Jian Xinhua and Nie Changfei: The Important Original Contributions of Xi Jinping’s Economic Thought to the Theory of Socialist Market Economy
The recently published first volume of the Selected Economic Works of Xi Jinping systematically reflects the rich connotations and original contributions of Xi Jinping’s economic thought, while also profoundly manifesting its theoretical style and practical character. Xi Jinping’s economic thought has opened up new frontiers for political economy with Chinese characteristics and has made important original contributions to the enrichment and development of Marxist political economy. In order to deeply study and implement Xi Jinping’s economic thought, and to more consciously arm our minds, guide practice, and promote work with it, this journal has once again invited scholars to conduct intensive readings of the first volume of the Selected Economic Works of Xi Jinping from different perspectives, so as to promote the study of the Party’s innovative theories in a way that goes deep, stays firm, and touches the heart.
Deepening the Understanding of the Laws of the Socialist Market Economy
An original contribution in scholarship or theory refers to newly proposed ideas, viewpoints, and methods that possess decisive significance for the formation and development of a doctrine or theory. The editorial note to the first volume of the Selected Economic Works of Xi Jinping points out: "Xi Jinping’s economic thought is an important component of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. It is a systematic theoretical generalization of the practical experience of economic development in the New Era, and the precious crystallization of ideas formed through the Communist Party of China's unremitting exploration of the path of socialist economic development. It has opened up new frontiers for political economy with Chinese characteristics, made important original contributions to the enrichment and development of Marxist political economy, and provided a sharp ideological weapon for promoting high-quality development, scientifically responding to major risks and challenges, and comprehensively building a modern socialist country." The original contributions of Xi Jinping’s economic thought to Marxist political economy are multi-dimensional, and one particularly important aspect is the original contribution to the theory of the socialist market economy.
Marx’s theory of socialist economic operation held that in a socialist society, the commodity economy would wither away, and social production would develop in a planned and proportionate manner according to social needs—that is, the implementation of what we call the planned economy. Although this theory revealed important characteristics of the socialist economic operation mode and the general trend of its change and development, it was neither fully consistent with the economic reality of the first socialist state, the Soviet Union, where commodities and money still existed, nor was it consistent with the actual economic situation of China's primary stage of socialism [1]. This was caused by historical and practical limitations. Marx, in the era in which he lived, did not see that the development of socialism is a long-term historical process that must pass through multiple stages of different developmental degrees, such as primary, intermediate, and advanced stages. The economic operation modes of each developmental stage are not exactly the same, and he could even less foresee China’s primary stage of socialism. Despite having essentially established a socialist economic system, it is impossible to eliminate the commodity economy; in addition to adhering to the planned and proportionate development of the national economy, it is also necessary to practice a socialist market economy.
After the founding of New China, the CPC attached importance to developing the commodity economy and exerting the role of the law of value. After Reform and Opening-up began, the CPC sought truth from facts in summarizing the experience and lessons of socialist economic development at home and abroad. Based on the conditions of the times and China's national conditions, it advanced with the times to create the theory of the socialist market economy. This is a brand-new market economy theory that existed in neither Marxist political economy nor Western economics. The theory of the socialist market economy is both the most important theory guiding China’s implementation of Reform and Opening-up and its achievement of great successes, as well as a major original contribution to world economics. In particular, since the 18th CPC National Congress, the Party Central Committee with Comrade Xi Jinping at its core has further innovated and developed the theory of the socialist market economy. It has proposed a series of new concepts, new ideas, and new strategies, making important original contributions in key areas such as deepening the understanding of the relationship between the government and the market, constructing a high-level socialist market economy system, and strengthening macroeconomic planning and regulation.
Deepening the Understanding of the Relationship Between the Government and the Market
Handling the relationship between the government and the market is the core issue for the effective operation of a market economy, and it is also the core issue of China’s economic system reform. Looking back at the history of agricultural economic thought, Western economics has never proposed a theory or method to reasonably and effectively handle the relationship between the government and the market. For a long time, it adhered to laissez-faire, advocating that the market should decide everything and believing that the government should only act as a "night watchman." Even later, when Keynes advocated for state interventionism and the use of macroeconomic policies to regulate social economic activities, he did not propose a theory or method to leverage the strengths of both the government and the market. This is a major flaw in the market economy theory of Western economics.
In 1992, the report of the 14th CPC National Congress proposed that "the goal of China’s economic system reform is to establish a socialist market economy system" and "to let the market play a basic role in resource allocation under the macroeconomic regulation of the socialist state." This was a major breakthrough in the theory of socialist economic operation and played an extremely important guiding role in Reform and Opening-up as well as economic and social development. Since the 18th CPC National Congress, the Party Central Committee with Comrade Xi Jinping at its core has further deepened the understanding of the roles and mutual relationship of the government and the market. It proposed the new viewpoint that the socialist market economy should "let the market play the decisive role in resource allocation and better play the role of the government," making an important original contribution to the theory of the socialist market economy.
