Ding Xiaoqin: Innovations and Breakthroughs in Economic Reform Theory

Reform is the key to liberating and developing social productive forces. Continuously improving and perfecting the economic system through economic reform is an essential path to stimulating economic vitality and ensuring sustained, healthy economic development. Since the 18th CPC National Congress, General Secretary Xi Jinping has profoundly grasped the phased characteristics of China’s economic development and changes in the external environment. Grounded in the great practice of China's economic and social development and focused on promoting high-quality development, he has persisted in taking economic system reform as the priority to comprehensively deepen reform. He has creatively proposed a series of new ideas, viewpoints, and judgments, forming the economic reform theory of Xi Jinping’s Economic Thought. As a vital component of Xi Jinping’s Economic Thought, this economic reform theory serves as both the "economic chapter" of his thought on reform and the "reform chapter" of his economic thought. It provides profound answers to a series of major theoretical and practical questions regarding China's use of reform to drive development in the New Era. Furthermore, it reveals the general laws of economic reform within the process of socialist modernization and elucidates the driving force for comprehensively advancing the great cause of building a strong country and national rejuvenation through a Chinese path to modernization both now and in the coming period. It holds significant theoretical and practical importance.

I.

The primary purpose of economic reform is to stimulate the endogenous momentum of social development by continuously adjusting the relations of production, ensuring the superstructure better adapts to the economic base, maximizing the release of economic development potential, and enhancing the overall efficiency of economic operations. Looking at the history of global development, countries around the world after World War II treated economic reform as a major avenue to solve development puzzles and break out of development dilemmas. However, due to differences in the nature, goals, methods, and approaches of reform, the practical results of economic reform have varied from country to country.

Following the founding of the People’s Republic of China and the establishment of the socialist system, how to improve and develop the socialist economic system became a brand-new task facing our country. Before Reform and Opening-up ^[1], China drew on Soviet experience to establish a highly centralized planned economic system, concentrating resources to prioritize the development of heavy industry. In less than 30 years, an independent and relatively complete industrial and national economic system was established. However, as practice evolved, an overly singular ownership structure and an increasingly rigid planned economic system greatly constrained the development of productive forces. After Reform and Opening-up, our Party broke through the shackles of traditional concepts. Under the premise of adhering to the Four Cardinal Principles ^[2], we absorbed and drew upon all advanced management experiences and methods that reflect the laws of modern socialized large-scale production, conducted bold reforms of the economic system, and continuously advanced theoretical innovation and practical breakthroughs in economic reform. Economic reform began in the countryside, later shifted to the cities, and then spread comprehensively. As the practice of economic reform deepened and understanding matured, the 14th CPC National Congress established the reform goal of building a socialist market economy system, initiating the magnificent process of developing a socialist market economy. Centered on this goal, we conducted arduous explorations of two core issues: the integration of public ownership with the market economy, and the relationship between the government and the market. This led to the formation of an ownership structure where public ownership is the mainstay and diverse forms of ownership develop together; a distribution system where distribution according to work is the mainstay and multiple modes of distribution coexist; and a resource allocation method that combines an effective market mechanism with moderate macro-regulation. These innovations in the socialist economic operating mechanism realized a historic transformation from a highly centralized planned economy to a vibrant socialist market economy, and from a closed or semi-closed state to all-round opening-up, driving China's economy to achieve world-renowned development achievements.

