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Yang Chengxun: A Discussion with Professor Tian Guoqiang on the Theory of Market Economy

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Comrade Hu Jintao pointed out in his speech during the meeting commemorating the 30th anniversary of the 3rd Plenary Session of the 11th CPC Central Committee that China must "[f]orm an economic management system in which the market plays a basic role in resource allocation under national macro-control." Our Party has consistently emphasized this orientation for socialist market economy reforms. However, regarding the specific relationship between the market and the government, the academic community still maintains differing understandings. For instance, in March 2011, Professor Tian Guoqiang published an article titled "Deep-Seated Problems in China’s Economic Development," which posited that "deep-seated market-oriented reforms are lagging," and that China should adhere to the "market-optimal economy" advocated by figures such as Hayek. The article argued for transforming the government into a "limited government" and relying on the "'non-action hand' [1] to allow more wealth to flow to the common people, thereby maximizing social and economic welfare." While some arguments and suggestions in that article possess a certain degree of rationality, other viewpoints are open to debate. This article, directed at certain perspectives in "Deep-Seated Problems in China’s Economic Development," offers several observations centered on the core issue of the relationship between the market and the government.

I. The essence of the market is not "governance through non-action," but profit-seeking competition within exchange relations

The premise of the article "Deep-Seated Problems in China’s Economic Development" is that the essence of a market economy is "governance through non-action" (wuwei erzhi). The article argues that the lag in deep-seated market reform is one of the causes of the long-term, deep-seated, and fundamental problems in the Chinese economy. It claims: "The essence of the market is governance through non-action; the necessary condition for governance through non-action is a perfected market system that makes the market effective; the necessary condition for an effective market is an effective government; and the necessary condition for an effective government is a limited and appropriately positioned government." This paper contends that there are several points in this formulation that warrant discussion.

First, there is a bias in the understanding of the essence of the market. A so-called "essence" refers to the fundamental attributes inherent in a thing that determine its nature and development. To regard "governance through non-action" as the essence of the market is at most—even if the view were valid—a description of a phenomenon or state of the market (i.e., its spontaneity), rather than an expression of its fundamental attributes. Comrade Mao Zedong once said: there is a contradiction between the "phenomena of a thing and its essence," but "a false appearance is distinct from a general phenomenon." [2] "Governance through non-action" is, at best, a market phenomenon or a false appearance; one must not conflate phenomena or false appearances with essence.

Second, if the market were indeed "governance through non-action," why would it require so many "proactive" (youwei) [3] preconditions—such as "must have an effective government" and "a limited and appropriately positioned government"? Therefore, if these proactive preconditions exist, the market cannot be characterized by "governance through non-action," but rather by a "governance through limited action."

Third, the essence of the market is not "governance through non-action," but rather maximized profit-seeking. The market embodies a relationship of commodity exchange. A market economy is an economic form that competes for profit on the basis of the totality of exchange relations. The essential attribute of the market is profit-seeking (capital-centricity). The so-called "governance through non-action" is merely a one-sided manifestation of the "invisible hand"; it still requires the "visible hand" ("governance through action") to assist it. This is a commonality across various types of market economies.

Fourth, the "governance through non-action" within parts of China’s market order has already caused significant harm and is a major factor in our "deep-seated problems." While the positive side of the market mechanism has brought immense vitality to China’s economic development, its negative side has caused disorder in the market and even generated a series of serious problems. These are briefly listed as follows: (1) severe food and drug safety issues; (2) excessive speculation exacerbating inflation; (3) poor product quality due to lax management; (4) market disorder leading to problems such as the illegal seizure of land, over-extraction of minerals, and excessive packaging of commodities, resulting in a serious waste of social wealth; (5) an widening gap between rich and poor; (6) severe environmental pollution; (7) frequent workplace safety accidents; (8) the breeding and spread of corruption; (9) criminal underworld forces dominating markets; (10) the expansion of commodity fetishism into money fetishism, where the "hidden rule" [4] of "nothing gets done without money" prevails everywhere, and so forth. One might even say that the extensive mode of economic development, the distorted industrial structure, and the sluggish upgrading of products are all related to a market left to "governance through non-action."

In terms of theoretical investigation, an understanding of the market economy should first be raised to the height of the "laws of the socialization of production" to reveal its deep-seated formative and operational foundations and mechanisms. A market economy embodies commodity exchange relations between people; the subjects participating in and organizing these activities are human beings. In a market economy, however, there is not only individual performance but also a set of rules that must be jointly observed. The existence and development of a market economy are also manifestations of the socialization of production—a form of economic connection built upon the social division of labor. Moreover, the deeper the social division of labor becomes, the more necessary this economic connection becomes (though there are other forms of economic connection). Markets initially formed spontaneously, but from their most nascent economic forms, they have been accompanied by a certain degree of management—even a small town fair requires someone to manage it. When a market economy permeates the entire society, it transforms into a method of resource allocation. This allocation is carried out through competition and price signals, the driving force of which is profit-seeking. Whatever method of resource allocation can make more money will be adopted. However, because completely disordered competition leads to problems such as excessive competition and monopoly, the market economy as a mode of resource allocation cannot function without macro-management, which necessitates a larger role for the government. Today, all types of markets in the world, including the "modern markets" of developed countries, involve both "hands" working together. Naturally, the market's "invisible hand" plays a basic role, but macro-control over the market is gradually being strengthened. This is because practice has proven that once market regulation fails, it triggers an economic crisis. Taking the United States as an example, in the nearly 70 years since World War II, there have been nearly 20 economic crises (or recessions) of varying sizes, the most recent being the 2007 subprime mortgage crisis, which triggered a comprehensive international financial crisis. The international financial crisis induced by the US subprime crisis was characterized by multi-factor superposition and protracted, sequential occurrences, and we have not yet fully emerged from it. This round of crisis has once again led to a re-examination of neoliberal arguments and policies in developed countries and worldwide; European and American nations have begun to return to strengthening government regulation. It is evident that the essence of the market is not "governance through non-action."

Regarding the profit-seeking essence of the market, it is impossible for a market economy to allow everyone to "participate in market competition" fairly and freely. This is because the profit-seeking essence of the market dictates that the degree of freedom to participate in the market must be determined by the amount of capital held by the owner. A pauper with nothing is unable to compete fairly in the market against a billionaire. In a market economy, those who truly possess freedom are the large capitalists, particularly financial capitalists like the American "financial predator" George Soros. Yet even they frequently run into walls due to the operation of objective laws, and some, like Lehman Brothers in the US, fall into bankruptcy. These phenomena repeatedly demonstrate that the essence of the market is profit-seeking, not "governance through non-action."

