Yuan Hongying: Adhere to Combining an Efficient Market with a Capable Government to Build a Modern Industrial System
A modernization of the industrial system is the material and technical foundation of Chinese-path modernization. The "Recommendations of the Central Committee of the Communist Party of China on the Formulation of the Fifteenth Five-Year Plan for National Economic and Social Development" (hereafter the "Recommendations"), adopted by the Fourth Plenary Session of the 20th CPC Central Committee, places "building a modern industrial system and consolidating and expanding the foundations of the real economy" as the first strategic task and makes important deployments for it. This reflects the continuity of the Party Central Committee’s strategic planning and the precision of its guiding principles. Building a modern industrial system requires both scientific guidance and strengthened policy support from the government, as well as the regulation of market mechanisms and continuous innovation by micro-entities such as enterprises. General Secretary Xi Jinping has pointed out: "We must persist in combining an effective market with a proactive government, promoting the mutual reinforcement of the advantages of various forms of ownership and their common development." Among the important principles that must be followed for economic and social development during the "15th Five-Year Plan" period, as clarified in the "Recommendations," is "persisting in the combination of an effective market and a proactive government." The "15th Five-Year Plan" period is a critical stage for laying a solid foundation and initiating comprehensive efforts to basically realize socialist modernization, and the task of steadily and rapidly building a modern industrial system while consolidating the foundations of the real economy is becoming even more arduous. To deeply implement the spirit of the Fourth Plenary Session of the 20th CPC Central Committee, we must promote a better combination of an effective market and a proactive government, give full play to the superiorities of our country's system, and open a new chapter in the construction of a modern industrial system during the "15th Five-Year Plan" period.
Persisting in the combination of an effective market and a proactive government is an inherent requirement for building a modern industrial system
How to understand and handle the relationship between the government and the market is the core issue of a market economy and a worldwide puzzle. General Secretary Xi Jinping noted: "On the issue of the roles of the market and the government, we must utilize dialectics and the 'two-point theory' (liǎngdiǎnlùn [1]); both the 'invisible hand' and the 'visible hand' must be used well." This profoundly reveals the dialectical unity and the indispensable nature of the two. Since the dawn of the New Era, the Party Central Committee with Comrade Xi Jinping at its core has profoundly summarized the experiences and laws of global economic development and creatively proposed that the market must play the decisive role in resource allocation while the government’s role is better exerted. This has pushed our Party's understanding of the laws governing socialist market economy construction to a new height.
A modern industrial system is an important component of a modern economic system and a significant hallmark of achieving economic modernization. The modern industrial system our country seeks to build is supported by scientific and technological innovation; it is an industrial system that firmly grasps the wave of the new round of technological revolution and industrial transformation, such as artificial intelligence, adapts to the requirements of harmony between humanity and nature, and efficiently aggregates global innovation elements. Simultaneously, our country’s modern industrial system prioritizes the real economy, adheres to the integrated development of the primary, secondary, and tertiary industries, and maintains and continuously strengthens the advantages of having a complete industrial system with strong supporting capabilities. Characterized by integrity, advancement, and security, it serves as the vital carrier for achieving high-quality development. In this sense, the process of building a modern industrial system is the process of promoting the leap from traditional productive forces to advanced productive forces; handling the relationship between the government and the market is of paramount importance in this process.
Exerting the role of an effective market can drive a modern industrial system to enhance its vitality and efficiency. Market-determined resource allocation is a general law of the market economy, and its positive role in building a modern industrial system is mainly reflected in three aspects. In terms of driving force, the integrity, advancement, and security of a modern industrial system fundamentally stem from high-level self-reliance and strength in science and technology. The market serves as the "catalyst" for scientific and technological innovation; through mechanisms such as profit orientation and competitive pressure, it encourages enterprises to increase R&D investment and drive technological iterations, further solidifying the technological foundation of modern industrial system construction. From the perspective of supporting force, the real economy is the foundation of the modern industrial system. Through price and competition mechanisms, the market guides production factors such as capital and technology toward the real economy, concentrating efforts on upgrading traditional industries, cultivating emerging industries, and forward-looking layouts for future industries, thereby comprehensively enhancing the competitive advantage and developmental momentum of the real economy. Regarding sustainability, people are the factor resource possessing subjective initiatives in the construction of a modern industrial system. Utilizing market mechanisms not only regulates the balance of supply and demand for human resources and improves the alignment of talent with economic and social development, but also allows for creating new professions and positions in tandem with the times, expanding the breadth and depth of human resource allocation and enhancing the vitality of innovative economic development. Overall, allowing the market to play its role in determining the direction of R&D, choice of technical routes, and allocation of factors can promote the convergence of high-quality productive factors toward the construction of a modern industrial system.
