China’s Economic Reform

Experience and Implications

Zhang Yu

• Publisher: Routledge
• Year: 2017
• Topic: Business
• eBook ISBN:
  9781351613118
• Subtopic: Business General
• Index: Business

China's growth miracle over the past 30 years has propelled it to become the world's second largest economy and potentially the largest in the following years. This book examines China's experience on economic reform, trying to find the reasons for the sustainable and rapid development and provide insights into the study of economic theories.

From the perspective of political economics, this book elaborates on China's socialist market economy which was officially confirmed as the goal of the country's economic reform in 1992. It expounds on China's economic model, the relationship between socialism and market economy, as well as the establishment and improvement of socialist market economy in China, deepening the studies in the laws governing China's economic development. Then, it explores the gradual reform, the reform of state-owned enterprises, and the relationship between governments and market, all of which are crucial to the success of China's economic reform. Finally, based on the analysis above, this book discusses the reasons for the constant and rapid development of China's economy.

With detailed analysis on the reform experience and theoretical implications, this book will appeal to scholars and students studying China's economy, and contribute to the development of economic theories.

1
Practices of economic reform and development of economics in China

Since the Third Plenary Session of the 11th Central Committee of the Communist Party of China, on the basis of achievements made in revolution and construction after the foundation of the New China, China has successfully explored the new road for socialist economic development with Chinese characteristics. As the Chinese economy has attracted all eyes worldwide for its vigorous vitality and vigor, China’s Model, China’s Experiences and China’s Road have become the focus of attention of the whole world. It is a significant and urgent task of the current age for Chinese economics circle to correctly summarize the great practices of Reform and Opening Up in China, establish the economics system and academic discourse system with Chinese characteristics, Chinese style and Chinese manner and enhance consciousness and confidence of economics in China.

I. Promote the development of theories based on practices

Theory reflects practices. Closely linked with practices of the construction of socialist economy with Chinese characteristics, contemporary economics of China, on the one hand, profoundly reflects the historical course and practice requirements of Reform and Opening Up and economic development in China, and, on the other hand, renders theoretical support for it in China and promotes development of practices.

In the early days after the foundation of the New China, directed against economic construction indiscriminately imitating the pattern of the Soviet Union at that time, Mao Zedong put forward that “the communist party and the circle of intellectuals of each country shall create new theories, write new works and produce their own theorists to serve current politics, instead of merely relying on ancestors”.¹ He called on the whole Party to learn from experiences and lessons of the Soviet Union and pushed forward the “second combination” of Marxism-Leninism and practical conditions of China. To this end, he had written important documents on guiding economic construction, including On the Ten Major Relationships and Draft of Sixty Working Methods, and tried to explore the road of socialist construction unique to China. He also suggested cadres of the whole party read Socialist Economic Problems of the Soviet Union written by Stalin several times and the “socialism part” in the third edition of Teaching Material on Politics and Economics prepared by the Institute of Economics of Soviet Union Academy of Sciences, which emphasized, “It is of great theoretical significance and practical significance to research on issues of politics and economics”, explored on a series of major issues in socialist politics and economics and proposed many valuable thoughts and important ideas. For example, political work makes the lifeblood of all economic work; take agriculture as the base and industry as the guidance and guarantee coordinated development of agriculture and light and heavy industry; prepare overall plans, take all factors into consideration, make appropriate arrangement and attach importance to comprehensive balance; simultaneously focus on central and local work and give full play to initiative of the both; handle relationships among the country, collective and individual well, and enable them to be in their proper place; eliminate polarization and ultimately achieve common prosperity; see the value rule as a great school as well as a useful tool for socialist construction; “march toward science” and “implement technological revolution” to fully realize modern agriculture, industry, national defense and science and technology; and rely mainly on our own efforts while seeking assistance abroad. These thoughts and ideas have made important contributions to the development of socialist political economics in China.

Since the time of Reform and Opening Up, Chinese economy and society have been exposed to profound changes and rapid development; it attained rare development miracles along human history, made historical contributions to world development and provided extremely typical and rich materials for the development of contemporary economics. Meanwhile, China is a big socialist country with vast territory, a large population and time-honored tradition that is going through development and transformation. Encountered with the concurrence of several major historical changes such as industrialization, informatization, marketization, globalization and reform of socialist systems, China’s practices and road are much more complicated, rich and special than those of any other country. As great practices are calling for theoretical innovation, the economics of China embraces unprecedented historical opportunities. As pointed out by Xi Jinping,

Practice is the source for theories. China has gone through magnificent course and acquired great achievements that strike the attention of the world during its economic development, and has brought about the great driving force, vigor and potentiality to theoretical creation. We shall conduct profound study on global economy and new conditions and issues in Chinese economy, to contribute Chinese wisdom to innovation and development of Marxism Political Economics.²