From the perspective of market price formation mechanisms, it cannot be entirely attributed to "governance through non-action" either. People often say: "Prices should listen to the market." This is only half-correct because a distinction exists between "true market prices" and "pseudo-market prices." A true market price is a price level objectively determined by the quantity of value and the relationship between supply and demand (the so-called "equilibrium price"), which must be respected. But even true market prices have certain negative impacts; we must do our best to follow the laws of price to compensate for, correct, and attempt to reduce the shocks and losses they may bring. Conversely, pseudo-market prices are high or low prices manufactured under the banner of the market. Those who manufacture pseudo-market prices include fraudsters, monopolists, those creating hollow demand, and businesses that use clever promotional tactics to mislead consumers—their only goal being to realize windfall profits for a few. As market entities, the pricing of enterprises or operators cannot be equated entirely with the equilibrium price; problems such as the fabrication of false cost information may exist. Today, pseudo-market prices are ubiquitous, and "listening to the market" is frequently used as a shield. To this end, we must distinguish between the true and the false to prevent pseudo-market prices from eroding society. Furthermore, one of the important causes of inflationary pressure is the relaxation of market regulation; the market of "governance through non-action" has let the "wild tiger" out of the "cage." Simultaneously, there is the problem of "information asymmetry." Some believe this is also a mechanism of price formation and operation, using it as an excuse to reject government supervision and guidance of prices. From the perspective of economic innovation, "information asymmetry" has indeed made a contribution; especially regarding the complex and volatile virtual economy, it has significant application value. However, it must be clarified that information asymmetry is not an objective law, but a business behavior and a price phenomenon. Information asymmetry is primarily a man-made factor; it is the seller utilizing their strong position to intentionally increase opacity in marketing by monopolizing information to mislead the counterparty. Thus, information asymmetry can also be called "information monopoly." Fundamentally, this violates the principles of exchange of equivalents and honest transactions. Once an absolutely dominant buyer's market appears, this information bubble will burst instantly or trigger moral hazard. In reality, the rapid development of the virtual economy, such as finance, has fueled unreasonable phenomena like speculation, monopoly, and information asymmetry, leading to a market filled with bubbles and false appearances. Therefore, we should not blindly believe in the myth that "information asymmetry" is unchangeable or inviolable. Instead, we should correct this phenomenon through "sunshine transactions" based on public information—yet this, too, cannot be achieved by relying on "governance through non-action."

Concerning the distributive function of the market economy, "governance through non-action" not only fails to reduce polarization but, on the contrary, is the primary cause of its intensification. The market does indeed perform a certain distributive function through price fluctuations, various forms of competition, and speculation using information asymmetry (so-called "opportunity income"). It should be said that the institutional distribution of consumer goods is primarily determined by ownership relations—what Western economics calls "property rights determine distribution." For example, distribution according to work is based on public ownership, whereas distribution according to capital or factors of production is based on private ownership. Primary distribution is mainly realized within the enterprise. The market only plays a supplementary promoting role in distribution, adjusting the distributive relationship between owners of products and assets through the form of price. However, capitalist ownership relations and market relations are often entangled, and their combination further intensifies polarization. For instance, even if laborers receive a certain wage in the primary distribution, their actual purchasing power is limited due to the effects of inflation, thereby impacting the real income of these basic laborers. Meanwhile, those possessing large capital can use inflation to make a fortune, further exacerbating the polarization of society. Thus, the "governance through non-action" of the market economy, far from solving the problem of polarization and "letting wealth flow to the common people," actually "maximizes" the pockets of the rich and generates and intensifies polarization. Furthermore, the resulting deficiency in internal demand weakens the internal impetus for social development, making economic growth more dependent on external demand. This creates a contradictory phenomenon of imported external inflation and insufficient internal purchasing power, causing price signals to become even more distorted. When Deng Xiaoping spoke in his later years about "polarization occurring naturally," [5] he was referring precisely to the result of the excessive liberalization of the market economy. As for the imbalances between regions, urban and rural areas, and industries, these are also the byproducts of market liberalization. There is a "law of uneven development" within a market economy: market development encourages those regions with capital and geographical advantages (such as the coast) to rise first, while capital, talent, and natural resources from backward or sub-developed regions flood into the developed areas, creating a "Matthew Effect" [6] in regional development. In practice, no country has ever relied solely on the market to solve the urban-rural gap; rather, after the market economy has become developed, they use fiscal transfer payments to raise the income levels of farmers or support the development of backward regions. The same applies to the gap between various industries, as uneven development inevitably leads to uneven profit rates across industries. This is the phenomenon of polarization that naturally evolves under "governance through non-action."

II. The direction of market economy reform should be to establish a strong government and a thriving market

The article "Deep-Seated Problems in China’s Economic Development" opposes the government playing a leading role in our market economy; this article argues that the leading role of the government must be exerted in the development of the socialist market economy. The most important manifestation of the socialist market economy is the "two integrations": first, the integration of the basic socialist economic system with the market economy; second, the integration of the leading role of the government with the foundational role of market mechanisms in resource allocation. This article will first fundamentally distinguish and analyze the role of the government in market operation and development, and then discuss the leading role of the government in the socialist market economy. This analysis does not focus on the "three emphases and three neglects" (emphasizing government while neglecting the market, emphasizing national wealth while neglecting people's wealth, and emphasizing development while neglecting service) or the "two transformations" (transforming from a development-oriented government to a public interest service-oriented government; and from an omnipotent government to a limited government that allows the market to play its full role), but rather concentrates on exploring the principles of the mutual relationship between the government and the market.