Exerting the role of a proactive government provides a vital guarantee for the development and security of a modern industrial system. Giving play to the market's decisive role in resource allocation does not mean letting the market do everything. It must be recognized that the market is not omnipotent; natural failures exist in areas such as industrial layout, public goods provision, and the maintenance of market order. The government must persist in doing some things while refraining from others, compensating for the areas where the market fails or is incapable of acting. Specifically, in the face of the restructuring of global industrial chains and intensifying technological competition, the government focuses on long-term goals by clarifying industrial development directions while guiding the strengthening of basic research. This is conducive to solving "bottleneck" (qiǎpózi [2]) problems in key core technologies, ensuring that the initiative in building a modern industrial system remains in our own hands. In the field of public services, the government provides infrastructure, public goods, and institutional policies for industrial development, creating a favorable atmosphere and environment for building a modern industrial system. In terms of market construction, the government ensures that market vitality is fully released within a regulated framework by strengthening market supervision, improving the legal system, and cracking down on monopolies and unfair competition. The more regulated government behavior is, the more effective the market role becomes. Being "proactive" is by no means excessive intervention; rather, it means following market laws, being in place without being absent, and filling gaps without overstepping (bǔwèi bù yuèwèi [3]), accurately intervening in areas where the market cannot function effectively to form an economic order that is both "dynamic" and "well-managed."
On the whole, the combination of an effective market and a proactive government is a manifestation of the mutual adaptation between the productive forces and the relations of production. An effective market represents the objective trend of productive forces seeking efficient resource allocation and continuous innovation, while a proactive government represents the active adjustments, institutional innovations, and strategic guidance of the relations of production to adapt to the requirements of the development of productive forces. Building a modern industrial system requires the combination of an effective market and a proactive government to ensure the smooth operation of various mechanisms concerning industrial quality enhancement, efficiency improvement, and efficient factor allocation. This also reflects the organic unity of theoretical, historical, and practical logic. From the perspective of theoretical logic, as a major innovation in socialist political economy with Chinese characteristics, the application of the combination of an effective market and a proactive government in the industrial field has formed a collaborative advancement pattern for industrial system modernization where the market stimulates vitality and the government regulates order. From the perspective of historical logic, this combination crystallizes the results of our country's institutional evolution from a planned economy to a planned commodity economy and then to a socialist market economy; it has propelled China’s leap from "establishing an independent and relatively complete industrial system and national economic system" to "possessing the advantages of a complete industrial system," demonstrating a unique path of promoting industrial modernization through institutional reform and innovation. From the perspective of practical logic, this combination provides an institutional guarantee for forming a new type of relations of production compatible with the development of new quality productive forces and the construction of a modern industrial system, driving the move toward intelligence, greening, and integration, and achieving industrial grade leaps and optimizations in quality and efficiency.
The combination of an effective market and a proactive government injects powerful momentum into the construction of a modern industrial system
The "Recommendations" propose that the "15th Five-Year Plan" period must "ensure that decisive progress is made in basically achieving socialist modernization," which sets new and higher requirements for building a modern industrial system. Currently, the construction of our country's modern industrial system is progressing steadily, but it also faces risks and challenges. Externally, due to factors such as the profound adjustment of the international balance of power and intensified geopolitical conflicts, global industrial and supply chains are accelerating their restructuring, and uncertainty has risen significantly. Internally, problems such as low efficiency in factor allocation, poor connection between innovation chains and industrial chains, and insufficient regional coordination remain prominent. To address these challenges, we must persist in the combination of an effective market and a proactive government, injecting continuous momentum into the construction of a modern industrial system by consolidating and expanding advantages, breaking through bottlenecks, and strengthening weak links.
We must clear the "blockage points" of sluggish market operations and improve the efficiency of industrial factor allocation. Achieving efficient factor allocation is an important requirement for building a modern industrial system. The modernization of the industrial system depends crucially on whether production factors such as capital, labor, technology, and data can flow freely and be optimally combined across different industries according to the principle of efficiency. Since the New Era began, the CPC Central Committee and the State Council have issued documents such as the "Opinions on Building a More Perfect Market-based Allocation System and Mechanism for Factors" and "Opinions on Building Data Infrastructure Systems to Better Play the Role of Data Elements," providing institutional guarantees for promoting the free flow and optimal allocation of factors. However, in practice, due to factors such as information asymmetry, problems like factor price distortions and resource misallocation still exist, weakening the overall coordination and competitiveness of the industrial system. Persisting in the combination of an effective market and a proactive government and better exerting the government's role as "proactive" without "overstepping" is key to ensuring the market is "effective." By improving property rights protection and anti-monopoly supervision systems and maintaining an order of fair competition, we can create a healthy and orderly market environment for modern industrial construction. By deepening market-oriented factor reforms and breaking down institutional barriers that hinder the flow of innovation elements, we can activate the value-creation potential of production factors. Through market-based means such as tax incentives and carbon emission trading, we can promote the aggregation of resources and factors toward more efficient and advanced industrial fields, enhancing the endogenous drive for building a modern industrial system.