In view of vigorous reform and development, since the Third Plenary Session of the 11th Central Committee of the Communist Party of China, the Communist Party of China has combined basic principles of Marxism and new practices in Reform and Opening Up and thus created the socialist political economics with Chinese characteristics. In October 1984, when the Resolution of the Central Committee of the Communist Party of China on Economic System Reform was approved, Deng Xiaoping praised this decision: “It has completed the first draft of political economics, the political economics that combine basic principles of Marxism and socialist practices in China”.³

In the recent 30 years, socialist political economics with Chinese characteristics have made great progress along with vigorous development of practices and initially established the complete theoretical system, where the major theoretical ideas include the following: the essence of socialism is liberation and development of the productive forces, the elimination of exploitation and polarization, and the ultimate achievement of prosperity for all; the basic system at the primary stage of socialism is keeping public ownership as the mainstay of the economy and allowing diverse forms of ownership to develop side by side; the socialist market economy is the market economics integrating basic socialist system and market economy, which gives full play to advantages of both the market economy and socialist system; adhere to the system in which distribution according to work is dominant and a variety of modes of distribution coexist and combine efficiency improvement and equity promotion; actively participate in economic globalization and meanwhile insist on independence, to make good use of the two markets and two resources, respectively, in China and overseas; hold on to the people-oriented development idea and firmly establish the innovative, coordinated, green, open and shared development principles; and persist in the road of mutual coordination, favorable interaction and profound integration of new paths of industrialization, informatization, urbanization and agricultural modernization with Chinese characteristics and so on. These theoretical achievements constitute the political economics adapting to contemporary China’s actual conditions and characteristics of the times, the new achievements of Chinization and modernization of Marxism political economics.

During this period, people in economic theory and academic circles gradually get rid of restrictions imposed by traditional theories of planned economy and transfer the focus of theories to the analysis of the practical course of economic operation as well as research and discussion on major issues in reform and development. The economics of China ushers in prosperous development. In terms of relations between theories and practices, achievements in economic research in China since Reform and Opening Up could be divided into three levels:

The first level is the research on countermeasures, such as investigation and research reports, and reform programs on macro-control system reform, enterprise reform, financial reform, fiscal reform, price reform, exchange rate reform, income distribution system reform and labor and social security system reform, as well as countermeasure reports and policy suggestions on national economic development plan, macro-economic policies and administrative measures for economy, etc. As for the theoretical structure, these researches belong to countermeasure research on the surface, which is closer to practical economic issues and further to basic economic theories. However, its significance cannot be underestimated, since it not only provides first-hand materials and references to economic decision-making by the Party and government but also renders important raw materials for development and innovation of economics in China. For instance, major theories and policies such as the application of the contract responsibility system, establishment of modern enterprise system of state-owned enterprises and proposal of indigenous innovation policy are all derived from researches on countermeasures.

The second level refers to researches on the basic theories of economic reform and economic development in China, such as discussions on productive forces and production relations, purpose of socialist production, economic effect, distribution on the basis of labor, relation between planned and market economy and rural land ownership in early 1980s; discussions on socialist planned commodity economy, economic operational mechanism and operational mode, whole thinking about economic reform and relation between inflation and economic growth, etc., in mid-1980s; discussions on essence and characteristics of socialist market economy, status and role of state-owned economy, content and form of modern enterprise system, relation between distribution on the basis of labor and distribution on the basis of production factors and essence and effect of economic globalization, etc., in the 1990s; and discussions on the train of thought to improve socialist market economy system, relation between efficiency and equity, new path of industrialization, third industrial revolution, relation between government and market, China’s mode and China’s path and theoretical system and academic discourse system of economics in China, etc., in the new century. These researches have promoted people’s understanding about the laws of economic reform and development in China and the development of socialist economic theories with Chinese characteristics.

The third level is the research on general theories of economics, such as researches on economic methodologies, value theories, currency theories, enterprise theories, growth theories and crisis theories, etc. Though looking abstract and less related to practical economy, these researches play a significant role in scientifically understanding laws of economic development and formulating correct economic policies. For example, in the theoretical realm, the discussions on deepening the labor and labor theory of value center on how to understand the establishment of autonomy of Chinese enterprises in socialist market economy, the generation of pricing mechanism and reform of income distribution system; the discussions on ownership and enterprises theories center on how to solve theoretical foundation for governance structure and system design of state-owned enterprises, and discussions on the essence of contemporary capitalist economy and development trend are directly related to how to understand the international environment and historical orientation of socialism with Chinese characteristics and how to formulate the correct strategies on opening.

In conclusion, great achievements have been made in all those three levels of researches, which have promoted the development of economics theories in China and made significant contributions to practices of Reform and Opening Up. These achievements cannot be denied.

