Zeng Zheng: Forming an Economic Order of "Dynamic Vitality" and "Effective Governance"
Establishing a sound economic order is an inherent part of constructing a high-level socialist market economy system, as well as an internal requirement for promoting high-quality development and fostering social harmony and stability. The Central Economic Work Conference identified the principle that "we must ensure both 'letting it live' and 'governing it well'" as a new realization and insight for performing economic work under the new circumstances. This is not only an important manifestation of the organic unity and synergistic power of an effective market and a promising government, but also an inevitable requirement for advancing the modernization of the national governance system and governance capacity. It demonstrates our Party’s scientific grasp of the laws governing the operation of a socialist market economy.
Placing Higher Demands on Economic Governance
General Secretary Xi Jinping has pointed out: "A key factor in the tremendous success of our country's economic development is that we have leveraged both the strengths of the market economy and the superiorities of the socialist system." Looking back at the history since reform and opening up, in the process of exploring the socialist market economy system, our country has consistently followed the internal needs of the development of productive forces and the realistic conditions of various developmental stages. Through reform, we have continuously adjusted the relations of production, ensured the mutual adaptation of the relationship between the government and the market, and achieved a dynamic balance between "releasing" (fang) [1] and "managing" (guan). This has gradually formed an economic system and governance framework that adapt dynamically to economic development.
After the reform and opening up in 1978, in order to solve the problem of the planned economy system restricting the development of productive forces and to alleviate the contradiction of commodity shortages, our country promoted reforms focused on "releasing" market entities. We implemented rural reforms and urban state-owned enterprise reforms, where the government significantly reduced planned intervention in production and sales. However, because the system of market supervision and management had not yet been established, localized market issues characterized by the pattern "disorder follows release" [2] frequently occurred. Starting in 1992, to adapt to the burgeoning rise of township enterprises and the emergence of the private economy, our country promoted the establishment of a socialist market economy system. This emphasized both "releasing and vitalizing" market entities and striving to regulate the macro-economy through means such as the tax-sharing system and monetary policy, conducting significant explorations in managing the macro-economy while stimulating micro-level vitality. After joining the World Trade Organization, facing the realistic demands of deepening marketization, the rule of law, and internationalization, our country advanced work in accelerating the transformation of government functions and promoting the construction of a market system. Problems of imbalance, lack of coordination, and unfairness accumulated in the early stages of reform and opening up were resolved to a certain extent. However, handling the relationship between the government and the market and coordinating "release" and "management" are eternal topics for a market economy; they must be optimized as stages of economic development shift and must be constantly adjusted under new developmental conditions.
Since the 18th National Congress of the CPC, our country's economic development has entered a New Era. Economic strength, scientific and technological prowess, comprehensive national strength, and people's living standards have leaped to a new level, meaning the scale and structural complexity of our economy have gradually increased. Being overall in the middle-to-late stages of industrialization and a period of stable urbanization development means our country is gradually transitioning from a stage of high-speed growth to a stage of high-quality development. The accelerative breakthroughs in the new round of technological revolution and industrial transformation mean that the technical conditions for economic operation and social development are undergoing profound changes. The world is experiencing great changes unseen in a century, meaning the external environment for economic and social development has become more complex and volatile. These changes in the realm of productive forces have created a favorable environment for handling the relationship between the government and the market, while also presenting new requirements.
The Third Plenary Session of the 18th CPC Central Committee explicitly stated that economic system 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 the decisive role in resource allocation and better playing the role of the government. The Third Plenary Session of the 20th CPC Central Committee identified "ensuring both 'letting it live' and 'governing it effectively' [3]" as an important component of building a high-level socialist market economy system. Subsequently, the "Recommendations of the CPC Central Committee on Formulating the 15th Five-Year Plan for National Economic and Social Development," reviewed and adopted by the Fourth Plenary Session of the 20th CPC Central Committee, identified "forming an economic order that is both 'letting it live' and 'governing it well'" as a vital task for persisting in the combination of an effective market and a promising government.