We must bridge the "break points" of disconnection between the innovation chain and the industrial chain to activate the endogenous momentum of industrial development. The deep integration of scientific and technological innovation with industrial innovation is the core path to building a modern industrial system. Since the New Era, our Party has insisted on placing scientific and technological innovation at the core of the overall national development, giving full play to its leading role in driving industrial innovation and injecting surging momentum into high-quality development. Meanwhile, it must be noted that the integration of technological and industrial innovation is not yet deep enough. For instance, the transformation rate of scientific research achievements in universities and research institutes is still not high, with some technical innovations remaining in the laboratory stage. Furthermore, some enterprises face the dilemma of having needs but no technology, or having technology but no application—the "two skins" (liǎngjiānpí [4]) phenomenon of R&D being divorced from market application has not been fundamentally reversed. Persisting in the combination of an effective market and a proactive government, with each performing its duties and working in synergy, can optimize systems and mechanisms to break through this bottleneck. The government provides strategic guidance for key directions, optimizes the innovation ecosystem through institutional building, and integrates various forces through organizational coordination; the market explores implementation paths based on demand, links the production and research ends with enterprises as the main body, and accelerates the transformation of achievements through competition. This can form an ecosystem where strategy sets the direction, policies provide strong support, the market explores paths, enterprises act as the mainstay, and society participates together, allowing the industrial and innovation chains to integrate deeply.
We must resolve the "difficult points" of unbalanced regional development and promote coordinated and linked industrial layouts. A modern industrial system requires not only an optimized industrial structure but also higher requirements for inter-regional division of labor, cooperation, and factor coordination. In recent years, China has promoted the deep integration of regional coordinated development strategies, major regional strategies, and the functional zone strategy, playing an important role in optimizing the layout of major productive forces. For example, the practices of major regional strategies such as the Beijing-Tianjin-Hebei coordinated development, the Yangtze River Delta integration, and the Guangdong-Hong Kong-Macao Greater Bay Area construction show that the coordination of the government’s and market’s "two hands"—through strengthening top-level design and breaking down market fragmentation—can promote the free flow of factors, drive the collaborative layout of upstream and downstream industrial chains, and improve the modernization level of the industrial system. At the same time, it must be recognized that regional industrial development in China still faces issues such as insufficient synergy, scattered layouts, and redundant construction. While market mechanisms have advantages in identifying comparative advantages and promoting industrial division of labor, they lack sufficient momentum in promoting regional coordinated development, and resource misallocation can further increase the risk of spatial differentiation. Only by persisting in the combination of an effective market and a proactive government, coordinating regional and industrial development, eliminating regional barriers, and building a national unified large market can the market coordinate resources and optimize allocation on a larger scale, promoting the formation of a regional layout for a modern industrial system characterized by complementary advantages, staggered development, and coordinated progress.
Identify the precise "balance point" between industrial security and opening up to the outside world, thereby enhancing the resilience of industrial development. In building a modernization industrial system within a complex and severe external environment, a dynamic equilibrium must be sought between achieving independent controllability in key fields and deeply integrating into the global division of labor. In this regard, relying purely on the spontaneous adjustment of market forces can easily lead to excessive dependence on external supplies for key technologies and core components, leaving industrial security vulnerable to the threats of technological blockades and the shocks of supply chain fluctuations. Conversely, excessive government intervention may weaken the motivation and efficiency of enterprises participating in international competition, damaging the overall competitiveness of the industrial system. To this end, we must promote the formation of a synergy between an effective market and a sentient government, achieving an organic combination between securing the "bottom line" [5] of national industrial security and embracing the "dividends" of international competitive cooperation. By building an industrial security "moat" [6] in weak market links and steadily expanding institutional opening-up, the government can create favorable conditions for enterprises to participate in global industrial and supply chains. Through resource allocation on a broader scale, the pressure of competition, and the pull of demand, the market can enhance industrial vitality and resilience. Only when the two coexist, assist each other, and complement one another can we ensure that China's industrial system possesses sufficient strategic depth and security buffers while actively integrating into the global division of labor and enhancing international competitiveness.