There is no need for reticence that economics of China is immature in general. Academic researchers are exposed to weak theories of foundation, copies of western economics and being unreliable, void and fickle, while the researches and academic innovation in economic theories evidently fall behind requirements proposed by practices and ages. This is normal in a certain sense. “Thoughts on form of life of human and then the scientific analysis always apply the road contrary to practical development. Thinking starts after the thing happens, which means starts from the results after completion of development course”.⁴ It is impossible for us to acquire mature and perfect theories of socialist economy before completion of socialist modernization construction in China. However, as long as we stick to correct direction, take the practices in China as a basis, take into consideration the Chinese history, confront bravely problems of China and summarize experiences, construct discourse, refine ideas and make innovation on theories, we can make theoretical achievements live up to the age and people and contribute more to human development.

II. Adhere to Marxism as guidance

The primary task for the construction of economics of China lies in adhering to and developing Marxism political economics or economics and promoting Chinization and modernization of Marxism economics. Lenin once pointed out that political economics “are the most profound, comprehensive and detailed demonstration and application of Marxist theories”. Engels once mentioned that the proletarian party has “all theories come from researches on political economics”. During socialist economic construction with Chinese characteristics, Marxism economics play a special, significant and irreplaceable role.

• (1) Scientific world outlook and methodology. The scientific nature of Marxist political economics is first reflected by its scientific world outlook – i.e., dialectical materialism and historical materialism. Based on the foundation of the outlook of dialectical materialism and historical materialism, Marxist economics also form the scientific methodology on analysis of economic phenomena, including the principle that productivity determines production relations and the economic base determines the superstructure, principle of analyzing individual economic behavior in the overall control of social and economic structure formed in the history, principle of determining the nature of the whole social and economic system based on the ownership of the means of production and principle of understanding and explaining the political and law system and ethical norms based on economic relations and realizing unification of compliance with laws and goals of social and economic development through social practices, etc. These principles provide scientific world outlook and methodology for us to scientifically understand the complicated economic phenomena.
• (2) Correct position and values. Why are the problems about human beings the fundamental matters of principle in research on philosophy and social sciences? Marxist political economics are the political economics of labor and represents interests of broad masses of laboring people. By integrating laws of economic development and goals of people’s practices, it scientifically proves the historical inevitability of socialism replacing capitalism and, on such a basis, proposes the social ideal of the elimination of exploitation and polarization, realization of free and all-around development of people and achievement of prosperity for all social members. In contemporary China, to adhere to the position and values of Marxism, we shall insist on people orientation, place the fundamental interests of the overwhelming majority of people as the starting point and finishing point for all considerations, lead all people to steadily advance to common prosperity and insist on the social ideal of Marxism and integrate promotion of economic and social development and the all-around development of people, thus to promote and realize the goal of all-around development of people.
• (3) General laws for social production. Marxist political economics unveil general laws for social production and propose many important theories, such as the theory of conservation of labor time as the primary economic law of people; theory of distribution of social labor in proportion; theory of primacy of production and relations among production, distribution, exchange and consumption; theory of approaches and methods to improve productivity of labor; theory of general content and basic elements of labor course; theory of development laws of division and coordination; and theory of division of two major categories of social reproduction and their relations, etc. These theories are of significant value in understanding laws and phenomena of economic development. For example, as for how to understand the essence of development, Marx once proposed the penetrating insight that the social development is fundamentally the development of productivity, while the development of productivity equals to the conservation of labor time, equals to the development of personal talents, equals to science increasingly becoming the major driving force for production, equals to compromise between people and nature, equals to added free time and equals to free and all-around development of individuals. This conclusion perfectly integrates the development of productivity, society and people, which greatly inspires us on promoting scientific development.
• (4) General laws for commodity production and market economy. Some people believe that as Marx’s Capital advocates planned economy, it thus has no guiding significance for the socialist market economy. This is completely a misunderstanding. As a matter of fact, the object of studying Capital is exactly to study the capitalist market economy instead of the planned economy. Marxist political economics profoundly research on the commodity economy and market economy and analyze the essence and laws of economic phenomena including value, currency, price, supply and demand, competition, cost, profit, credit, information and rent, etc., particularly the essence and operating laws of capital. Ignoring the capitalist production relations, these laws are also applicable for socialist market economy. A great progress and contribution of Marxist political economics in the contemporary age lies in that it proposes the theory of the socialist market economy and successfully establishes the socialist market economy system in practices. By abandoning the capitalist market economy, the socialist market economy reflects the principle of univers...

Table of contents

• Cover
• Title
• Copyright
• Contents
• 1 Practices of economic reform and development of economics in China
• 2 Political-economics analysis of Chinese economic model
• 3 Theories and practices on socialist market economy
• 4 Logic of gradual reform in China
• 5 Market failure does not constitute the basis for existence of the state-owned economy – concurrently on the status and role of the state-owned economy in the socialist market economy
• 6 The relationship between government and market in the socialist market economy
• 7 Reasons for the constant and rapid development of the Chinese economy
• Index