Entering the New Era, China's economy has transitioned to a stage of high-quality development, but promoting this development faces deep-seated institutional and mechanistic problems. For instance, the basic institutions of the market economy are imperfect, the positioning of government functions is unclear, the laws and systems for implementing the "Two Unwaveringlys" ^[3] are incomplete, and the fiscal, tax, and financial systems are not sound. Issues of unbalanced, uncoordinated, and unsustainable development remain prominent. There is an urgent need to conduct institutional innovation through deepening reform to provide a stronger institutional guarantee for high-quality economic development. Facing the real-world problems in economic development head-on, the CPC Central Committee with Comrade Xi Jinping at its core has focused on the institutional obstacles constraining high-quality economic development. It has made a series of major deployments to deepen economic system reform, focusing on reforms that facilitate improved resource allocation efficiency, enhanced development quality and benefits, and the mobilization of enthusiasm from all parties to fully stimulate the endogenous power and innovative vitality of the whole society. Centered on building a modernized economic system, we persist in and improve the basic socialist economic system, refine the macro-economic governance system, and actively construct an economic system characterized by effective market mechanisms, dynamic micro-entities, and moderate macro-regulation. We promote the deep integration of scientific and technological innovation with industrial innovation, accelerate the construction of the new development pattern, and drive changes in the quality, efficiency, and drivers of economic development. Under the powerful impetus of reform, China's development puzzles have been gradually solved, development vitality has continuously strengthened, and development advantages have been increasingly manifested. Over the past decade and more, despite being hit by various unforeseen factors, the Chinese economy has consistently moved forward steadily, achieving historic leaps step by step. Many indicators of productive force development and numerous projects in the field of science and technology have caught up with, reached, or even surpassed international advanced levels, writing a brilliant chapter in economic development and reform.

Unlike the remarkable achievements of China's economic reform, economic reforms in many other countries have yielded poor results or even ended in failure. As early as the 1950s, as the flaws of the traditional planned economic system became increasingly apparent, the Soviet Union and Eastern European socialist countries began economic reforms, exploring the introduction of market mechanisms into the socialist economy. Although some local progress was made, they failed to form a rational economic system adapted to the development of productive forces. At the same time, because they failed to adhere to the socialist direction during reform, it eventually led to the drastic changes in Eastern Europe and the collapse of the Soviet Union. Subsequently, the implementation of radical "shock therapy" reforms resulted in economic stagnation, social unrest, and a severe decline in the people's standard of living. As for developed capitalist countries, they have always attempted to resolve crises and alleviate social contradictions through reform when encountering economic crises. In the 1970s, facing the "stagflation" crisis, countries such as Britain and the United States implemented neoliberal reforms, advocating for economic liberalization, privatization, and marketization. While economic growth recovered in the short term, it caused issues such as the economy shifting from the real to the virtual ^[4] and a widening gap between the rich and the poor; the 2008 international financial crisis was a concentrated outbreak of these contradictions. To deal with the crisis, some developed countries like France proposed structural reform measures, but with little success. In recent years, Western developed countries have been plagued by problems such as high inflation, high public debt, deteriorating fiscal sustainability, and intensifying income inequality—which, to some extent, is proof of unsuccessful economic reform. After World War II, some developing countries in regions like Latin America attempted to accelerate catch-up through government intervention, only to pivot to neoliberalism after such intervention failed, and then oscillated between liberalism and government intervention. They have consistently failed to find an economic system and development path suited to their own national conditions, nor have they achieved their expected development goals.

From this, it can be seen that economic reform is an extremely complex and difficult systemic undertaking. It involves the adjustment of relations of production and the improvement of the superstructure; it requires the effective coordination of multi-dimensional interest relationships such as the short-term and the long-term, the local and the whole, and the domestic and the international. Without a correct direction and goal, without strong leadership and organization, and without scientific theoretical guidance and the support of the masses, any economic reform is unlikely to succeed. The reason China's economic reform has succeeded is precisely because we have provided scientific and correct answers to these major issues.

II.

Reform and opening-up is the most distinctive feature of contemporary China. Since the start of reform and opening-up, and especially in the New Era, China's economic and social development has achieved world-renowned success. The great practice of China's economic reform contains extremely valuable reform experience. The economic reform theory of Xi Jinping’s Economic Thought is a brand-new theoretical achievement formed in the fertile soil of the practice of reform and opening-up. This theory draws on the lessons of economic reform abroad, summarizes the practical achievements and experiences of China's economic reform, and profoundly answers fundamental questions concerning the success or failure of economic reform, such as "what to change" and "how to change." It has formed a series of important realizations regarding the underlying laws of reform. This is not only instructive for China's economic reform but also possesses global significance in responding to the questions of the times and solving the reform puzzles of all nations. It represents an innovation and breakthrough in economic reform theory, enriching and developing the theories of Marxist political economy regarding economic systems and economic reform, and constitutes a major original contribution.