From the perspective of the law of the socialization of production, the market economy possesses a duality: it is brimming with vitality yet full of contradictions; it is highly efficient but has great defects and many variables; its advantages are prominent, but its disadvantages are equally so, and the two often manifest in tandem. The vitality of the market lies in its linkage mechanism (supply and demand), accounting mechanism, incentive mechanism, competition mechanism, resource allocation mechanism, interlocking mechanism (i.e., driving the development of the productive forces), and selection mechanism [10]. Market defects are mainly manifested in two major fields. First, the sphere covered by the market involving commodity production, circulation, and operation, as well as various links including the increasingly massive financial sector. In this field, the market's characteristics of spontaneity, blindness, cyclicality, and volatility can trigger many serious consequences, such as inflation, excessive competition, speculative disruptions, monopoly pricing, waste of resources, polarization [7], and economic crises. Solving the contradictions in this major field requires the action of the government, and sometimes even requires the government to play a leading role (such as in the supervision and governance of various types of safety). Second, the vast range of areas that have some links with the market but cannot be covered by it, such as equity in social income distribution, the architecture of the social security system, ecological environmental protection, energy conservation and emission reduction, resident health, the development of new resources, the progress of agricultural production, water conservancy construction, relief and prevention of natural disasters, support for underdeveloped areas, social public security, basic theoretical research in many natural sciences, R&D of high and new technologies, national defense construction, and military security. In terms of the resources they occupy, this major field accounts for approximately one-fourth of total wealth; in terms of the role it plays, it may account for more than one-third of what human life requires. Regarding the increasingly serious ecological problems, this is a major issue concerning the survival and development of contemporary humanity and future generations. Since the development of the market economy in developed countries, their large-scale industrial systems have seriously damaged the balance of nature, causing many ecological disasters. The Gulf of Mexico oil spill in 2010 and the Fukushima nuclear leak in Japan in 2011 further demonstrate that even a mature market economy cannot solve ecological problems. Take agriculture as another example; this is an essential industry for human survival, yet no country relies solely on market regulation to solve agricultural development issues. U.S. agricultural subsidies account for as much as 40% of farmers' expenditures. If one relied solely on the market without government leadership, the disadvantaged position of low agricultural product prices could never be fundamentally changed. Therefore, in both of the above categories of fields, it is necessary for "both hands" to work together through coordinated coupling; this is an objective requirement of the law of the socialization of production. For instance, in the development processes of Japan and South Korea, during their periods of government leadership, economic development was rapid and stable, but after shifting to the neoliberal stage, it immediately slowed down and stagnated.

History and reality prove that to fully utilize market advantages and overcome its defects, both the market and the government—the "two hands"—are indispensable. Macroscopically, market fluctuations must be corrected through macro-control, scheduling, and regulation, and the consequences of economic crises especially require macro-control to resolve. Mesoscopically, the government must manage markets at all levels, protect resources, maintain public interests, and stabilize society. Microscopically, the market behavior of enterprises also requires government management, including the supervision of product quality, the prevention and control of environmental pollution, the regulation of employee income distribution, and various tax policies—all of which require the government to formulate and execute. This is an objective necessity and a requirement for the operation of socialized production. Human society, especially socialized large-scale production, requires orderly development and needs the government to constantly resolve the contradictions generated by market disorder. Currently, in so-called modern developed market economy countries, a certain degree of management and various economic policies have existed since the time of Adam Smith. The "night watchman" role in safeguarding is indispensable and sometimes even plays a leading role; the government's role is increasingly strengthening. By the era of monopoly capitalism, monopoly capital merged directly with the government, sometimes directly forming state capitalism. Although liberal thought subsequently regained the upper hand, the global capitalist crisis that occurred from 1929 to 1933 brought about the Roosevelt New Deal and Keynesianism. This "economic revolution" explicitly proposed the idea of government intervention with the aim of correcting liberalism. After World War II, when the U.S. dollar monopolized the world, Keynesianism was maintained for over 40 years, which was precisely the period of relatively stable U.S. economic development. However, because it could not change the institutional nature of capitalism, it eventually fell into the dilemma of "stagflation." Consequently, in the 1980s, Britain and the U.S. began to adopt neoliberal policies, and in the 1990s, they promoted the so-called "Washington Consensus" in Latin America, implementing comprehensive nominal liberalization in domestic and international markets. In reality, the U.S. itself practices a double standard and double policy, maintaining many regulations on economic departments and products. The current round of the international financial crisis has once again led to the return of Keynesianism in developed countries. The historical facts mentioned above demonstrate that market mechanisms and the role of the government cannot be separated for a moment; it is merely that they take turns leading, with one being stronger at times and the other at others. Therefore, a market economy cannot exist apart from the role of the government; this is the inherent meaning of a modern market economy.

For a socialist market economy, government leadership is an inherent requirement of the system, because a pure market economy is based on profit-seeking, whereas a socialist market economy requires a people-centered approach (legitimately pursuing economic interests while using them for the people). For the socialist market economy to develop steadily, it needs to utilize the role of market mechanisms in allocating resources, but it must overcome market defects to provide a mechanism for stable economic development that avoids severe economic fluctuations and especially economic crises, truly achieving high-quality, fast, and sustainable development. For example, in facing the impact of the international financial crisis since 2008, China used macro-control measures to become the first in the world to recover. Furthermore, a very important point is that for socialism to exert its advantage of mobilizing resources to accomplish major undertakings [8], the leading role of the government must be brought into play. For instance, China has built the world's largest cross-regional water diversion project (the South-to-North Water Diversion Project), the longest West-to-East Power Transmission and West-to-East Gas Pipeline projects (with a total length of over 8,000 kilometers), and the highest altitude Qinghai-Tibet Railway. Additionally, regarding emergency mechanisms for responding to natural disasters such as earthquakes and mudslides, the speed of action and recovery of the Chinese government is rarely seen in the world.

In both actual operation and theory, there is a question of how to communicate between the leading role of the government and the foundational role of the market in allocating resources. This should be addressed through a certain information mechanism, forming a cyclic system of input, transmission, and output [12]. Viewed from a philosophical height, the role of the state, including planning, is a matter of the "subjective meeting the objective" [9]; it belongs to the category of ideology, but it is not arbitrary—it is a reflection of objective facts. During the period of the New Economic Policy (NEP) in the Soviet Union, regarding the strengthening of planning, some once believed that factors of will and consciousness should play a greater role. Lenin, however, believed that this is "the 'will and consciousness' of the state, rather than of individuals" [13]; it should represent and reflect the interests of the people and objective laws. Here, there is a question of the channel for the coupling and communication between the "two hands," so as to unify consciousness and spontaneity. We are currently exploring this point and will gradually improve it. Of course, various deviations will inevitably occur during the exploration process, but as long as we seek truth from facts and continuously correct deviations based on reality, we will step by step achieve better coupling. For instance, solving the problems of inflation and polarization requires the synergistic action of the "two hands" with macro-control as the lead; the same applies to the issue of overall economic transformation.

