Zhang Laiming: Formulating an Economic Order that is Both "Dynamic" and "Under Control"
At the Central Economic Work Conference [1] held late last year, General Secretary Xi Jinping summarized and refined our Party's understanding of the regular patterns of economic work, proposing the five "must-integrations" [2], which further enrich and develop Xi Jinping Economic Thought. The first of these is that "we must integrate the relationship between an effective market and a proactive government, forming an economic order that is both 'dynamic' and 'under control.'" This is an inevitable requirement for upholding and perfecting the socialist market economy system, developing the socialist market economy, and promoting high-quality development. We must deeply study and grasp the stances, viewpoints, and methods that permeate Xi Jinping Economic Thought; deepen our understanding of and earnestly follow the laws of economic development; and deepen economic structural reform to form an economic order that is both "dynamic" and "under control," promoting high-quality development with a firm and steady pace [3].
Forming an economic order that is both "dynamic" and "under control" requires grounding the integration of an effective market and a proactive government in a sense of historical consciousness regarding the development of the socialist market economy.
The relationship between the government and the market is a factor of decisive influence on economic development. Since the founding of New China [4], our Party has led the people in arduous exploration and practice, proceeding from China’s reality and conforming to the laws of economic development to improve economic construction, gradually finding the correct path of developing a socialist market economy. It can be said that the exploration, formation, and expansion of this path has always revolved around the core issue of how to correctly understand and handle the relationship between the government and the market. This is a historical process of continuously recognizing objective laws, upholding truth, and correcting errors on the basis of practice; it is a historical process where there is no "best," only "better." From a planned economy to "the planned economy as primary, market regulation as supplementary," then to "a planned commodity economy based on public ownership," to "the combination of planned economy and market regulation," and finally to the socialist market economy—this is how we have advanced step by step. Establishing a socialist market economy is a great pioneering feat in world economic history, as it was previously widely believed that a market economy was unique to capitalism and a planned economy was the basic characteristic of a socialist economy.
In the process of developing the socialist market economy, our practical exploration and theoretical understanding of it have never ceased, nor did they stop at "letting the market play a foundational role in resource allocation under national macro-control." This reflects the Chinese Communists’ firm adherence to historical materialism and their historical consciousness in the pursuit of truth. Since the 18th National Congress of the CPC [5], General Secretary Xi Jinping has proposed a series of new thoughts, viewpoints, and judgments regarding the handling of the relationship between the government and the market, leading the ship of the socialist market economy through the waves. The Third Plenary Session of the 18th CPC Central Committee proposed that economic structural reform is the focus of comprehensively deepening reform, and the core issue is handling the relationship between the government and the market, letting the market play a decisive role in resource allocation and better playing the role of the government. The Fifth Plenary Session of the 19th CPC Central Committee proposed upholding and perfecting the basic socialist economic system, giving full play to the decisive role of the market in resource allocation, better playing the role of the government, and promoting a better combination of an effective market and a proactive government. The Third Plenary Session of the 20th CPC Central Committee proposed that we must better leverage the role of market mechanisms, create a fairer and more vibrant market environment, achieve optimal efficiency and maximized benefits in resource allocation, and ensure the market is both "dynamic" and "under control," thereby better maintaining market order, compensating for market failures, smoothing the circulation of the national economy, and stimulating the endogenous impetus and innovative vitality of the entire society.
Ideology leads practice, and the path determines destiny. General Secretary Xi Jinping pointed out: "A key factor in the great success of China's economic development is that we have leveraged both the merits of the market economy and the superiority of the socialist system." It is precisely under the guidance of the Party’s innovative theories that we have surged forward along the correct path of developing a socialist market economy, making continuous progress in building an effective market and a proactive government, thereby creating a miracle of rapid economic development. From 1979 to 2023, China’s economy grew at an average annual rate of 8.9%, much higher than the world average of 3.0% during the same period, with an average annual contribution to world economic growth of 24.8%, ranking first in the world. Since the 18th CPC National Congress, China's total economic volume has continuously reached new heights, and is expected to exceed 130 trillion yuan in 2024. At the same time, we must realize that in the long river of history, the socialist market economy is still a new phenomenon, and the socialist market economy system is still a new system. Whether in terms of giving full play to the decisive role of the market in resource allocation or in terms of better playing the role of the government, we need to continuously explore in practice and do better by constantly summarizing and applying experience. We must profoundly grasp the relationship between an effective market and a proactive government through the magnificent historical process of the Party leading the people to develop the socialist market economy, deepen economic structural reform, and promote high-quality development, continuously strengthening our historical consciousness in integrating the two to open up new historical horizons.
