Leveraging the Role of Economic Reform

The third plenary session of the 20th Central Committee of the Communist Party of China (CPC) was a momentous meeting convened at a critical point in our efforts to build a great country and move toward national rejuvenation through Chinese modernization. The session deliberated and adopted the Resolution of the Central Committee of the Communist Party of China on Further Deepening Reform Comprehensively to Advance Chinese Modernization (hereinafter “the Resolution”). The document stresses the need to avail ourselves of the leading role of economic reform and to coordinate reforms in all areas so as to provide strong impetus and institutional support for Chinese modernization.

I. Utilizing economic reform to advance reforms in all areas

Utilizing the leading role of economic reform accords with the fundamental tenets of Marxism 

Marxist theory holds that production relations and the superstructure are determined by, but also act upon, the productive forces and the economic base, respectively. The essence of reform is the adjustment and optimization of production relations and the superstructure to achieve greater productivity, thereby liberating and developing the productive forces and boosting social vitality. To continue comprehensive reform involves the economic, political, cultural, social, and ecological spheres. Economic reform has an important bearing and transmissive influence on reforms in other areas, with progress in major economic reforms affecting progress in reforms in many other areas. For economic development to remain at the center of Chinese modernization, economic reform must be our focal point and driving force. This will ensure reforms in other areas advance in a coordinated and concerted manner.

Utilizing the leading role of economic reform has facilitated China’s historic achievements in reform and opening up 

The third plenary session of the 11th CPC Central Committee, convened in 1978, shifted the focus of our Party’s work to economic development, initiating wide-ranging and thorough reforms first in rural areas and then in cities to invigorate the country internally and open it up to the outside world. 

The third plenary sessions of the 14th CPC Central Committee and 16th CPC Central Committee, in 1993 and 2003, respectively, issued decisions on the establishment and improvement of the socialist market economy and more in-depth economic reform. 

The third plenary session of the 18th CPC Central Committee held in 2013 adopted the Decision of the CPC Central Committee on Major Issues Concerning Comprehensively Deepening Reform, which stated that economic structural reform would be the priority in driving deeper reform. It also noted that a pivotal issue was to balance the relationship between the government and the market, and proposed, for the first time, the intentions of getting the market to play a decisive role in the allocation of resources and better utilizing the role of government.

An aerial view of the Comprehensive Research Facility for Fusion Technology (CRAFT), a national-level scientific installation in Hefei, Anhui Province, August 3, 2024. To continue economic reform, it is necessary to steadily foster new growth drivers and new strengths with a focus on the primary task of high quality development. PEOPLE’S DAILY / PHOTO BY ZHANG MIN

The fourth plenary session of the 19th CPC Central Committee in 2019 proposed giving full rein to the decisive role of the market in the allocation of resources and better utilizing the government’s role. The CPC Central Committee has remained committed to reforms to develop the socialist market economy, with constant improvements to China’s market economy, thereby providing institutional safeguards for achieving the two miracles of rapid economic growth and enduring social stability.

If China is to write a new chapter in the chronicle of the two miracles in the new era, we must continue to utilize the leading role of economic reform to advance in-depth reform and high-standard opening.

Utilizing the leading role of economic reform is required to achieve high-quality development 

Economic development is a central task of the CPC, and high-quality development is a primary task of building a modern socialist country. We face extremely challenging reform and development tasks to realize our objectives of basically achieving socialist modernization and putting our per capita GDP on par with mid-level developed countries by 2035 as well as developing China into a great modern socialist country by the middle of this century. 

During more than four decades of rapid development, China’s per capita GDP rose from US$156 in 1978 to US$12,700 in 2023. The current average per capita GDP of mid-level developed countries is over US$20,000, meaning that China remains a developing, middle-income country and that a development gap still exists between our country and developed, high-income countries. Development imbalances and inadequacies continue to plague China’s efforts to promote high-quality development.

On the new journey in the new era, in order to promote high-quality development, we must use the important instruments of reform and opening up to upgrade the economy and expand output and lay a solid material and technological foundation. This will enable our country of more than 1.4 billion people to catch up gradually with the development level and standard of living of developed countries.

II. The major tasks in deepening economic reform and utilizing its leading role

We must build a high-standard socialist market economy

A high-standard socialist market economy will act as an important guarantee for Chinese modernization. 

On the core issue of handling the relationship between the government and the market, the Resolution highlighted the importance of building a high-standard socialist market economy. It emphasized the need to ensure that the market plays the decisive role in resource allocation and that the government better fulfills its role. It also emphasized the need to uphold and improve China’s basic socialist economic system, better leverage the role of the market, foster a fairer and more dynamic market environment, and make resource allocation as efficient and productive as possible. It also proposed lifting restrictions on the market while ensuring effective regulation, so as to unleash the internal driving forces and creativity of the whole of society.