Compared to "governing effectively" (guan de zhu), "governing well" (guan de hao) may seem like a difference of a single word, but it actually places higher demands on our country's methods of economic governance. It emphasizes that governance must better reflect the rule of law, improve the basic institutions of the market economy, and gradually achieve a leap toward "institutional governance." This means governance must be more precise and flexible, avoiding both "market failure" and better leveraging the government's role, gradually realizing a transition from "blocking" to "dredging." It also points toward governance being more forward-looking, gradually shifting toward a combination of pre-emptive prevention at the source, mid-term assessment and adjustment, and post-event collaborative governance, focusing more on enhancing the self-developed resilience of the economic system.
Focusing on Objectives and Coordinating Three Key Relationships
According to public policy theory, important goals of economic governance include improving resource allocation efficiency, promoting income redistribution, and stabilizing economic operation and growth. In recent years, various countries have also taken ensuring security as an important dimension of economic governance. Therefore, regarding these four aspects, "governing well" represents a new shift in the philosophy of economic governance compared to "governing effectively."
From the perspective of improving efficiency, "governing effectively" emphasizes more on correcting market failures such as excessive competition and monopolies through administrative and legal means. Conversely, "governing well" further requires that while solving problems of market externalities, market vitality should be stimulated through precise regulation and institutional innovation to promote the Pareto optimality of resource allocation.
From the perspective of promoting fairness, "governing effectively" emphasizes more on holding the bottom line of market and social fairness by governing unfair competition and regulating income distribution. "Governing well" further requires that, on the basis of achieving basic fairness, a fair system with equal opportunities should be constructed for market entities and various social groups through institutional design and policy support.
From the perspective of maintaining stability, "governing effectively" emphasizes more on ensuring that the macro-economic landscape does not experience major fluctuations through macro-prudential management and micro-prudential supervision. "Governing well" further requires that, through precise regulation and compliance supervision, the economic system's capacity for adaptation, repair, and long-term competitiveness in the face of shocks should be enhanced.
From the perspective of ensuring security, "governing effectively" emphasizes more on holding the security red line through strict supervision and control. "Governing well" further requires coordinating the "securing of the bottom line" with "promoting development," better coordinating development and security, and effectively maintaining national economic security during opening up, thereby achieving a positive interaction between high-quality development and high-level security.
At the same time, in practice, to maintain economic order and optimize economic governance while earnestly achieving both "letting it live" and "governing it well," we must focus on coordinating three key relationships.
First, coordinate the relationship between efficiency and fairness. Efficiency and fairness are the two major goals pursued by economic governance; coordinating them is an important requirement for both "letting it live" and "governing it well." The focus of "letting it live" is to improve efficiency. By streamlining administration and delegating power, and by breaking down institutional barriers, we allow the market to play the decisive role in resource allocation, encouraging all types of market entities to explore boldly and compete actively, thereby creating social wealth with higher efficiency. The focus of "governing it well" is to safeguard fairness, improve regulatory rules, crack down on monopolies and unfair competition, and regulate market order. Simultaneously, through means such as tax regulation, social security, and the equalization of basic public services, we remedy the shortcomings of spontaneous market regulation, ensuring that the fruits of development benefit all people more extensively and fairly toward common prosperity.
Second, coordinate the relationship between innovation and stability. Innovation is the primary driver leading development, while stability is the prerequisite for sustainable development. The balance between stability and innovation is a practical requirement for "letting it live" and "governing it well." The focus of "letting it live" is to stimulate innovation, relax entry restrictions on emerging fields and new business models, provide innovation subjects with greater space for trial and error, and encourage technological, model, and institutional innovation, thereby releasing the vitality of innovation and creation. "Governing it well" emphasizes fortifying the bottom line of stability, establishing and improving risk prevention and control mechanisms, and making early predictions and timely interventions regarding potential risks that may arise during the innovation process. Meanwhile, we must properly handle the adjustment of interest distribution brought about by innovation to ensure overall social stability.