Changing the "basic role" of the market to the "decisive role," and proposing to let the market play the decisive role in resource allocation, is because the market economy is essentially an economy where the market decides resource allocation; the market deciding resource allocation is a general law of the market economy. Emphasizing the decisive role of the market is conducive to establishing a correct concept of the relationship between the government and the market throughout the Party and society, conducive to transforming the mode of economic development, conducive to transforming government functions and preventing "government failure," and conducive to suppressing the phenomena of passivity and corruption. At the same time, proposing to "better play the role of the government" is because "market failure" exists. The market plays a decisive role in resource allocation, but not a total role. China implements a socialist market economy system; we must persist in exerting the superiority of the socialist system and the active role of the Party and government to effectively overcome "market failure."
General Secretary Xi Jinping pointed out: "We must adhere to dialectics and the 'two-point theory' [2], continue to work hard on the combination of the basic socialist system and the market economy, and give full play to the advantages of both sides, requiring both an 'effective market' and a 'proactive government' [3], striving to solve this worldwide problem in economics through practice." To truly achieve an effective market and a proactive government, where the advantages of the government and the market complement each other and both are fully utilized, the key—under the premise of forming a unified, open, and orderly competitive market system—is to achieve the following: First, whatever the market can do and solve should be decided and solved by the market; second, for economic activities that are not yet clear or certain in the short term, the market can be allowed to decide, regulate, and experiment first, and if practice proves it does not work, the government can then intervene; third, effectively solve the problems of excessive government intervention and inadequate supervision. What the government should manage must be managed well, and what it should not manage must be resolutely left alone. The government should neither be "absent" nor "overstep" or "misplace" its role [4], but should instead implement scientific overall planning and macroeconomic regulation, as well as clean and efficient government governance.
Proposing the Construction of a High-Level Socialist Market Economy System
In 1993, the Decision of the CPC Central Committee on Several Issues Concerning the Establishment of a Socialist Market Economy System, adopted at the Third Plenary Session of the 14th CPC Central Committee, clearly defined the connotations, extensions, and characteristics of the socialist market economy system. Through more than thirty years of development, China has established a relatively complete socialist market economy system, but it is not yet mature or perfect enough. Since the 18th CPC National Congress, General Secretary Xi Jinping has profoundly grasped the new situation and requirements of economic system reform in the New Era. Centering on the perfection of the socialist market economy system, he has made a series of important expositions and proposed the construction of a high-level socialist market economy system. This profoundly answers a series of major theoretical and practical questions regarding the further improvement of the socialist market economy system in the New Era, providing a fundamental follow-through and action guide for accelerating the improvement of the socialist market economy system on the new journey of the New Era. This is another important original contribution to the theory of the socialist market economy.
What is a high-level socialist market economy system, and what are its basic characteristics and main contents? According to the Decision of the CPC Central Committee on Further Deepening Reform Comprehensively to Advance Chinese-path Modernization (hereinafter referred to as the "Decision"), a high-level socialist market economy system is one that can better leverage market mechanisms, create a fairer and more dynamic market environment, and achieve the optimization of resource allocation efficiency and maximization of benefits. It is an economic system that is both "flexible in releasing" and "effective in managing" [5], better maintaining market order, compensating for market failures, smoothing the national economic cycle, and stimulating the endogenous momentum and innovative vitality of the whole society. Regarding ownership, we must persist in and implement the "Two Unswervinglys"—that is, unswervingly consolidating and developing the public sector of the economy, and unswervingly encouraging, supporting, and guiding the development of the non-public sector. This ensures that economic entities of all ownership types use productive forces equally according to the law, participate in market competition fairly, and receive equal legal protection, promoting the complementary strengths and common development of various ownership sectors. Regarding the market system, it requires the construction of a unified national market. Regarding macroeconomic regulation, it implements scientific macroeconomic regulation and effective government governance. Regarding distribution, it constructs an institutional system in which primary distribution, redistribution, and third distribution [6] are coordinated and matched, continuously improving the income distribution system. Regarding social security, it emphasizes improving the social security system. In particular, the "Decision" explicitly includes basic market economy systems such as the property rights system, the market information disclosure system, the commercial secret protection system, the market access system, the social credit system, and the regulatory system as important components of a high-level socialist market economy system. These are new viewpoints and requirements that did not exist previously.