Economic reform is a profound revolution. It often involves profound changes in ideas and concepts as well as profound adjustments to various complex interest relationships. Without a strong leading force, it is difficult to break through the barriers of entrenched interests, build a consensus for reform, and push for the implementation of reform measures. The failure of many reforms, throughout history and across the world, is often due to the lack of a strong leading force, which leaves them unable to continue when encountering immense resistance. General Secretary Xi Jinping has pointed out that upholding the Party’s overall leadership is our greatest political advantage and the fundamental guarantee for the successful advancement of China's reform and opening-up; further comprehensively deepening reform must be conducted under the centralized and unified leadership of the Party Central Committee to ensure that reform always proceeds along the correct political direction. In contemporary China, the Communist Party of China is the highest force for political leadership, occupying the core position in the national governance system and playing the role of the leadership core that oversees the overall situation and coordinates all parties in various national undertakings. Only by consistently upholding the Party's leadership can reform ensure the correct direction, maintain strong strategic resolve, form a powerful collective force, and ultimately achieve success. This is an "absolute truth" fully proven by the great practice of China’s reform and opening-up. To further comprehensively deepen reform, leading officials at all levels must take a clear political stand, consciously maintain a high degree of alignment with the Party Central Committee in thought, politics, and action, and gather strength to ensure that all reform tasks are implemented effectively, seeking substantial results.

Economic reform is a major matter concerning the vital interests of all people. If the interests and demands of the broad masses are ignored, and if there is no support and participation from the broad masses, no reform can succeed. Even if it could alleviate social contradictions in the short term, it would eventually fail. After World War II, some Western capitalist countries attempted to ease social contradictions through the establishment of mixed economies and the welfare state model. However, when economic development encountered the "stagflation" crisis in the 1970s, they turned to neoliberal reforms and relaxed capital regulation. This led to a rapid widening of the wealth gap and an intensification of social contradictions, resulting in political polarization and social fracture; consequently, major reform plans and measures became difficult to carry out. General Secretary Xi Jinping has pointed out that reform has meaning only if it is for the people; reform has momentum only if it relies on the people. The fundamental purpose of our Party in advancing the comprehensive deepening of reform is to promote social fairness and justice, ensuring that the fruits of reform and development benefit all people more extensively and equitably. China's economic reform has been successful precisely because we have always persisted in a people-centered approach, ensuring that reform is for the people, relies on the people, and its fruits are shared by the people. To further deepen economic system reform, we must respect the principal position and pioneering spirit of the people and stimulate their creative potential. At the same time, we must attach great importance to the wealth gap under market economy conditions, continue to reform and improve the income distribution system, solidly promote common prosperity, and truly ensure that the reform responds to the people’s calls.

Economic reform is intended to solve various deep-seated contradictions and problems constraining economic development. However, different countries have different histories and cultures, varying internal and external environments, and different stages of development. They cannot possibly face identical contradictions and problems, and naturally, there is no one-size-fits-all reform plan. Economic reform must persist in seeking truth from facts and adhere to national and global conditions as its reality-based foundation. It must not blindly copy the models and experiences of other nations, nor should it be dominated by foreign ideologies. General Secretary Xi Jinping has noted that what kind of governance system a country chooses is decided by that country’s historical inheritance, cultural traditions, and level of economic and social development—it is decided by the people of that country. We must proceed from our national conditions and the realities of economic and social development, advancing reform under leadership and in stages without seeking sensationalist effects or putting on "surface-level shows" ^[5], and always adhering to the correct direction of reform and opening-up. What should be changed and can be changed, we will resolutely change; what should not be changed and cannot be changed, we will resolutely not change. Reviewing the history of China's economic reform, we have persisted in the direction of socialist market economy reform. We have pursued neither the old path of being closed and rigid nor the "evil path" of changing flags and banners ^[6]. Instead, we have carried out reform step-by-step according to practical development and realistic needs, emphasizing the combination of the strengths of the market economy with the superiorities of the socialist system, successfully establishing the socialist market economy system. At present, we must profoundly grasp national and global conditions, focusing on the prominent contradictions and problems facing high-quality development. We must dare to make breakthroughs while remaining steady and sure, ensuring the effective advancement of economic system reform and the realization of established goals and tasks.