If speaking only from the perspective of scale, under any conditions it is "small government, big market"—no matter how large a government is, it cannot compare to the scale of the market. As for streamlining administrative structures, this has been our consistent advocacy, and we will continue to pursue it seriously in the future. In reality, both the government and the market are limited; the market does not cover everything, and the role of the government is to lead the market and cover the vast areas that the market cannot cover (market failure). In this regard, the scope of government leadership is much larger than that of the market. In fact, the major decisions of many countries rely on the government leading the market. Especially under socialist conditions, the government's role must occupy the leading position, which means regulating and guiding the market based on the nature and requirements of socialism; it involves not only macro-controlling the market but also managing the market through rules at the micro-level. Once the government's role is weakened, the defects and side effects of the market will be amplified. Therefore, the government should be the main force in both "unleashing" the market and managing it well. A more accurate description of the positioning of the government and the market should be "strong government, flourishing market." That is to say, the government leads the market with correct decision-making, regulation, and management, correcting market failures and various side effects, enabling the market to play its role in resource allocation within the scope of the national will, thereby achieving a "flourishing market." As Deng Xiaoping emphasized: "Our socialist state apparatus is powerful. Once a situation of deviating from the socialist direction is discovered, the state apparatus will step in to intervene and correct it." Within the prescribed scope, the government should fully unleash the vitality of the market, allow it to play its foundational role in allocating resources, and provide constant supervision, regulation, and correction of deviations, while also controlling and managing areas the market cannot cover. Related to this, the view that the government should not engage in "development" and "construction" does not conform to socialist reality. "Development is the absolute principle" [10]; without doing a good job in development, how can one do a good job in service? Can adhering to scientific development and changing the mode of economic development be effective without government leadership? Can mobilizing resources to accomplish major undertakings and utilizing the "whole-nation system" [11] rely primarily on the market? Relying only on a "small government" is clearly of no avail.

The "three emphases and three neglects" in the article "Deep-Seated Problems in China’s Economic Development" are also worth discussing. For instance, "emphasizing national wealth while neglecting people's wealth" is an inaccurate judgment. To say that an insufficient degree of marketization has caused "a rich state and a poor people" is inconsistent with China's reality. China's national strength has indeed increased, with its GDP ranking second in the world. However, compared with developed countries and even many developing countries, we are not considered rich. Our fiscal revenue only accounts for about 20% of GDP, which is significantly lower than many countries in the world. There are particularly many areas where the state needs to spend, and there are also fiscal deficits and a considerable amount of national debt; therefore, it cannot be said that we are already a "rich state." At the same time, the problem of "poor people" also requires specific analysis. It is true that we still have a low-income population of around 40%; although the people's lives have greatly improved, most people are not yet considered rich. However, relative to the state, it cannot be said that this is "poor people." "Wealth for the people" achieved by relying on the market's "governance through non-interference" [12] will not be wealth for the majority, but will rather allow a minority to become even wealthier. In fact, currently, the tax burden on high-income groups is relatively low, while their income accounts for a large proportion of national income. Therefore, the "governance through non-interference" of the market can, in essence, only further deepen polarization. What we should do is utilize our institutional advantages and the leading role of the government to deepen the reform of income distribution.

As for the primary methods of government regulation of the market, administrative intervention should certainly not be the mainstay; rather, economic and legal means should be primarily employed, supplemented by administrative means when necessary. The key goal of such regulation must be to benefit socio-economic development and the interests of the people. This requires that we not blindly copy Western economic theories—theories which, in reality, are not followed in their entirety even by developed countries. Our emphasis on the government's leading role is not a return to the planned economy system, but a sublation [13] of it. This does not mean eschewing government reform; rather, we must continue to deepen government reform and improve government functions. We must particularly overcome defects such as official corruption, inefficient government operations, and local protectionism, while strengthening institutional building. This is not a total adoption of Keynesianism, but rather an approach based on socialist tenets to solve the problems of government "absence, displacement, and overstepping." [14] We must understand the meaning of "government-led" scientifically: we must both deepen reform to sweep away various obstacles to the formation of a unified national market, and prevent laissez-faire loss of control by strengthening rational regulation, thereby combining market rectification with the transformation of government functions.

III. China's Market Economic Development Must Adhere to its Socialist Nature and Focus on Exerting the Leading Role of the State-Owned Economy

Currently, some scholars often speak at length about the market economy but fail to mention "socialism" or the factors that determine the nature of a market economy. This allows capitalist market elements to ferment imperceptibly, eventually leading to a situation where the capitalist character devours the socialist character. Particularly against the backdrop of the immense power of traditional global market forces, we must remain vigilant during the development of the socialist market economy against the negative factors of the capitalist market economy that might seize the opportunity to exert influence and erode our country’s basic economic system. Therefore, in the practice of market economic reform, it is of paramount importance that we adhere to the system of socialism with Chinese characters and maintain a socialist market economy system with distinctive characteristics.

It is worth noting that a certain saying is currently popular in some academic circles: that the market economy is universal and should not be distinguished as socialist or capitalist, but should instead be called a "modern market economy"—referring to the Euro-American style free market economy. This provides theoretical support for the socialist market economy to slide toward a capitalist market economy. The development of our country's market economy must adhere to its socialist nature, focusing on the government’s role in macro-control and the leading role of the state-owned economy. A market economy characterized by "governance through non-action" (wuwei erzhi) [15] might allow the economy to expand temporarily, but such development cannot be solid, coordinated, or sustainable, nor can it solve the problems faced during the development of our country's economy. Even in developed capitalist countries, "governance through non-action" has caused repeated economic and systemic crises, leading to numerous problems such as economic stagnation, volatility, recession, environmental pollution, and social unrest.

The practice of more than 30 years since the Reform and Opening-up began has proved that our socialist market economy system is being perfected and has already demonstrated its superiority. In just a few short decades, we have traversed the path that took some Western countries one or two hundred years to complete. These achievements have attracted worldwide attention, and the "China Model" or "Beijing Consensus" has been widely praised. We cannot attribute the achievements of the socialist market economy solely to the private economy. On the one hand, the private economy has indeed made indelible contributions in revitalizing the market, increasing employment, and accelerating GDP growth; it must continue to play a positive role in the future, although certain problems emerging in its development require vigorous standardization. On the other hand, the country's major construction projects, strategic initiatives, and the stable development of the entire economy still rely on the government's leading role and the dominant position of the state-owned economy. That is to say, from the macro to the micro levels, we must organically combine the "visible hand" and the "invisible hand," leveraging the primary function of the public economy to avoid certain defects of the market economy. It should be emphasized that major measures and projects concerning the nation's economic lifeline and national security are all driven by the public ownership economy. If private enterprises are allowed to take the leading position, the socialist economy will gradually decline. Looking ahead at the period of major strategic opportunities [16] and the period when contradictions are becoming concentrated and prominent, the public ownership economy is the one that truly possesses the capacity to resist risks and maintain development stamina; it is the foundation of the socialist market economy. State-owned economy, in particular, assumes the role of the primary subject of the socialist market economy. Without this subject, the socialist market economy would inevitably change its nature. Of course, we must simultaneously develop diverse economic sectors, allowing each to do its best and find its proper place so that all may advance together on the broad road of the socialist market economy. However, we must never use "market economy" as a pretext to confuse the status of the subject with that of the non-subject, nor use "private incentives" as a pretext to eliminate collective and overall interests, nor use "private sector vitality" as a pretext to negate the superiority of "concentrating resources to accomplish major undertakings." China's destiny can only be placed in the development and improvement of the system of socialism with Chinese characteristics and the socialist market economy; this is the choice of history.