Taking the formation of an economic order that is both "dynamic" and "under control" as the starting point and ultimate goal of integrating the relationship between an effective market and a proactive government.
To accomplish any undertaking, one must first clarify the purpose—the starting point and ultimate goal of the work. The Central Economic Work Conference held late last year proposed that "we must integrate the relationship between an effective market and a proactive government" in conjunction with "forming an economic order that is both 'dynamic' and 'under control,'" which clarifies the goal of integrating the two. We must focus our efforts and work hard toward this goal.
In a certain sense, economic order is the lifeline of economic development. Without a good economic order, there is no economic development; this is true across all times and regions. Economic structural reform is, in the final analysis, intended to create a good economic order so that economic construction can proceed in a sustained and healthy manner. What kind of order is required for the development of a socialist market economy? This Central Economic Work Conference refined and deepened past understandings, clearly summarizing its basic characteristics as being both "dynamic" and "under control." This was proposed based on a profound understanding of the past cycle of "chaos following liberalization, and stagnation following control" [6], and is targeted at the current reality where neither the market’s decisive role in resource allocation nor the government’s role are fully realized. It is a concentrated expression of dialectics and the "two-point theory" [7] regarding the relationship between the effective market and proactive government.
It should be seen that the government and the market each have their own roles in promoting economic development; they are organically unified and irreplaceable. We cannot use the market's decisive role in resource allocation to replace or even negate the government's role, nor can we use the better exercise of the government's role to replace or negate the market's decisive role. Instead, both the "invisible hand" and the "visible hand" must be used and must be strong, each fulfilling its position, performing its duties, demonstrating its strengths, and coordinating tacitly. Only in this way will social and economic life display a situation that is both vibrant and orderly. It should also be seen that the rational boundaries between government and market roles are not static; they change along with the domestic development stage, the principal contradiction [8] in society, technological and economic conditions, and the international development environment. This reminds us that integrating the relationship between an effective market and a proactive government cannot be achieved overnight, nor once and for all; it requires consistent effort and must persist over the long term. We must uphold dialectical materialism and historical materialism, proceed from reality, actively adapt to changing realities, and understand the effective market and proactive government in a way that advances with the times.
From the perspective of institutional building, an economic order that is both "dynamic" and "under control" is a rule-of-law economic order. General Secretary Xi Jinping pointed out: "The socialist market economy is essentially a rule-of-law economy. Economic disorder often stems from laws not being followed or violations not being prosecuted. Therefore, we must adhere to rule-of-law thinking, strengthen our concept of the rule of law, and regulate and govern the economy according to the law." Whether it is being "dynamic" or "under control," both must proceed along the track of the rule of law. Only when there are rules and the rule of law, and when all parties act according to the law, can economic order be formed. Therefore, we emphasize that major reforms must have a legal basis; we emphasize the equal protection of the legitimate rights and interests of citizens, legal persons, and other organizations; we emphasize that there must be no selective law enforcement, let alone extra-legal leniency; and we emphasize unremitting efforts to create a first-class market-oriented, law-based, and internationalized business environment. We focus on steadily expanding institutional opening up in terms of rules, regulations, management, and standards; focusing on the formulation of laws such as the Private Economy Promotion Law; focusing on law enforcement and justice regarding anti-monopoly and anti-unfair competition; focusing on rectifying financial chaos according to the law; regulating and guiding the healthy development of capital; and focusing on prominent problems such as the infringement of the legitimate rights and interests of workers and consumers. The purpose of all these is to improve the legal environment necessary for promoting economic development and to create an economic order that guarantees high-quality development.
Forming an economic order that is both "dynamic" and "under control" also requires combining a goal-oriented approach with a problem-oriented approach, taking the urgent resolution of real-world problems as the focal point for integrating the relationship between an effective market and a proactive government.
To get things done and do them well, one must adhere to both a goal-oriented and a problem-oriented approach. This is because the process of achieving a goal is essentially the process of solving real-world problems—it is for the purpose of resolving those problems thoroughly and effectively. Forming an economic order that is both "dynamic" and "under control" must also adhere to this combination.
Currently, in the operation of China’s socialist market economy, several prominent problems remain in both the construction of an effective market and a proactive government. These include issues of malfeasance and misfeasance such as improper intervention in micro-entities by certain local governments, local protectionism, and ineffective implementation of production safety responsibilities. There are also unfair competition issues such as the abuse of dominant market positions and false commercial propaganda by certain enterprises. Therefore, we must resolve problems affecting the effective play of market roles while also resolving the issues of government absence or overreach. The fundamental way to solve these problems is to strengthen institutional building. Because institutions are fundamental, holistic, stable, and long-term, the process of sustained and healthy development of the socialist market economy must be accompanied by the continuous improvement of the socialist market economy system.