The Resolution affirmed the need to uphold and fulfill commitments to the public and non-public sectors. It emphasized the need to deepen reform of state capital and SOEs; help state capital and SOEs become stronger, do better, and grow bigger, with their core functions and core competitiveness enhanced; and introduce value-added accounting in the state-owned sector. It also emphasized the need to foster a favorable environment and create more opportunities for the development of the non-public sector. The Resolution called for the formulation of a private sector promotion law, improvements to the long-term mechanism whereby private enterprises participate in major national projects, and giving assistance to capable private enterprises to take part in leading national initiatives aimed at making breakthroughs in major technologies.

The Resolution pointed out the need to refine the modern corporate system with Chinese features and promote entrepreneurship; support and guide enterprises of all types as they work to use resources and production factors more efficiently, improve their operation and management, and fulfill their social responsibilities; and strive to quickly foster a greater number of world-class enterprises. It stressed building a unified national market, including developing a unified market for urban and rural land designated for construction, fostering an integrated national market for technology and data, and refining the integrated framework of distribution rules and standards. It stated that we must step up efforts to develop a complete domestic demand system, including setting up long-term government investment mechanisms to support the development of major projects that are of fundamental and far-reaching importance and serve the public interest, as well as refine long-term mechanisms for expanding consumption, while reducing relevant restrictions and boosting public spending as necessary. The Resolution also called for refining the systems underpinning the market economy, including improving the protection of property rights, market information disclosure system, market access system, bankruptcy and market exit systems, and social credit and oversight systems. 

We must promote high-quality economic development

High-quality development is a foremost task in building a modern socialist country. 

The Resolution emphasized that we must apply the new development philosophy to steer reform and ground our efforts in the new stage of development, deepen supply-side structural reform, and improve incentive and constraint mechanisms for promoting high-quality development. It stated that we need to improve institutions and mechanisms for fostering new quality productive forces in line with local conditions. This includes refining institutions and mechanisms for the optimization and upgrading of traditional industries, enhancing the policy and governance systems for promoting the development of strategic industries, and establishing a mechanism for ensuring funding increases for industries of the future. It also includes accelerating the formation of relations of production that are more compatible with new quality productive forces and channeling various types of advanced production factors toward the development of new quality productive forces, in order to increase total-factor productivity significantly.

The Resolution called for improvements to the systems to promote full integration between the real economy and the digital economy. This entails improving the policy system for developing the digital industry and transforming traditional industries with digital technologies, putting in place a funding mechanism to ensure that the share of manufacturing in the national economy remains at a desirable level, and improving the system for routine regulation of the platform economy. 

The Resolution emphasized the need to refine the institutions and mechanisms for developing the service sector, including refining the policy system for supporting the development of the service sector, promoting the integration of producer services, and improving the mechanisms for accelerating the diversified development of consumer services.

The 2024 China International Fair for Trade in Services at the China National Convention Center, Beijing, September 11, 2024. The event, themed “Global Services, Shared Prosperity,” was jointly held at the China National Convention Center and Shougang Park, September 12 to 16, 2024. PHOTO BY XINHUA REPORTER JU HUANZONG

It is also necessary to balance the relationship between development and security. To this end, the Resolution stated that we must develop China’s strategic hinterland and formulate backup plans for key industries and improve the systems for bolstering the resilience and security of industrial and supply chains. This is an inevitable requirement to respond effectively to containment and suppression as well as decoupling and delinking and to ensure safe development.

We must support all-around innovation 

Science and technology (S&T) are our foremost productive forces, talent is our primary resource, and innovation is our principal driver of growth. 

The Resolution emphasized the need to implement fully the strategy of invigorating China through science and education, the strategy of developing a quality workforce, and the innovation-driven development strategy, as well as to make coordinated efforts to promote integrated reform of institutions and mechanisms pertaining to education, science and technology, and talent, so as to boost the overall performance of our country’s innovation system. In other words, we must strive to create a virtuous cycle between high-quality education, talent, and S&T.

Regarding deepening comprehensive reform in education, we must focus on fostering a new generation of young people to shoulder the mission of realizing national rejuvenation, enhance our ability to nurture top-tier innovative talent, and advance coordinated reforms in student training methods, school operation models, management systems, and support mechanisms. We must develop mechanisms for adjusting the configuration of disciplines and foster talent training models to meet the needs of China’s scientific and technological development and national strategies, strive to cultivate innovative capacity, and explore ways to gradually expand free education. 