Web Editor: Lanheshui

In his speech at the commemorative gathering for the 30th anniversary of the Third Plenary Session of the 11th CPC Central Committee, Comrade Hu Jintao pointed out: China must "form an economic management system in which, under national macro-control, the market plays a basic role in resource allocation." Our Party has always emphasized this orientation for socialist market economy reform. However, regarding the specific relationship between the market and the government, there are still different understandings in academic circles. For instance, in March 2011, Professor Tian Guoqiang published an article titled "Deep-Seated Problems in China’s Economic Development," which proposed that "deep-level market-oriented reform lags behind" in China, and that we should adhere to the "market-optimality economy" advocated by Hayek and others. He suggested transforming the government into a "limited government," relying on a "'non-acting hand' to let more wealth flow to the common people so as to maximize socio-economic welfare." While some points and suggestions in that article possess a certain rationality, some of its views are open to debate. This article addresses certain views in "Deep-Seated Problems in China’s Economic Development" and offers several perspectives centered on the core issue of the relationship between the market and the government.

I. The Essence of the Market is Not "Governance Through Non-Action," but Profit-Seeking Competition within Exchange Relations

The standpoint of the article "Deep-Seated Problems in China’s Economic Development" is that the essence of the market economy is "governance through non-action." The article argues that the lag in deep-level market-oriented reform is one of the causes of the long-term, deep-seated fundamental problems in China's economy. This is because "the essence of the market is governance through non-action, and the necessary condition for governance through non-action is improving the market system to make the market effective; the necessary condition for an effective market is an effective government; and the necessary condition for an effective government is a limited and appropriately positioned government." This article contends that there are several points in this formulation that are open to debate.

First, there is a bias in the understanding of the essence of the market. "Essence" refers to the fundamental attributes inherent in an object that determine its nature and development. Viewing "governance through non-action" as the essence of the market—even if the viewpoint were valid—describes only a phenomenon or state of the market (i.e., spontaneity), rather than its fundamental attribute. Comrade Mao Zedong once said: there is a "contradiction between the phenomenon and the essence of a thing," but "false appearances are different from general phenomena." "Governance through non-action" is, at most, a market phenomenon or a false appearance; one cannot confuse phenomena or false appearances with essence.

Second, if the market were truly "governing through non-action," why would it require so many "active" (youwei) prerequisites, such as the "necessity of an effective government" and a "limited and appropriately positioned government"? Therefore, if these "active" prerequisites exist, the market cannot be "governing through non-action" in an absolute sense, but must be an "active governance" within certain limits.

Third, the essence of the market is not "governance through non-action," but maximized profit-seeking. The market reflects a relationship of commodity exchange. The market economy is an economic form that competes for profit on the general basis of exchange relations. The essential attribute of the market is profit-seeking (centering on money). The so-called "governance through non-action" is merely a one-sided expression of the "invisible hand," which still requires the help of the "visible hand" ("active governance"). This is a commonality among all types of market economies.

Fourth, the market order of "governance through non-action" in parts of our country has already caused major harm and is a significant factor in our "deep-seated problems." While the positive side of the market mechanism has brought great vitality to China’s economic development, its negative side has caused market disorder and even generated a series of serious problems. These are briefly listed as follows: (1) serious food and drug safety issues; (2) excessive speculation exacerbating inflation; (3) poor product quality due to lax management; (4) market disorder leading to problems such as irregular land occupation, excessive mineral extraction, and excessive packaging of commodities, resulting in significant waste of social wealth; (5) widening gap between rich and poor; (6) serious environmental pollution; (7) frequent work safety accidents; (8) the breeding and spread of corruption; (9) underworld forces bullying others and dominating markets; (10) the expansion of commodity fetishism into money fetishism, where "hidden rules" of "no money, no service" prevail everywhere, and so on. It can even be said that issues including an extensive mode of economic development, distorted industrial structures, and slow product upgrading are all related to markets characterized by "governance through non-action."

Investigating from a theoretical perspective, our understanding of the market economy should first be raised to the level of the laws of the socialization of production to reveal its deep-seated foundations and mechanisms of formation and operation. The market economy embodies the commodity exchange relations between people; people are the subjects who participate in and organize these activities. However, in a market economy, there are not only individual performances but also rules that must be jointly observed. The existence and development of the market economy are also a manifestation of the socialization of production, serving as a form of economic link built upon the social division of labor. Moreover, the more the social division of labor deepens, the more these economic links are needed (though there are other forms of economic linkage). Markets were initially formed spontaneously, but from their most rudimentary forms of market economy, they have been accompanied by a certain degree of management—even a tiny community market requires someone to manage it. When the market economy permeates the entire society, it transforms into a way of allocating resources. This allocation unfolds through competition and price signals, and its driving force is profit-seeking. Whatever method of resource allocation can make more money will be adopted. However, because completely disordered competition leads to problems like excessive competition and monopoly, the market economy as a resource allocation method cannot operate without macro-management, which requires the government to play a greater role. Today, various types of markets in the world, including the so-called modern markets of developed countries, are operated by "two hands" acting together. Of course, the market's "invisible hand" plays a basic role, but macro-control over the market is gradually strengthening. This is because practice has proved that once market regulation fails, it triggers an economic crisis. Taking the United States as an example: in the nearly 70 years since World War II, nearly 20 economic crises (or recessions) of various sizes have occurred. The most recent was the 2007 subprime mortgage crisis, which triggered a comprehensive international financial crisis. The international financial crisis triggered by the U.S. subprime crisis was characterized by multi-element superposition and protracted, continuous outbreaks; it has not yet been fully overcome. This round of crisis has once again led to a re-examination of neoliberal propositions and policies in developed countries and throughout the world. European and American countries have begun to turn toward strengthening government regulation. It is evident that the essence of the market is not "governance through non-action."

From the profit-seeking essence of the market, it is impossible for a market economy to allow everyone to "participate in market competition" fairly and freely. This is because the profit-seeking essence of the market dictates that the degree of freedom to participate in the market economy must be determined by the amount of capital possessed by the capital owner. A penniless poor person cannot compete fairly in the market with a billionaire. In a market economy, those who truly possess freedom are the big capitalists, especially financial capitalists like the American financial tycoon George Soros. However, even they often hit a wall due to the operation of objective laws; some even fall into bankruptcy, like Lehman Brothers in the United States. These phenomena repeatedly illustrate that the essence of the market is profit-seeking, not "governance through non-action."