Third, coordinate the relationship between development and security. Development is the guarantee of security, and security is the prerequisite for development. Coordinating development and security is a major principle of our Party's governance, and it is also the bottom-line requirement for "letting it live" and "governing it well." The focus of "letting it live" lies in opening up fields that help enhance developmental momentum, promoting the free flow of factors of production, deepening opening up and cooperation, and promoting higher-quality development through higher-level opening up. The focus of "governing it well" lies in guarding the security red line, focusing on key areas, strengthening bottom-line thinking, and improving the security prevention and control system. While expanding opening up, we must guard against the input of external risks to ensure that development does not deviate from the security track.
Comprehensive Maintenance of a Sound Economic Order
General Secretary Xi Jinping has emphasized that the purpose of "releasing" is to break down institutional barriers affecting the development of productive forces, while the essential requirement of "management" is to build a economy based on the rule of law. Recently, the impact of changes in our country's external environment has deepened, the contradiction of strong supply and weak demand domestically has become prominent, and there are many hidden risks in key areas. Market entities have unstable expectations, which can easily trigger a series of chain reactions. This also places new demands on forming an economic order that is both "letting it live" and "governing it well." We should proceed as soon as possible from three levels—macro-economic governance, meso-level industrial promotion, and micro-level order maintenance—to gradually form an economic order characterized by bursting market vitality, fair and orderly competition, reasonable income distribution, and strong security resilience.
In macro-economic regulation, we must focus on the forward-looking, precise, and synergistic nature of governance. Macro-economic regulation is an important means for the government to perform its economic functions and is a key support for achieving the goal of both "letting it live" and "governing it well." We must coordinate counter-cyclical and cross-cyclical regulation [4], improve expectation management mechanisms, increase policy transparency, and strengthen responses to emerging, trending, and potential issues. We must promote "targeted treatment" using macro-policy tools, construct a regulation model where counter-cyclical and cross-cyclical regulation are synergistic, and accurately grasp the timing, intensity, and effectiveness of macro-policy implementation to avoid policy lag and overreaction. We must strengthen the strategic guiding role of national development plans, strengthen the synergy between fiscal and monetary policies, promote synergy between macro-economic and micro-economic policies, and strengthen the synergy between economic and non-economic policies. We must improve the mechanism for assessing the consistency of macro-policy orientation, focus on the construction of policy transmission mechanisms, and continuously improve the effectiveness of macro-regulation to effectively stimulate micro-market vitality.
In promoting industrial development, we must focus on the guiding, fair, and inclusive nature of governance. To promote industrial development, we must both "let it live" to fully stimulate the innovative and competitive vitality of market entities, and "govern it well" to guide the healthy development of industry through scientific and effective governance. This involves shifting industrial policy toward functional roles and toward improvements in the business environment. We must ensure fair competition among economies under all types of ownership, promote the coordinated development of traditional and emerging industries, promote the integrated development of large, medium, and small enterprises, and encourage the development of new business models, leaving ample space for industrial technological and model innovation. Simultaneously, we must optimize the industrial development ecosystem, construct a synergistic support system of "policy + service + innovation + finance + talent," clear the bottlenecks in enterprise development, and provide long-term mechanisms for sustainable industrial development.
In maintaining market order, we must focus on the law-based, standardized, and normalized nature of governance. Market order is the guarantee of economic vitality, and maintaining it is an important manifestation of "letting it live" and "governing it well." We must improve the basic institutions of the market economy, resolutely break down bottlenecks and obstacles to the construction of a unified national market, and protect the property rights of enterprises under all types of ownership and the legitimate rights and interests of entrepreneurs in accordance with the law. We must regulate law enforcement and judicial behavior in the market domain, clarify the discretionary standards for administrative penalties, promote "double random, one disclosure" [5] supervision, and implement credit-based tiered and classified supervision. In new business models and fields, we should explore inclusive, prudent, and flexible supervision to improve regulatory adaptability and actual effectiveness. We must promote the shift of market supervision toward "normalized governance," establish a full-process prevention and control mechanism covering source governance, early correction, and recovery/disposal, improve credit supervision mechanisms, and construct a smart supervision system. By fully leveraging the roles of social supervision and public opinion supervision, we can make standardized market behavior a consensus and fair competition a norm, creating a sound market environment for economic development.