comments and feedback

Two Inspirations in Upholding and Improving the Basic Economic System of China

In Celebration of the 40th Anniversary of the Reform and Opening-up Policy

Submit Time:30-07-2018 | Zoom In | Zoom Out

Author:Teng Wensheng and Zheng Xinli | Source:People's Daily (June 13, 2018)

Abstract:

The 19th National Congress of the Communist Party of China (CPC) established the guiding position of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era across the Party. Upholding and improving China's basic socialist economic system constitutes an important part of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. Since the 18th CPC National Congress, the officials and people, led by the Party, have worked hard to arrive at the pattern of ownership, structure of income distribution and feasible form of realizing the basic economic system that meet the requirements raised by the fact that China is still in the primary stage of socialism and by the development in the new era. At the same time, they have made active explorations to uphold and improve China's basic socialist economic system by developing mixed-ownership economy and enabling the gains of development to benefit all Chinese people in a more inclusive and fair way. During the process, they have gathered valuable experience, further unleashed the productive forces of the country, and secured major achievements in building socialism with Chinese characteristics.  

Mixed ownership comes as an important form through which China's basic socialist economic system can be realized.  

As pointed out by the Decision adopted at the Third Plenary Session of the 18th CPC Central Committee, "The basic economic system with public ownership playing a dominant role and different economic sectors developing side by side is an important pillar of the socialist system with Chinese characteristics and is the foundation of the socialist market economy." "A mixed economy with cross holding by and mutual fusion between state-owned capital, collective capital, and non-public capital is an important way to materialize the basic economic system of China. It is conducive to improving the amplification function of state-owned capital, ensuring the appreciation of its value and raising its competitiveness, and it is conducive to enabling capital with all kinds of ownership to draw on one another's strong points to offset weakness, stimulate one another, and develop together." Developing mixed-ownership economic entities stands as an effective approach to and an inevitable option for upholding the principal position of public ownership, making the state-owned economic entities more vibrant, dominant and influential, and propelling the non-public economic sectors towards sound development by empowering them to grow more vibrant and creative.  

As China's practice in the reform and opening-up drive and the socialist modernization push has proved, the introduction of a modern corporate system through which the general shareholders' meeting, the board of directors and the senior management check and balance with each other for coordinated co-existence can help to pool various resources together, recruit highly competent decision-making teams engaged in corporate operation, and turn out a large number of firms which feature great technological development capacity, international competitiveness, and potential for growth. These companies constitute an important force that China will rely on to unleash inspirations for innovation and realize industry upgrade. By developing mixed-ownership economic sectors, state-owned enterprises (SOEs) can wield control over more capital at lower costs, thus allowing them to better uphold the dominant position of public ownership, exploiting the leading role of state-owned economic entities, and making state-owned economy more vibrant, dominant and influential. At the same time, private firms have the chance to enhance their operation and management, put in place the modern corporate system, optimize the product lineup, invigorate the potential for further growth, and maintain adequate momentum for sustained development. Mixed-ownership enterprises that are controlled by the state are allowed to implement employee stock ownership plans (ESOP), as a move to make themselves more united and competitive. As outlined by the State-owned Assets Supervision and Administration Commission of the State Council in its Opinions on State-controlled Mixed-ownership Enterprises' Implementation of the Pilot Employee Stock Ownership Plans, total shares held by employees shall be no more than 30% of the total equity of a company in principle; a single employee shall hold shares that account for no more than 1% of the total equity; the plans shall not be implemented at the cost of state-owned shareholders' controlling position; after the implementation of these plans, state-owned shareholders shall hold shares that represent no less than 34% of the total equity. The abovementioned three figures tell a lot about the guiding principles conveyed by the Third Plenary Session of the 18th CPC Central Committee for the SOE reform.  