From the perspective of the formation mechanism of market prices, it cannot be attributed entirely to “governance through non-interference.” People often say: “Prices should listen to the market.” This statement is only half right, as a distinction must be drawn between genuine market prices and pseudo-market prices. A genuine market price is a price level (the so-called equilibrium price) determined objectively by the magnitude of value and the relationship between supply and demand; this must be respected. Yet even genuine market prices have certain negative impacts; one must comply as much as possible with the law of value to compensate for and rectify these, seeking ways to reduce the shocks and losses they may bring. In contrast, pseudo-market prices are high or low prices manufactured under the banner of the market. Those who manufacture pseudo-market prices include fraudsters, monopolists, creators of artificial demand, and businesses that use clever promotional tactics to mislead consumers; their aim is merely to realize windfall profits for a few. As market subjects, the pricing of enterprises or operators cannot be equated entirely with equilibrium prices, and problems such as the fabrication of false cost information may exist. Today, pseudo-market prices are ubiquitous, and frequently use the slogan “listening to the market” as a shield. Therefore, we must distinguish truth from falsehood to prevent the erosion of society by pseudo-market prices. Furthermore, one important cause of inflationary pressure is the relaxation of market regulation; a market characterized by “governance through non-interference” has allowed “wild tigers” to escape their “cages.” At the same time, there is the issue of “information asymmetry.” Some believe this is also a mechanism of price formation and operation, using it as a pretext to reject a degree of government supervision and guidance over prices. From the perspective of economic innovation, the concept of information asymmetry has indeed made contributions; it has great application value, particularly for the complex and ever-changing fictitious economy [18]. However, it must be made clear that information asymmetry is not an objective law, but rather a type of business behavior and price phenomenon. Information asymmetry is primarily a man-made factor; it is a means by which the seller utilizes their dominant position to monopolize information, intentionally increasing opacity in marketing to mislead the counterparty. Thus, information asymmetry can also be called “information monopoly.” Fundamentally, this violates the principles of exchange of equal values and honest trading. Moreover, once an absolutely dominant buyer's market emerges, this information bubble will burst immediately or trigger moral hazard. In reality, the rapid development of the fictitious economy, such as finance, has fueled irrational phenomena like speculation, monopoly, and information asymmetry, leading to a market cluttered with bubbles and illusions. Therefore, we must not believe in the myth that "information asymmetry" is unchangeable or inviolable; rather, we should rectify this phenomenon through "sunshine trading" based on public information. This, too, cannot be achieved through "governance through non-interference."

Regarding the distributive function of the market economy, “governance through non-interference” not only fails to reduce polarization but, on the contrary, is the primary cause of its intensification. Through price fluctuations, various types of competition, and speculation using information asymmetry (so-called "opportunity income"), the market can indeed perform a certain distributive function. It must be said that the institutional distribution of consumer goods is determined first and foremost by the relations of production—what Western economics calls property rights determining distribution. For instance, distribution according to work [19] is based on public ownership, while distribution according to capital or factors of production is based on private ownership. Primary distribution is mainly realized within the enterprise. The market only plays a secondary, auxiliary role in distribution, adjusting the distributive relations between owners of products and assets through the form of price. However, capitalist ownership relations and market relations are often entangled, and their combination further exacerbates polarization. For example, even if laborers obtain a certain wage in the primary distribution, their actual purchasing power is limited due to the effects of inflation, thereby affecting the real income of these basic workers; meanwhile, owners of large capital can use inflation to make a fortune. This further intensifies social polarization. Therefore, the “governance through non-interference” of the market economy not only fails to solve the problem of polarization and “let wealth flow to the common people,” but instead “maximizes” the pockets of the rich, creating and aggravating polarization. Furthermore, the resulting insufficiency of domestic demand weakens the internal impetus for social development, making economic growth more dependent on external demand. This creates a contradictory phenomenon of imported external inflation coupled with insufficient internal purchasing power, causing price signals to become even more distorted. When Deng Xiaoping spoke in his later years of "polarization appearing naturally," [20] he was precisely referring to the result of the excessive liberalization of the market economy. As for the imbalances between regions, urban and rural areas, and industries, these are likewise the concomitants of market liberalization. There is a law of uneven development in the market economy: market development fosters the prior rise of regions with capital and geographical advantages (such as coastal areas), while the capital, talent, and natural resources of backward and sub-developed regions flock to the developed ones. This produces a “Matthew Effect” in regional development. In practice, no country has ever relied solely on the market to resolve the urban-rural gap; rather, after the market economy has become developed, they increase farmers' income levels or support the development of backward regions through fiscal transfer payments. The same applies to the gap between various industries, because unbalanced development inevitably leads to uneven profit rates across different sectors. This is the phenomenon of polarization that naturally evolves from “governance through non-interference.”

II. The Direction of Market Economic Reform Should Be the Establishment of a Strong Government and a Flourishing Market

The article Deep-Seated Problems in China’s Economic Development opposes the government playing a leading role in our market economy. This article maintains that the leading role of the government must be exerted in the development of the socialist market economy. The most important manifestation of the socialist market economy is the combination of two elements: first, the combination of the basic socialist economic system with the market economy; second, the combination of the leading role of the government with the fundamental role of the market mechanism in resource allocation. This article first analyzes the role of the government in market operation and development from a fundamental perspective, before discussing the leading role of the government in the socialist market economy. This section does not analyze the "three emphases and three neglects" (emphasizing government while neglecting the market; emphasizing national wealth while neglecting people's wealth; emphasizing development while neglecting service) nor the "two transformations" (transforming from a development-oriented government to a public-interest service-oriented government; transforming from an omnipotent government to a limited government that allows the market to play its full role), but focuses on exploring the principles of the relationship between the government and the market.