Centering on the core issue of handling the relationship between the government and the market and improving the socialist market economy system, we must both strengthen the building of relevant systems and mechanisms and reinforce the execution of existing systems. Regarding the strengthening of systems and mechanisms, a typical recent example is the formulation of the Private Economy Promotion Law. Codifying the policies and effective practices of the CPC Central Committee and the State Council regarding the private economy since the start of reform and opening up—and especially since the 18th CPC National Congress—into a legal system is conducive to forming a legal environment and social atmosphere that promotes the common development of all types of ownership, including the private economy. This is also a foundational institutional project for improving the socialist market economy system. Regarding the reinforcement of existing systems, a recent typical example is the General Office of the State Council's issuance of the Opinions on Strictly Regulating Administrative Inspections of Enterprises. Aimed at addressing frequent instances of improper administrative inspections by certain localities and departments that affect normal production and business operations and the improvement of the business environment, it explicitly requires that the regulation of administrative inspections be a key part of special actions to regulate enterprise-related law enforcement. This aims to curb random inspections at the source, increase the investigation of such inspections, and strive to ensure that the government is neither "absent" nor "overreaching." These two typical cases clearly reflect the firm will and pragmatic spirit of the CPC Central Committee and the State Council in improving the socialist market economy system, and they serve as demonstrations for forming an economic order that is both "dynamic" and "under control."
In integrating the relationship between an effective market and a proactive government, all regions and departments must relate to their own realities and vigorously implement the spirit of the Third Plenary Session of the 20th CPC Central Committee. They must use further comprehensively deepening reform and improving systems and mechanisms to correct market failures, market chaos, and government absence or overreach, better leveraging market mechanisms to create a fairer and more vibrant market environment and achieve optimal efficiency and maximized benefits in resource allocation. We must ensure that economies under all types of ownership use factors of production equally, participate in market competition fairly, and receive equal legal protection, promoting the mutual complementarity and common development of various ownership types. We must support and guide all types of enterprises in improving the utilization efficiency of resources and factors, improving operation and management, and fulfilling social responsibilities. We must strengthen anti-monopoly and anti-unfair competition efforts, and clean up or abolish various regulations and practices that hinder a unified national market and fair competition. We must regulate local investment promotion regulations and systems, strictly forbid illegal policy incentives, enhance comprehensive market supervision capabilities, and deepen the reform of the local standards management system. We must improve the mechanism where factor prices are determined primarily by market supply and demand, preventing improper government intervention in price formation. We must improve the mechanism where the market evaluates the contribution of production factors—such as labor, capital, land, knowledge, technology, management, and data—and determines remuneration accordingly. We must improve the systems and mechanisms for government investment to effectively drive social investment, deepen the reform of the investment approval system, and form an endogenous growth mechanism for effective investment led by the market. We must improve long-term mechanisms for expanding consumption, reduce restrictive measures, and reasonably increase public consumption. We must equitably and permanently protect the property rights of economies under all types of ownership according to the law, establish an efficient comprehensive management system for intellectual property rights, apply the same responsibilities, crimes, and penalties to infringements of property rights and legitimate interests regardless of ownership type, and improve the punitive damages system. We must prevent and correct the use of administrative or criminal means to intervene in economic disputes, and improve mechanisms for identifying and correcting wrongful cases involving enterprises according to the law. We must optimize the market access environment for new business formats and fields, and improve the social credit system and supervision institutions, among other measures.
At the same time, we must profoundly recognize the internal connection between government behavior and market roles: the more regulated government behavior is, the more effective the role of the market will be. The government must achieve administration according to the law and fulfill its statutory duties; it must ensure that "anything mandated by law must be done" and "nothing unauthorized by law can be done," knowing what to do and what to refrain from doing. Regarding what to do, the government must continuously build a rule-of-law economy and a credit-based economy, improve market rules and take the lead in obeying them, and correct market failures and regulate competitive order through the lawful exercise of government functions. Regarding what to refrain from doing, the government must respect and leverage the decisive role of the market in resource allocation and prevent improper intervention in the activities of micro-entities.
(The author is the Deputy Director and member of the Leadership Group of the Development Research Center of the State Council)
Source: People's Daily (January 16, 2025, Page 09)
Web Editor: Hui Hui