The key to economic development lies in optimizing the mode of resource allocation. Government and the market are the two basic modes of allocating resources; only by correctly handling the relationship between the government and the market is it possible to promote sustained and healthy economic development. This is also the core content of economic reform. A significant reason why the economic development of some countries has encountered problems is that they have consistently failed to correctly handle the relationship between the government and the market, even going so far as to simplify them into an adversarial relationship. The success of China’s market economy reform lies in its consistent focus on seeking the optimal combination of government and market relations. General Secretary Xi Jinping has pointed out that the core of deepening economic structural reform is handling the relationship between the government and the market; letting the market play the decisive role in resource allocation while better exerting the role of the government. The roles of the market and the government are complementary, mutually reinforcing, and mutually supportive; we must promote a better combination of an effective market and a capable government. China’s national development planning and industrial policies, as well as its government-led science and technology finance models, all embody the organic integration of an effective market and a capable government, providing strong support for promoting high-quality development. To further improve the systems and mechanisms for promoting high-quality development, we must better coordinate the relationship between an effective market and a capable government, create a fairer and more dynamic market environment, and promote the formation of an economic order that is both "flexibly released" and "well-managed" ^[7], achieving optimized resource allocation efficiency and maximized benefits, thereby fully demonstrating the advantages of the socialist market economy system.

"To succeed, one must have a method" ^[8]. Economic reform is a systematic project. Problems from the developmental stage and problems arising after development, general contradictions and deep-seated contradictions, tasks remaining to be completed and newly proposed tasks are all intertwined and superimposed. They involve all aspects and involve intricate relationships. One must pursue scientific methods and adhere to the correct methodology for reform to proceed smoothly. General Secretary Xi Jinping has emphasized the need to persist in seeking progress while maintaining stability, promoting stability through progress, and establishing the new before breaking the old ^[9]; to correctly handle the relationship between reform, development, and stability; to persist in combining the leadership of the Party with respect for the people’s pioneering spirit; to persist in combining "crossing the river by feeling the stones" ^[10] with top-level design; to persist in combining a problem-oriented approach with a goal-oriented approach; to persist in combining pilot programs with comprehensive implementation; and to persist in combining reform decisions with legislative decisions. We must emphasize the systematic, holistic, and synergistic nature of reform, coordinating the progress of reforms in various fields to generate an integrated effect. We must handle major relationships such as those between the economy and society, government and market, efficiency and equity, vitality and order, and development and security. Reform requires heavy emphasis on planning, and even heavier emphasis on implementation. These important expositions profoundly clarify the important methodology that should be upheld in economic reform. At a new starting point, we must closely pivot around the series of major decisions and deployments made by the Party Central Committee regarding economic structural reform, placing greater emphasis on systemic integration, highlighting key priorities, and focusing on the actual results of reform to strive for tangible effects.

III

General Secretary Xi Jinping has pointed out that as China’s development has reached its current stage, development and reform have become highly integrated; every step forward in development requires a step forward in reform, and the continuous advancement of reform can provide a powerful impetus for development. Currently, China is in a critical period of consolidating the foundation and exerting full force to basically realize socialist modernization, facing the arduous task of further deepening economic structural reform. We must profoundly grasp the economic reform theory of Xi Jinping Economic Thought, focus on the institutional and programmatic obstacles restricting high-quality development, further promote deep-level reforms, and push for better alignment between the relations of production and the productive forces, the superstructure and the economic base, and national governance and social development, continuously enhancing developmental momentum and social vitality.

Focus on building a high-level socialist market economy system to deepen reform and enhance the momentum of high-quality development. A high-level socialist market economy system is an important guarantee for Chinese-path modernization. Currently, problems such as imperfect market institutional rules, sluggish factor mobility, insufficient vitality of market entities, and the displacement, overstepping, or absence of government ^[11] are relatively prominent and urgently need to be resolved through reform. We must persist in and implement the "Two Unwaveringlys" ^[12], providing legal and institutional guarantees for the equal use of productive factors, fair participation in market competition, and effective protection of legitimate rights and interests, thereby fully stimulating the vitality of all types of market entities. We should accelerate the improvement of systems and mechanisms for the market-based allocation of factors, establishing and improving a unified urban-rural market for construction land, a functionally sound capital market, a smooth-flowing labor market, and a highly efficient technology market for the conversion of achievements, promoting the efficient allocation of various factor resources. We should improve the system of macroeconomic regulation and control, coordinate reforms in key areas such as fiscal, taxation, and finance, strengthen the synergy of fiscal and monetary policies, and enhance the effectiveness of macroeconomic governance.

