Socialist market system drives growth

The ongoing third plenary session of the 20th Central Committee of the Communist Party of China is expected to inject vitality into new, high-quality productive forces and the development of a socialist market economy.

Since the third plenary session of the 11th Central Committee of the Communist Party of China in 1978, the focus in China has been on seeking truth through practice, centering on economic construction, and reform and opening-up. The subsequent sessions introduced significant theoretical innovations such as the immutable nature of the relationship between commodity and money, the primary stage of socialism, and the concept of a socialist market economy.

After the third plenary session of the 18th CPC Central Committee in 2013, the Chinese political economy has ventured into new realms, advocating for the market's decisive role in resource allocation while emphasizing the enhanced role of the government. The primary contradiction in society has evolved to be that between people's growing material and cultural needs and unbalanced and inadequate development, marking a new phase in the primary stage of socialism. The mission of this phase is to achieve high-quality development and build a high-level socialist market economy and fostering new quality productive forces.

Productive forces comprise all the factors contributing to the productive activity of human beings. Machines and tools are productive forces, as are factories, means of transportation and communications, technology and science. Productive forces also include the concentration of production in large factories and the social division of labor which allows for more intensive use of machines. These tools and machines not only reflect the level of productive forces but also define economic epochs.

The difference between various economic epochs is not what is produced, but how it is produced. Labor is the most active component of productivity and the lever that enhances it. And the advancement of productive forces dictates the state of economic development.

Productive forces and production relations are interdependent, with the latter influencing the former. The fit between production relations and productive forces, and the superstructure with the economic base can either promote or hinder economic and social development.

Therefore, it is crucial to continuously adjust production relations and the superstructure driven by the development of productive forces.

Reform essentially involves adjusting production relations and the superstructure that no longer fit with the evolving productive forces. As industrial spaces saturate and the efficiency of marginal investments wanes, innovation becomes essential to spawn new economic growth points. The unseen social landscapes always hold potential for dazzling economic growth, powered by robust new quality productive forces.

Deeper reform is necessary to adjust all the elements of production relations and the superstructure that do not support these new forces. Ownership issues are often the first that need to be addressed. The ingrained bias against the private sector sometimes surfaces subtly, affecting economic development. So balancing State-owned and private enterprises is key to ensuring robust economic growth.

Distribution has always been a central issue in political economics, while polarization is detrimental to any country. The lesson from the United States is that entrepreneurs like Steve Jobs and Elon Musk should be rewarded in proportion to their contributions, while excessive earnings, such as those seen on Wall Street, should be curbed. China's distribution system must support innovators and ensure social stability. Such a balance cannot be achieved by the market alone; as markets become more perfect, polarization intensifies, necessitating government intervention.

That's why China's approach to economic modernization is not merely about growth; it is about reshaping the economic framework to foster innovation, ensure fairness and maintain social stability through thoughtful reform and governmental adjustments.

As China transitions from a traditional planned economy to a socialist market economy, the superstructure must adapt to better suit the economic base. This means ensuring government actions help meet the demands of an efficient socialist market economy.

Indeed, the government's role is irreplaceable, yet its actions must be correct and not solely focused on short-term macroeconomic controls, which often result in inconsistent outcomes. Instead, its focus should be on setting long-term rules and systems that are compatible with socialist market economy, allowing the economy to operate in a healthy way without the need for sensational interventions. These rules, though less dramatic, should help maintain a stable economic environment.

A key priority is the construction of a unified national market, making clear government support for vital sectors, such as the real economy. The government's role in supporting basic scientific research is crucial and cannot be replaced. Additionally, the government should propel industries that clear bottlenecks and advance forward-looking sectors.

The immediate need is to curtail local governments' penchant for vanity projects, which waste enormous resources and distort performance evaluations. There must be a decisive move toward streamlining the administration, enhancing local governments' ability to turn central directives into practical productivity, and translate the spirit of these directives into actionable measures.

More importantly, it is necessary to deepen reform to adjust production relations and the superstructure to suit the evolving productive forces. With these adjustments, new quality productive forces will advance rapidly, driving China's development forward with unprecedented momentum.

The author is a professor at the School of Economics, Renmin University of China.

The views don't necessarily reflect those of China Daily.

If you have a specific expertise, or would like to share your thought about our stories, then send us your writings at opinion@chinadaily.com.cn, and comment@chinadaily.com.cn.