In terms of deepening reform of the science and technology management system, with our sights on the global frontiers of science and technology, the development of the economy, the major needs of the country, and the health and safety of our people, we must improve the management of science and technology plans to ensure that they are forward-looking and play a guiding role in basic research, interdisciplinary frontier areas, and key fields. We must reinforce the principal role of enterprises in innovation, strengthen enterprise-led collaboration between industries, universities, and research institutes, and allow public institutions engaged in scientific research to implement a more flexible management system as compared to general public institutions, so that they can explore approaches to instituting corporate management. We must also give scientists and engineers a greater say in the distribution of gains from the transfer of their scientific and technological advances and deepen reforms to grant researchers corresponding rights over scientific and technological outputs.

Regarding deepening institutional reforms for talent development, we must make our policies on talent more proactive, open, and effective. We need to step up efforts to build a contingent of personnel with expertise of strategic importance, enhance the mechanisms for identifying, selecting, and training young innovators, and refine incentive mechanisms for talent, giving greater influence to employers and creating a more accommodating environment for talent development. We must also improve support mechanisms for recruiting talent from overseas and explore avenues for establishing an immigration system for highly skilled personnel.

We must improve macroeconomic governance 

Sound macro regulation, along with effective governance by the government, is essential for ensuring that we can fully leverage the institutional strengths of our socialist market economy. 

The Resolution proposed developing mechanisms for formulating and executing national strategies, fostering greater constructive interaction between our fiscal, monetary, industrial, pricing, and employment policies in order to promote the implementation of national development plans and major strategies, and evaluating both economic and non-economic policies to ensure that they are consistent with the macro policy orientation.

In terms of deepening reform of the fiscal and tax systems, we must improve the relationship between central and local governments, place more fiscal resources at the disposal of local governments by expanding sources of tax revenue at the local level, and ensure that the fiscal resources of prefecture- and county-level governments are commensurate with their administrative powers. The central government must hold more fiscal powers as appropriate and raise the proportion of central government expenditure accordingly, while no requirements for supporting funds from local governments in violation of regulations shall be made.

Regarding reform of the financial system, we must actively develop technology finance, green finance, inclusive finance, pension finance, and digital finance. We need to improve the functions of the capital market to give balanced weight to investment and financing, improve the financial regulatory system, and strengthen financial security mechanisms as we open our doors wider to the outside world. 

To improve mechanisms for implementing the coordinated regional development strategy, we must develop a regional economic layout and a territorial space system characterized by complementarity between different regions and territorial spaces and refine the system for functional zoning. We must improve integrated regional development mechanisms, introduce new mechanisms for cooperative development across administrative divisions, and enhance institutions and mechanisms for promoting the marine economy. 

Following more than four decades of rapid development in China under the policy of reform and opening up, the prosperity of our society has grown and our economy has utilized idle and existing resources, but we must improve the allocation of newly acquired resources while adjusting the mix of existing resources as well as explore the introduction of national macro balance sheet management.

We must promote integrated urban-rural development

Integrated urban and rural development is essential to Chinese modernization. It is also an inherent requirement for realizing people’s aspirations for a better life and promoting common prosperity. 

The Resolution stressed the need to pursue coordinated progress in new industrialization, new urbanization, and the comprehensive revitalization of the countryside; facilitate greater urban-rural integration in planning, development, and governance across the board; and promote equal exchanges and two-way flows of production factors between urban and rural areas, so as to narrow the disparities between the two and promote their shared prosperity and development. 

With regard to improving the institutions and mechanisms for advancing new urbanization, we must put in place mechanisms to foster positive interactions between the processes of industrial upgrading, population concentration, and urban development. We must implement systems for allowing people to obtain household registration and access basic public services in their place of permanent residence. The process of granting permanent urban residency to people moving from rural to urban areas must also be accelerated. Moreover, we need to protect the lawful land rights and interests of former rural residents who now hold permanent urban residency and protect, in accordance with the law, their rights to contract rural land, to use their rural residential plot, and to share in the proceeds from rural collective undertakings. 

In terms of consolidating and improving the basic rural operation system, we need to move forward with well-organized trials to extend rural land contracts by another 30 years upon the expiration of second-round contracts and deepen the reform to separate ownership rights, contract rights, and management rights of contracted land.

New students receive textbooks and tour the campus ahead of the autumn semester at Yucai Primary School, Yangzhou, Jiangsu Province, August 30, 2024. Since the start of the new era, major reform measures have been rolled out in key areas concerning the people’s wellbeing, ensuring a stronger, more tangible, and more sustainable sense of gain, happiness, and security for urban and rural residents alike. PEOPLE’S DAILY / PHOTO BY MENG DELONG

Regarding improving supporting systems to strengthen agriculture, benefit rural residents, and enrich rural areas, we must improve the investment mechanisms for rural revitalization, refine the regular mechanisms for preventing rural residents from relapsing into poverty, and establish a system of multi-tiered and categorized support for low-income rural residents and underdeveloped areas. We need to improve long-term mechanisms for promoting all-around rural revitalization and coordinate efforts to establish an inter-provincial mechanism for major grain-purchasing areas to compensate major grain-producing areas, so as to make substantive headway in incentivizing the latter. 