Since the introduction of the reform and opening-up policy, waves of great industrial companies have sprung up nationwide. Their development persuasively attests that China's basic socialist economic system is of great vitality. Among these companies, some are the success cases of SOE reform like ZOOMLION, some set a good example for the reform of collective-ownership enterprises like Haier, and some tell the story about how a private stock cooperative enterprise rises to become a world-renowned hi-tech company like HUAWEI. Although they are varying in ownership, these firms have something in common, i.e. they managed to establish the normative shareholding system and scientific corporate governance structure on a clear-cut ownership while adjusting their equity structure and improving their modern corporate system constantly. A close look into the practice of some successful industrial companies reveals that China's private companies have triggered positive changes in terms of ownership, distribution and labor relations through developing the mix-ownership economy. For instance, with respect to ownership relations, quite a few firms have established an ownership which is invested and shared by all laborers through implementing the employee stock ownership plans. When it comes to distribution relations, many mixed-ownership companies pursue a distribution policy based on labor and employees' contribution. Once taking the leading position, this form of distribution will promote all staff members towards common prosperity. As to company-employee relations, corporate managers and workers share out work and cooperate with one another. Engaging employees in corporate administration on different levels and to varying extents manages to arouse their enthusiasm, initiative and creativity. As a result, many companies are developing into communities of shared interests where employees can achieve joint growth through discussion and collaboration. So it is fairly to say that developing mixed-ownership economy can not just meet the requirements of the basic economic system with public ownership playing a dominant role and different economic sectors developing side by side, but also offer a new creative approach to realizing China's basic socialist economic system and allowing it to demonstrate greater superiority and vitality.  

Achieving shared prosperity for all Chinese people proves to be an essential condition for upholding and improving the basic economic system.  

The basic economic system with public ownership playing a dominant role and different economic sectors developing side by side enables the Chinese people of all ethnic groups to benefit from the gains of economic and social development,  underpin the ruling status of the Party, and uphold the socialism with Chinese characteristics. Seeing the gains of development benefit all Chinese people in a more inclusive and fair way and realizing the shared prosperity for all people step by step stands as not only an important objective facing China for economic development, but also an imperative requirement for upholding and improving the basic socialist economic system in the country.  

The Party made a major decision in the very beginning of its reform and opening-up journey, which is "allowing and encouraging some of the people and some areas to get rich first through honest labor and lawful operations, and then encouraging them to help others with a view to achieving shared prosperity for all the people and all regions." This is the oft-cited saying that goes "some areas and some people can get rich first, lead and help other regions and people, and gradually achieve common prosperity." It is a major approach to reform and also a significant strategy for development. Its purposes and points lie in that on the condition of ensuring the dominant position of public-ownership economic sector, China will develop self-employed, private and other non-public economic sectors in replacement of the sole public ownership structure which has fallen behind the actual productive forces; break the constraints imposed on production and distribution by the absolute equalitarianism under the planned economic system, as a move to arouse workers' initiative, further unleash productive forces, move faster in economic development, and lay a solid foundation for the final realization of common prosperity. The practice has proved that this move worked: a new production landscape where public ownership played a dominant role with non-public economic sectors developing side by side and where distribution according to work is the main form that co-exists with other forms of distribution with various factors considered soon emerged at every corner of the country and in both urban and rural areas. From then on, the egalitarian practice that paid no respect for "more work deserving good pay" came to an end rapidly. The vast laborers and social members rolled up their sleeves to work as hard as they could. As a result, the Chinese economy became full of vitality and started to develop rapidly. It can be therefore said that unleashing and developing productive forces continuously and realizing shared prosperity for all Chinese people step by step stand as two important objectives that are confronting the basic economic system with public ownership playing a dominant role and different economic sectors developing side by side.  

After the reform and opening-up practice in the past four decades, China has become the world' second largest economy, secured a leading position in terms of economic and technological strength, defense capabilities, and composite national strength, and seen its people raising their living standards substantially. What it achieved over the period amounts to a miracle of development which has never been seen in the human history. Over the past four decades, both public-ownership economy and non-public economic sectors developed in leaps and bounds, and workers and managerial personnel of public and private companies all made enormous contributions to the reform and development of the country. As public-ownership economy gets its dominant position underpinned constantly, the state-owned economic sector has the chance to give its due role into full play; SOEs are able to become stronger, do better and grow bigger; and non-public economic sectors sustain sound development, and gain more vitality and creativity. There emerges a landscape where public-ownership economy and non-public economic sectors complement with each other to bring out the best in them. Facts have proved that pursing the basic economic system with public ownership playing a dominant role and different economic sectors developing side by side at the time when China is still in the primary stage of socialism can meet the requirements raised by the development of productive forces and the comprehensive advancement of the Chinese economy and society. As a completely correct move, it should be improved and upheld over the long run.  