Focus on building a strong domestic market to deepen reform and accelerate the construction of a new development pattern. Strengthening the internal circulation and accelerating the formation of a robust domestic economic circulation system is the strategic bedrock for responding to changes and gaining the initiative amidst complex situations. Currently, the contradiction of "strong supply and weak demand" in China's economy is prominent, for which there are institutional and programmatic reasons. We must persist in expanding domestic demand as a strategic pivot, closely combining the improvement of people's livelihoods with the promotion of consumption, and "investment in things" with "investment in people," enhancing the endogenous power and reliability of the domestic internal circulation. We must prioritize enhancing the consumption capacity of residents, improving long-term mechanisms for expanding consumption, and establishing sound management methods adapted to new business formats, modes, and scenarios of consumption, reducing restrictive measures and vigorously boosting consumption. We should improve the systems and mechanisms by which government investment effectively drives private investment, perfect mechanisms for stimulating the investment vitality of social capital and promoting the implementation of investment, and form an endogenous growth mechanism for effective investment led by the market. Closely following the requirements of the "Five Unities and One Openness" ^[13], we will push forward the construction of a national unified large market in depth, improving the statistical, fiscal, taxation, and evaluation systems conducive to its construction.

Focus on accelerating high-level scientific and technological self-reliance and self-strengthening to deepen reform, and accelerate the formation of relations of production that are better suited to new quality productive forces. Developing new quality productive forces is an inherent requirement and an important focus for promoting high-quality development. In recent years, as new quality productive forces have accelerated their development, some of China’s important technologies and industries have joined the world’s advanced ranks, yet many problems remain. For instance, investment in basic research is relatively insufficient, some key core technologies are still controlled by others ^[14], science and technology are "disconnected" from industry ^[15], the market-oriented system for supporting sci-tech finance is imperfect, and the alignment between talent cultivation and industrial demand is insufficient. We must push forward the development of education, technology, and talent as an integrated whole, accelerate the improvement of the new-type whole-nation system ^[16], carry out collaborative research on key core technologies, and promote the development of strategic emerging industries and future industries. We should improve systems and mechanisms for developing new quality productive forces suited to local conditions, promoting a modernized industrial system where different regions complement each other's advantages with unique characteristics and a reasonable structure. We should build a sci-tech finance system compatible with technological innovation, improve the multi-level capital market system, and give full play to the guiding role of fiscal funds to drive more social capital to invest early, invest small, invest long-term, and invest in "hard tech," injecting powerful momentum into the realization of high-level scientific and technological self-reliance and self-strengthening.

Focus on building an income distribution system that reflects efficiency and promotes fairness to deepen reform, and promote more obvious substantive progress in achieving common prosperity for all people. Currently, China still faces some prominent problems in the field of income distribution. For example, the proportion of resident income in the distribution of national income and the proportion of labor remuneration in the primary distribution remain relatively low, and unreasonable income gaps still exist between different ownership types, industries, and groups; the pattern of income distribution needs further optimization. We must persist in the primacy of distribution according to work while allowing multiple modes of distribution to coexist. We will build a distribution system in which primary distribution, redistribution, and tertiary distribution ^[17] are coordinated and integrated, effectively increasing the income of low-income groups, steadily expanding the size of the middle-income group, and reasonably regulating excessive income. In the primary distribution stage, we will improve the distribution mechanism where the market evaluates the contribution of various factors and remuneration is determined by contribution, increasing the share of labor remuneration in the primary distribution and striving to realize the synchronization of labor remuneration increases with productivity increases. In the redistribution stage, we will increase the intensity and precision of regulation through taxes, social security, and transfer payments, and solidly promote the equalization of basic public services in areas concerning people's livelihoods, such as education, healthcare, housing, and elderly care. In the tertiary distribution stage, we will actively improve diverse public welfare mechanisms such as social assistance, private donations, and charitable enterprises.