Adhere to the coordinated efforts of the "two hands" [7] to ensure the important deployments for building a modern industrial system are implemented. The Proposal [8] requires the construction of a modern industrial system with advanced manufacturing as its backbone, and makes specific arrangements for optimizing and upgrading traditional industries, cultivating and strengthening emerging and future industries, promoting the high-quality and efficient development of the service sector, and constructing a modern infrastructure system. We must persist in the coordinated efforts of the "two hands," ensuring the successful completion of the main goals for modern industrial system construction proposed in the Proposal through a better combination of an effective market and a sentient government.
Form a synergy in structural optimization to promote deep industrial transformation and upgrading. Promoting the optimization of industrial structures through improvements in technology, markets, and management provides a vital impetus for deep industrial transformation and upgrading. To this end, we must fully respect market laws and actively leverage the role of the government, taking intelligence, greening, and integration as the direction, ensuring that efforts are exerted in the same direction to form a synergy. We should mobilize the enthusiasm of market forces, continuously expand the space for the market mechanism to function, promote the transformation and upgrading of traditional industries, cultivate and strengthen strategic emerging industries and future industries, and lead industries to achieve a leap in functional level at a higher stage. We must further clarify the boundaries between the government and the market, base our efforts on making the real economy bigger and stronger, better leverage the role of the government, strengthen the directional guidance of industrial policy, and improve its foresight, precision, and synergy. We should enrich and perfect the policy toolbox, enhance overall policy efficacy, deeply advance the implementation of fair competition policies, and create a market environment where various types of business entities compete fairly and strive for development.
Form a synergy in factor allocation to promote the efficient concentration of resources in key fields. Improving the quality and allocation efficiency of factors of production is an important support for building a modern industrial system. We must continue to promote the market-oriented reform of factors such as land, labor, capital, and technology, and accelerate the construction of a high-standard market system. We should promote healthy market competition, leverage the role of price signals, and guide the efficient flow of productive forces toward pillar industries, key industries, and emerging industries. We must improve basic market economy systems such as open and transparent property rights protection, market access, fair competition, and social credit; accelerate the establishment of institutional mechanisms for the data factor market; and perfect systems for data property rights attribution, market transactions, and the distribution of rights and interests. We will advance the construction of a unified national market in depth, break down local protectionism and market fragmentation, maintain a more open, fair, and just market order, and create a world-class business environment that is market-oriented, law-based, and internationalized, facilitating the smooth flow of factor resources across industries and regions on a broader scale. These measures are conducive to further leveraging the role of the market and promoting the efficient concentration of resources in key fields.
Form a synergy in promoting innovation to cultivate and develop new quality productive forces. Scientific and technological innovation is the core element for building a modern industrial system and developing new quality productive forces. We should make good use of market mechanisms such as the transmission of competitive pressure and the drive for economic interests to mobilize the enthusiasm and creativity of various business entities, stimulate the innovation potential of enterprises as main actors, increase the supply of high-quality technology, and drive the "emergence of the new" in the industrial system through original and disruptive scientific and technological innovation. We should leverage the advantages of market risk mechanisms in encouraging trial and error, creating an atmosphere that tolerates and corrects mistakes. The government should target key fields and weak links, playing a leading role in strengthening breakthroughs in key core technologies and basic research in priority areas. It should strengthen support for the creation of application scenarios and large-scale demonstrations, actively act in the supply of public goods and services such as the upgrading of traditional infrastructure and the construction of new infrastructure, and apply innovation achievements to specific industries and industrial chains.
Form a synergy in secure development to consolidate and expand the advantages of China's industrial system. Based on making the real economy bigger and stronger and consolidating the industrial foundation, we must leverage the role of an effective market to discover new technologies, new industries, new business forms, and new models in a timely manner, cultivating new points of economic growth. Grasping the development trends of the digital economy, we will promote digital industrialization and industrial digitization, facilitate the deep integration of the internet, big data, and artificial intelligence with manufacturing, accelerate the digital and intelligent transformation of the manufacturing industry, and consolidate and enhance the leading position and competitive advantage of manufacturing. In terms of macroeconomic governance, the government must adhere to both development and regulation, focusing on high-quality development as the primary task. It should coordinately advance reforms in key areas such as fiscal, taxation, and finance, resolve structural contradictions in key industries, build a solid bottom line for security and a defense line against risks, and ensure the consistency of various regulatory policy orientations, providing a stable and transparent policy environment for the construction of a modern industrial system.
(The author is a researcher at the CASS Base of the Shandong Provincial Research Center for Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era) People's Daily (November 19, 2025) Web Editor: Chu Yang