Reform focus on property rights, market

Three decades ago we advanced on two main courses of economic reform including enterprise reform, ownership reform, price reform, and the reform of the economic operating system. Since then the two main courses of reform have not only deepened but also yielded remarkable results.

The first course is to adjust and reform the ownership structure, which includes reviving and promoting economic individualism, developing overseas economic practices and introducing them suitably to the domestic economy, adjusting and reforming State and collective ownerships, as well as establishing and improving an economic system centered on public ownership, while multiple forms of ownership structure develop simultaneously.

Reform and opening-up have revived economic individualism. Since 1979 the Communist Party of China and the government have launched various policies supporting economic individualism, leading to China's rapid economic development, both in urban and rural areas. In fact, by the end of 2016, more than 80 million people were running their businesses individually. Also, economic individualism has helped solve many people's employment problem, increased the vitality of private economy and satisfied people's multiple demands.

The development of private economy gained momentum when the authorities started issuing business licenses in 1988, gaining added pace after former leader Deng Xiaoping's speech during his southern tour in 1992. The contribution of private businesses, including those run by individuals, to China's GDP increased from less than 1 percent in 1979 to more than 20 percent in 2001, and it is estimated that private economy and foreign investment account for 50 to 60 percent of GDP nowadays.

Since the establishment of special economic zones, China has gradually increased the use of foreign investment. And thanks to their rising number, foreign direct-invested enterprises have become a significant market player in China.

The report to the 15th National Congress of the CPC in 1997 for the first time clearly advanced the establishment of a basic socialist economic system, pointing out that the main body of China's basic economic system during the primary stage of socialism would center on public economy, while the multiple-ownership economy develops simultaneously. And the report to the 19th National Congress of the CPC in 2017 said China must follow and improve the basic economic and distribution systems of socialism, consolidate and develop public economy, and resolutely encourage, support and guide the development of nonpublic economy.

The second main course of economic reform is the transition and reform of the economic operating mechanism to allow the market, not planning, to play a crucial role in resource distribution, with the government regulating the macroeconomy using fiscal and monetary policies.

As for price reform, it started at the beginning of overall reform and opening-up. China relaxed price control on agricultural and related products, and domestic goods way back in 1985, which vitalized the commodity market. By 2016 the prices of more than 97 percent of the commodities and services had been freed up.

The large-scale price reform provides good conditions for market development, and only a unified, open, competitive and orderly market can play a crucial role in resource distribution.

Since the Third Plenary Session of the 18th Central Committee of the CPC, the government has been taking measures to reform the administrative approval system in order to reduce administrative intervention in microeconomic activities. It has also been streamlining public services, and improving market supervision, social management and environmental protection to ensure the healthy operation of socialist market economy.

In his report to the 19th National Congress of the CPC, General Secretary Xi Jinping said future economic reform should focus on improving the property rights system and factor market distribution. And the two main courses of economic reform are in line with the two key points highlighted by Xi.

The author is former director of the Financial and Trade Institute, Chinese Academy of Social Sciences. The article is an excerpt from his speech on economic system reform theory and practice in four decades of reform and opening-up at the CASS on June 28.