Common prosperity comes as an underlying principle of socialism with Chinese characteristics. The effect achieved by upholding and improving the basic socialist economic system is, in the final analysis, manifested in seeing the gains of development benefit all Chinese people in a more inclusive and fair way and in realizing shared prosperity for all the people step by step. After 40 years' reform and opening-up efforts, a large proportion of Chinese population in all areas and fields have got themselves rich through honest labor and lawful operations. Even though the vast laborers and social members have seen that their material and cultural needs are met much better than before, there is still a fairly long way to go before the dream for common prosperity comes true. Since the 18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping at the core has been focusing on achieving shared prosperity for all Chinese people step by step, acting on the requirements for upholding and improving the basic socialist economic system of the country and the basic socialist income distribution system, and working hard to see that individual incomes grow in step with economic development and pay rises in tandem with increase in labor productivity. At the same time, it has made efficient institutional arrangements to see all Chinese people have a greater sense of fulfillment as they contribute to and gain from development; and put in place a sound income distribution pattern which values efficiency most and takes fairness into account, with a view to advocating equality and fairness and promoting shared prosperity for all the people, equalizing their access to basic public services, and narrowing down the gap in income distribution gradually. The Party makes further clear in its report at the 19th National Congress two periodic objectives: by 2035, solid progress will have been made toward prosperity for everyone; and by the middle of the 21st century, common prosperity for everyone is basically achieved.  

The practice since the introduction of the reform and opening-up policy, especially the conclusion of the 18th CPC National Congress, suggests that only seeing the gains of development benefit all Chinese people in a more inclusive and fair way and moving steadily toward common prosperity for everyone, can the basic socialist economic system of the country take root in the practice, develop a close affinity with the people, and have the chance to get consolidated and refined with each passing day. First, we must keep keenly aware that ownership relations determine income distribution relations. The ownership structure with public ownership playing a dominant role and different economic sectors developing side by side entails the income distribution pattern where distribution according to work is the main form that co-exists with other forms of distribution with production factors considered also. Since China practices socialism, its ownership structure must be able to meet the requirements raised by the development of productive forces, by putting public ownership at the dominant position and developing different economic sectors side by side. Furthermore, its income distribution pattern must adapt to the development of productive forces. As a result, incomes are distributed in China mainly according to work and in full consideration of many other criteria. This makes it economically possible for China to embark on a path of socialism with Chinese characteristics and to move toward common prosperity for all Chinese people step by step. As Comrade Xi Jinping stresses, practicing the basic economic system with public ownership playing a dominant role and different economic sectors developing side by side is a fundamental policy that has been determined by the Party; and there must be no irresolution about working to consolidate and develop the public sector, and there must be no irresolution about working to encourage, support and guide the development of the public sector. Second, we must gain an in-depth understanding that one of the important objectives for upholding and improving the basic economic system is to achieve common prosperity for all Chinese people step by step. To this end, we need to uphold and improve the basic income distribution system, roll out better mechanisms, policies and measures, increase incomes of rural and urban residents, and narrow down the gap in income distribution constantly. Besides, spearheaded by the guiding principle of the CPC Central Committee, we will further refine the initial income distribution mechanism, by following the principle of distribution according to one's work while improving our institutions and mechanisms for distribution based on factors of production. We will further improve the redistribution mechanism to regulate income redistribution with intensified efforts, by increasing income for people on low incomes, adjusting excessive incomes, and prohibiting illicit income. In addition, we will move faster to ensure equitable access to basic public services, raise public service and social security standards, and narrow down income gaps, while achieving common prosperity for all Chinese people step by step.  

(By the president and the executive president of China Association of Policy Science)


Related Articles