rural vitalization strategy and implement the coordinated regional development strategy to address Chinese economic development’s imbalances and inadequacies. 

We should pursue a rural vitalization strategy and speed up the modernization of agriculture and rural areas. We must prioritize the development of agriculture and rural areas. To build rural areas with thriving businesses, pleasant living environments, social etiquette and civility, effective governance, and prosperity, we need to put in place sound systems, mechanisms, and policies for promoting integrated urban-rural development. First, we will consolidate and improve the basic rural operation system, advance reform of the rural land system, and improve the system for separating the ownership rights, contract rights, and management rights for contracted rural land. Rural land contracting practices will remain stable and unchanged on a long-term basis; the current round of contracts will be extended for another 30 years upon expiration. Second, we will press ahead with reform of the rural collective property rights system, safeguard the property rights and interests of rural people, and strengthen the collective economy. Third, we must ensure China’s food security so that we always have control over our own food supply. Fourth, we will establish industrial, production, and business operation systems for modern agriculture, and improve the systems for supporting and protecting agriculture. We will develop appropriately scaled agricultural operations of various forms, cultivate new types of agribusiness, improve specialized agricultural services, and encourage small household farmers to become involved in modern agriculture. Fifth, we will promote the integrated development of the primary, secondary, and tertiary industries in rural areas, support and encourage employment and business startups there, and open up more channels to increase rural incomes. Sixth, we will strengthen basic services in rural communities, and improve the governance model in rural areas based on a combination of self-governance, rule of law, and rule of virtue. We will train professional rural service personnel who have a good knowledge of agriculture, love our rural areas, and care about rural people. 

We should implement the coordinated regional development strategy. First, we will devote more energy to speeding up the development of old revolutionary base areas, areas with large ethnic minority populations, border areas, and poor areas. We will strengthen measures to reach a new stage in the large-scale development of the western region; deepen reform to accelerate the revitalization of old industrial bases in the northeast and other parts of the country; help the central region rise by tapping into local strengths; and support the eastern region in taking the lead in pursuing optimal development through innovation. To this end, we need to put in place new, effective mechanisms to ensure coordinated development of different regions. Second, we will create networks of cities and towns based on city clusters, enabling the coordinated development of cities of different sizes and small towns, and speed up work on granting permanent urban residency to people who move from rural to urban areas. Third, we will relieve Beijing of functions nonessential to its role as the capital and use this effort to drive the coordinated development of the Beijing-Tianjin-Hebei region; and we will develop forward-looking plans and adopt high standards for building the “Xiongan New Area”. Fourth, we will facilitate the development of the Yangtze Economic Belt by promoting well-coordinated environmental conservation and avoiding excessive development. Fifth, support will be given to resource-depleted areas in their economic transformation. Sixth, we will accelerate development in the border areas, and ensure their stability and security. 

(Author: Wang Lanjun   Employer: Economic Research Bureau of the Central Policy Research Office)


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