From the perspective of the law of the socialization of production, the market economy has a dual nature: it is full of vitality yet fraught with contradictions; it is highly efficient but possesses major defects and many variables; its strengths are prominent, but its weaknesses are equally so, and the two often appear in tandem. The vitality of the market lies in its linkage mechanisms (supply and demand), accounting mechanisms, incentive mechanisms, competition mechanisms, resource allocation mechanisms, interlocking mechanisms (i.e., promoting the development of the productive forces), and selection mechanisms. Market defects are mainly manifested in two major spheres: The first is the sphere of commodity production, circulation, and operation that the market can cover, including the increasingly massive financial sectors and other links. In this sphere, the market's characteristics of spontaneity, blindness, periodicity, and volatility can trigger many serious consequences, such as inflation, excessive competition, speculative disruption, monopoly pricing, waste of resources, polarization, and economic crises. Resolving the contradictions in this large sphere requires the role of the government, and sometimes even requires the government to play a leading role (such as in the supervision and management of various types of security and safety). The second sphere consists of the vast areas that may have some links to the market but which the market cannot cover, such as fairness in social income distribution, the architecture of the social security system, ecological and environmental protection, energy conservation and emission reduction, public health, the development of new resources, the development of agricultural production, water conservancy construction, relief and prevention of natural disasters, support for backward regions, social order, research and development (R&D) of basic theories in many natural sciences and high-end technologies, national defense construction, and military security. In terms of the resources it requires, this large sphere accounts for approximately one-quarter of total wealth; in terms of the role it plays, it may account for more than one-third of the needs of human life. Taking the increasingly serious ecological problem as an example, this is a major issue concerning the survival and development of today's humanity and future generations. Since the development of the market economy in developed countries, their large-scale industrial systems have seriously damaged the balance of nature, causing many ecological disasters. The Gulf of Mexico oil spill in 2010 and the Fukushima nuclear leak in Japan in 2011 further demonstrate that even a mature market economy cannot solve ecological problems. Another example is agriculture, an essential industry for human survival; yet no country relies solely on market regulation to solve the problem of agricultural development. U.S. agricultural subsidies account for 40% of farm household expenditures. If one relied solely on the market without government leadership, the weak position of low agricultural prices could never be changed. Therefore, in both of the above spheres, the "two hands" [21] must work together in a coordinated coupling; this is an objective requirement of the law of the socialization of production. For instance, during the development process of Japan and South Korea, economic development was rapid and stable during the period of government leadership, but slowed down or stagnated immediately after shifting to the neoliberal stage.

History and reality prove that to fully utilize market advantages and overcome its defects, both "hands"—the market and the government—are indispensable. Macrosocially, market fluctuations must be rectified through macroeconomic regulation, coordination, and rules; the consequences of economic crises especially require macroeconomic regulation to resolve. Mesosocially, the government must manage markets at all levels, protect resources, maintain public interests, and stabilize society. Microsocially, the market behavior of enterprises also needs government management, including supervision of product quality, prevention and control of environmental pollution, regulation of employee income distribution, and various tax policies. These are objective necessities and requirements for the operation of the socialization of production. Human society, especially large-scale socialized production, requires orderly development, and requires the government to constantly resolve the contradictions produced by market disorder. Even in so-called modern developed market economy countries, a certain degree of management and various economic policies have existed since Adam Smith; the role of the so-called "night watchman" in guarding remains indispensable, sometimes even playing a leading role, and the role of the government has been increasingly strengthened. In the era of monopoly capitalism, monopoly capital merged directly with the government, in some cases forming state capitalism directly. Although liberal ideas later gained the upper hand again, the global capitalist crisis of 1929–1933 brought about the Roosevelt New Deal and Keynesianism. This "economic revolution" explicitly proposed the idea of government intervention, aimed at rectifying liberalism. After World War II, the U.S. dollar monopolized the world, and Keynesianism was maintained for over 40 years, which was precisely the period when the U.S. economy developed relatively stably. However, because it could not change the institutional essence of capitalism, it ultimately fell into the dilemma of "stagflation." Consequently, in the 1980s, Britain and the United States began to adopt neoliberal policies, and in the 1990s, they promoted the so-called "Washington Consensus" in Latin America, pushing for comprehensive nominal liberalization in domestic and international markets. In reality, the United States itself practices a double standard and double policy, maintaining many regulations on economic sectors and products. Meanwhile, the current round of the international financial crisis has once again led to a return to Keynesianism in developed countries. These historical facts demonstrate that the market mechanism and the role of the government are inseparable; they merely take turns leading, with one being stronger at times and the other at others. Therefore, the market economy cannot exist apart from the role of the government; this is an inherent part of the modern market economy.

For the socialist market economy, government leadership is an inherent requirement of the system. This is because a pure market economy is based on profit-seeking, whereas the socialist market economy requires a people-centered approach (pursuing legitimate economic interests while utilizing them for the benefit of the people). For the socialist market economy to develop stably, it needs to utilize the role of market mechanisms in resource allocation, but it must overcome market defects to ensure a mechanism for stable economic development that avoids violent economic fluctuations, especially economic crises, thus truly realizing high-quality [22], fast, and sustainable development. For instance, in the face of the impact of the international financial crisis since 2008, China used macroeconomic regulatory tools to be among the first in the world to recover. Furthermore, and very importantly, for socialism to leverage its advantage of concentrating resources to accomplish major tasks, the leading role of the government must be exerted. For example, China has completed the world's largest cross-regional water diversion project (the South-to-North Water Diversion Project), the longest West-to-East Power Transmission and West-to-East Gas Pipeline projects (over 8,000 kilometers in length), and the highest-altitude Qinghai-Tibet Railway. In addition, in terms of emergency mechanisms for responding to natural disasters such as earthquakes and mudslides, the speed of action and recovery of the Chinese government is also rare in the world.

In both practical operation and theory, there exists the question of how to bridge the leading role of the government with the foundational role of the market in allocating resources. This should be addressed through a specific information mechanism, forming a circulatory system of input, transmission, and output [23]. From a philosophical height, the role of the state—including planning—is the subjective meeting the objective; it belongs to the category of ideology, yet it is not arbitrary, but rather a reflection of objective facts. During the period of the New Economic Policy in the Soviet Union, regarding the strengthening of planning, some once believed that factors of will and consciousness should play a larger role. Lenin, however, held that this was the "'will and consciousness' of the state and not of the individual" [24]; it ought to represent and reflect the interests of the people and objective laws. Here, there is a question of the channels for the mutual coupling and communication of the "two hands," thereby unifying consciousness and spontaneity. We are currently exploring this point and will gradually improve it. Naturally, in the process of exploration, various deviations are bound to appear, but as long as we seek truth from facts and continuously correct deviations based on reality, we will achieve better coupling step by step. For instance, solving the problems of inflation and polarization relies on the synergistic effect of the "two hands," with macro-control as the lead; the same applies to the overall transformation of the economy.