Strengthening Macroeconomic Planning and Regulation
The market economy inevitably suffers from "market failure," and the state must implement necessary macro-management and regulation. Since Reform and Opening-up, China has formed a relatively systematic theory and set of means for macroeconomic management, which has greatly enriched and developed Marxist political economy. Determining the general keynote of macroeconomic regulation and carrying out reasonable and effective management of both the supply and demand sides are the basic contents and principle requirements of macroeconomic planning and regulation in a socialist market economy. The Party Central Committee with Comrade Xi Jinping at its core has determined the general keynote of seeking progress while maintaining stability. It has proposed the basic means of regulating the macro-economy from both the supply side and the demand side, emphasizing the need to deepen supply-side structural reform and promote the organic integration of supply-side structural reform with the strategy of expanding domestic demand. This has further innovated and developed the theories and means of socialist market economy macroeconomic management, and is also an important original contribution to the theory of the socialist market economy. The main contents of these original contributions are as follows:
First, seeking progress while maintaining stability. General Secretary Xi Jinping pointed out: "The focus of 'stability' should be on stabilizing economic operation, ensuring that economic growth, employment, and prices do not fluctuate significantly, and ensuring that no regional or systemic financial risks occur. The focus of 'progress' should be on adjusting the economic structure and deepening reform and opening up, ensuring that new results are achieved in transforming the mode of economic development and in innovation-driven development." Why emphasize seeking progress while maintaining stability? Because the general keynote of seeking progress while maintaining stability is both an important principle of governance and a methodology for doing economic work well. Only if the economy and society operate smoothly can a stable and favorable macro-environment be created for deepening reform and opening up and adjusting the economic structure; only if substantial progress is made in deepening reform and opening up and adjusting the economic structure can good expectations be created for the smooth operation of the economy and society. How can we achieve seeking progress while maintaining stability? First, we must clarify that "stability" and "progress" share a relationship of dialectical unity and must be grasped as a whole. When advancing various tasks, analyzing problems, devising countermeasures, and implementing them, we must assess the situation, think deeply, and respect laws. We must oppose both passive coping or lack of initiative, as well as impulsive, reckless action or rushing for success. What should be stable must be kept stable, and what should progress must be pursued proactively, grasping the rhythm and intensity of work. That is to say, "stability" and "progress" should coordinate with and promote each other, seeking progress under the premise of maintaining overall stability, grasping "timing, degree, and effectiveness" [7], establishing the new before breaking the old [8], promoting stability through progress, and advancing steadily.
Second, management of both supply and demand sides. The supply side and the demand side are the two basic means of managing and regulating the macro-economy. Demand-side management focuses on solving aggregate problems and emphasizes short-term regulation, mainly stimulating or suppressing demand by adjusting taxes, fiscal expenditures, and monetary credit to drive economic growth. Supply-side management focuses on solving structural problems and emphasizes stimulating the drivers of economic growth, mainly improving the quality and efficiency of the supply system by optimizing factor allocation and adjusting the production structure to drive economic growth.
Third is supply-side structural reform. General Secretary Xi Jinping has pointed out, "The supply-side structural reform we speak of is not the same thing as the supply-side school of Western economics; we cannot view supply-side structural reform as a carbon copy of the Western supply-side school, and we must even more strictly prevent some people from using their interpretations to propagate 'neoliberalism' [9] and take the opportunity to manufacture negative public opinion." In its essence, the aim and focus of supply-side structural reform are to liberate and develop the social productive forces; it is to use the methods of reform to improve relevant institutions, promote structural adjustment and optimization, reduce ineffective and low-end supply, expand effective and mid-to-high-end supply, and strengthen the adaptability and flexibility of the supply structure to changes in demand. This improves total factor productivity, ensuring that China's supply capacity better satisfies the growing, upgrading, and individualized material, cultural, and ecological environmental needs of the broad masses of the people, thereby realizing the socialist purpose of production. Advancing supply-side structural reform means solving the problems existing on the supply side of our economy through a series of policy initiatives—particularly those promoting scientific and technological innovation, developing the real economy [10], and guaranteeing and improving the people's livelihood. In this process, it is necessary to emphasize supply while also paying attention to demand; to highlight the development of social productive forces while also focusing on improving the relations of production; to allow the market to play the decisive role in resource allocation while also better exerting the role of the government; and to address current concerns while remaining grounded in the long term. In advancing supply-side structural reform, revitalizing the real economy is the primary task. It is necessary to start from the production end, promote the effective resolution of overcapacity, facilitate industrial optimization and restructuring, reduce corporate costs, develop strategic emerging industries and modern service industries, increase the supply of public goods and services, and improve the adaptability and flexibility of the supply structure to demand changes. In short, this means "Three Deletions, One Reduction, and One Supplement" [11] (sān qù yī jiàng yī bǔ)—namely, cutting overcapacity, de-stocking, deleveraging, reducing costs, and strengthening weak links.
Fourth is the organic integration of supply-side structural reform with the strategy of expanding domestic demand. General Secretary Xi Jinping noted, "The key to constructing a new development pattern lies in achieving the unobstructed flow of the economic cycle. Whether this can be achieved depends primarily on whether the supply and demand sides have strong momentum, are overall matched, and exist in dynamic balance and positive interaction. This requires the organic integration of the strategy of expanding domestic demand with the deepening of supply-side structural reform, exerting force and coordinating cooperation on both the supply and demand ends simultaneously, forming a higher-level dynamic balance where demand pulls supply and supply creates demand, thus achieving a virtuous cycle of the national economy." Promoting the organic integration of the two requires continuous deepening of supply-side structural reform—making advances in some areas while retreating in others, and maintaining certain sectors while applying pressure to others—to enhance the suitability and balance between supply and demand.
(Authors: Jian Xinhua and Nie Changfei. Jian is a Distinguished Professor at the School of Economics and Management, Nanchang University, and Professor at the Economic Development Research Center of Wuhan University; Nie is an Associate Professor at the School of Economics and Management, Nanchang University.)
Online Editor: Tong Xin Source: Guangming Daily, May 29, 2025, Page 15.