If speaking strictly in terms of scale, under any conditions, it is "small government, big market"—no matter how large a government is, it cannot match the scale of the market. As for streamlining institutions, this has been our consistent position, and we must seriously pursue it in the future. In reality, both government and market are limited; the market does not cover everything, and the role of the government is to lead the market and cover the vast areas that the market cannot encompass (market failures). In this regard, the scope of government leadership is much larger than that of the market. In fact, major decisions in many countries rely on the government leading the market. Especially under socialist conditions, the government's role must occupy a dominant position, which means regulating and guiding the market according to the nature and requirements of socialism. This involves not only macro-control of the market but also managing the market with rules at the micro-level. Once the role of the government is weakened, the defects and side effects of the market will be amplified. Therefore, the government should be the main force in both vitalizing and managing the market. A more precise description of the positioning of the government and the market should be "strong government, flourishing market." That is to say, the government leads the market with correct decision-making, regulation, and management, correcting market failures and various side effects, allowing it to play its role in resource allocation within the scope of the national will, thereby achieving a "flourishing market." As Deng Xiaoping emphasized: "Our socialist state apparatus is powerful. Once a deviation from the socialist direction is discovered, the state apparatus will intervene and correct it." Within specified limits, the government must fully unleash the vitality of the market and allow its foundational role in resource allocation to function, while monitoring, regulating, and correcting deviations at all times, and simultaneously controlling and managing areas the market cannot cover. Related to this, the view that the government should not engage in "development" or "construction" does not conform to socialist reality. "Development is the absolute principle" [25]; how can services be rendered well without properly managing development? Can adhering to scientific development and transforming the mode of economic development be effective without government leadership? In concentrating strength to accomplish major tasks [26] and utilizing the "whole-nation system" [27], can we rely primarily on the market? Relying solely on a "small government" is clearly of no avail.

The "three emphases and three neglects" mentioned in the article Deep-seated Problems in China's Economic Development also merit discussion. For example, the claim of "emphasizing national wealth while neglecting people's wealth" is an inaccurate judgment. To say that an insufficient degree of marketization has caused "a rich state and a poor people" is inconsistent with Chinese reality. Our national strength has indeed increased, and our GDP ranks second in the world. However, compared with developed countries and even many developing countries, we are not considered wealthy. Our fiscal revenue accounts for only about 20% of GDP, significantly lower than that of many countries globally. The areas where the state needs to spend are particularly numerous, and there are fiscal deficits and a considerable amount of national debt; thus, it cannot be said that we are already "rich as a state." At the same time, the "poor people" problem requires specific analysis. It is true that we still have a low-income population of around 40%; although the people's lives have greatly improved, most are not yet wealthy. However, relative to the state, it cannot be said that the "people are poor." The "people's wealth" achieved through the market's "governing by doing nothing" [28] would not be wealth for the majority, but would rather make a minority even wealthier. In fact, the tax burden on high-income groups is currently too low, while their share of national income is too high. Therefore, the market's "governing by doing nothing" can, in essence, only further deepen polarization. What we must do is utilize our institutional advantages and the leading role of the government to deepen the reform of income distribution.

As for the primary means by which the government regulates the market, it certainly cannot rely mainly on administrative intervention, but must primarily employ economic and legal means, supplemented by administrative means when necessary. The key goal of regulation is to benefit economic and social development and the interests of the people; thus, we cannot blindly copy Western economic theories, which, in fact, even developed countries do not strictly follow. Our emphasis on the leading role of the government is not a return to the planned economy system, but a Aufheben (sublation) [29] of it; it is not a rejection of government reform, but a call to continue deepening government reform and improving government functions—especially overcoming corruption among officials, inefficient government operation, and local protectionism through strengthened institutional building. It is not a complete copying of Keynesianism, but rather an effort to resolve the problems of government "absence, displacement, and overstepping" [30] in accordance with socialist purposes. We must scientifically understand the meaning of government leadership: we must both deepen reform to remove various obstacles to the formation of a unified national market, and prevent a state of laissez-faire lack of control by strengthening rational regulation, combining the rectification of the market with the transformation of the government.

III. China’s Market Economic Development Must Adhere to its Socialist Nature and Focus on Playing the Leading Role of the State-Owned Economy

Nowadays, some scholars often speak extensively about the market economy but fail to mention "socialism" or the factors that determine the nature of a market economy. This allows the elements of a capitalist market economy to ferment imperceptibly, eventually leading to capitalist individuality devouring socialist individuality. Especially against the backdrop of powerful global traditional market forces, we must be vigilant during the development of the socialist market economy against the negative factors of the capitalist market economy that might seize the opportunity to erode our basic economic system. Therefore, in the practice of market economy reform, we must adhere to the system of socialism with Chinese characteristics and maintain a socialist market economy with distinct characteristics; this is of vital importance.

It is noteworthy that a certain narrative is currently popular among some in academia, claiming that the market economy is universal and should not be distinguished as socialist or capitalist, but should instead be called a "modern market economy"—meaning an Anglo-American style free market economy. This provides theoretical support for the socialist market economy to slide toward a capitalist market economy. The development of our market economy must adhere to its socialist nature and focus on the macro-control role of the government and the leading role of the state-owned economy. A market economy of "governing by doing nothing" might allow the economy to expand temporarily, but such development cannot be solid, coordinated, or sustainable, let alone solve the problems faced in the process of China's economic development. Even in developed capitalist countries, "governing by doing nothing" has caused successive economic and institutional crises, resulting in stagnation, fluctuations, recession, environmental pollution, social unrest, and many other problems.

The practice of over 30 years since the start of reform and opening up has proved that our socialist market economy system is being perfected and has already demonstrated its superiority. In just a few short decades, we have traveled the path that took some Western countries one or two hundred years; these achievements have attracted world attention, and the "China Model" or "Beijing Consensus" has been widely praised. We cannot attribute the achievements of the socialist market economy solely to the private economy. On the one hand, the private economy has indeed made indelible contributions to vitalizing the market, increasing employment, and accelerating GDP growth, and it must continue to play an active role in the future; however, some problems have also emerged in its development that require vigorous regulation. On the other hand, the nation's major construction projects, strategic initiatives, and the stable development of the entire economy still rely on the leading role of the government and the dominant position of the state-owned economy. That is to say, at every level from macro to micro, the "visible hand" and the "invisible hand" must be organically integrated, the primary function of the public economy must be exerted, and the various pitfalls of the market economy must be avoided. It should be emphasized that major measures and projects concerning the nation's economic lifelines and national security are all driven by the public ownership economy. If private enterprises are allowed to take the dominant position, the socialist economy will gradually decline. Looking toward the future period of major strategic opportunities and the period where contradictions are concentrated and prominent, the public ownership economy is what truly possesses anti-risk capabilities and development potential; it is the foundation of the socialist market economy. Particularly, the state-owned economy assumes the role of the primary subject of the socialist market economy. Without this subject, the socialist market economy would inevitably change its nature. Of course, we must simultaneously develop various economic sectors, allowing each to do its best and find its proper place, advancing together on the broad road [31] of the socialist market economy. However, we must never confuse the status of the "subject" and "non-subject" in the name of the "market economy," nor cancel collective and overall interests in the name of "private incentives," nor negate the superiority of "concentrating strength to accomplish major tasks" in the name of "private sector vitality." China's destiny can only be entrusted to the system of socialism with Chinese characteristics and the development and perfection of the socialist market economy; this is the choice of history.

Web Editor: Lanheshui Release Time: 2013-08-27 13:07:44