In order to deepen reform of the land system, we must reform and refine the system for offsetting cultivated land that has been put to other uses; improve the mechanisms for developing, verifying, managing, and protecting high-standard cropland; and optimize land management. We need to promote mixed land development and use and allow for changes in land use purposes when appropriate, ensuring that idle and inefficiently used land can be put to better use. We need to formulate policies for extending land use rights for industrial and commercial purposes and for renewing them upon expiration.

We must pursue high-standard opening up 

Opening up is a defining feature of Chinese modernization. We must remain committed to the basic state policy of opening to the outside world, increase our capacity for opening up while expanding international cooperation, and develop new institutions for a higher-standard open economy.

The Resolution called for the steady expansion of institutional opening up, including our alignment with high-standard international economic and trade rules and coherent rules, regulations, management, and standards relating to property rights protection, industrial subsidies, environmental standards, labor protection, government procurement, e-commerce, the financial sector, and other areas, in an effort to create an institutional environment that is transparent, stable, and predictable. 

It also proposed reforming further the management systems for inward and outward investment, removing all market access restrictions in the manufacturing sector, and opening up sectors such as telecommunications, the internet, education, culture, and medical services further in a well-conceived manner. We need to improve relevant measures to make it more convenient for people from outside the mainland to live, access medical services, and make payments on the mainland, as well as strive to attract and utilize foreign investment. 

The Resolution called for optimization of the layout for regional opening up, including accelerating all-around opening up with links running eastward and westward, across land, and over sea, in order to develop a diverse array of pacesetters for opening up. 

It also proposed improvements to the mechanisms for high-quality cooperation under the Belt and Road Initiative, including coordinated efforts to advance both major signature projects and “small but effective” public welfare projects. 

We must ensure and improve the people’s wellbeing 

Ensuring and enhancing the people’s wellbeing in the course of development is one of the key tasks of Chinese modernization. 

The Resolution proposed a number of means to resolve the most practical problems that are of greatest and most direct concern to the people, including improvements to the income distribution system. It suggests building an institutional framework under which primary distribution, redistribution, and tertiary distribution are well coordinated and mutually complementary, as well as putting systems in place to boost the incomes of low-income earners, steadily expanding the size of the middle-income group, and properly regulating excessive incomes, thereby creating a distribution pattern of predominantly middle-income earners that gradually leads to common prosperity. 

With regard to improving the employment-first policy, we must develop sound mechanisms for promoting high-quality and full employment, enhance the system of lifelong vocational skills training, coordinate urban and rural employment policies, and refine the mechanisms for promoting equal opportunities. 

In terms of improving the social security system, we need to build a sound social security system to serve people in flexible employment, rural migrant workers, and those in new forms of employment, improve policies for transferring social security accounts, step up the construction and supply of government-subsidized housing, and quickly establish a new development model for the real estate sector.

Regarding implementing further reforms to the medical and healthcare systems, we must improve the public health system, support coordinated development and governance of medical services, medical insurance and pharmaceuticals, deepen the reform of public hospitals to make them better serve the public interest, and guide and better regulate the development of private hospitals. 

In terms of improving the systems for supporting population development and providing related services, we must provide full life-cycle population services to all in order to promote high-quality population development, refine the policy system and incentive mechanisms for boosting the birth rate, work to build a pro-childbirth society, and enhance policies and mechanisms for developing elderly care programs and industries.

We must deepen reform in ecological conservation

Chinese modernization is the modernization of harmony between humanity and nature. 

The Resolution emphasized the need to build a Beautiful China and promote the modernization of harmony between humanity and nature, issuing specific plans to accelerate reforms in the area of ecological conservation. It emphasizes the need to ramp up the green transition in all areas of economic and social development by improving the basic systems for ecological conservation, environmental governance systems, and the mechanisms for green and low-carbon development, enhancing our ecological conservation systems. 

We must implement fiscal, tax, financial, investment and pricing policies as well as standards to support green and low-carbon development, accelerate the planning and development of a new type of energy system, and put in place new mechanisms to facilitate the transition from controlling the total amount and intensity of energy consumption to controlling the total amount and intensity of carbon emissions. To create the safeguards needed to advance actively yet prudently toward reaching peak carbon emissions and carbon neutrality and develop new strengths in green and low-carbon development, we need to establish a carbon emissions statistics and accounting system, a carbon labeling and certification system, as well as a carbon footprint management system and improve the cap-and-trade system for carbon emissions and the trading system for voluntary greenhouse gas emissions reduction.

Han Wenxiu is Executive Deputy Director of the Office of the CPC Central Commission for Financial and Economic Affairs.

(Originally appeared in Qiushi Journal, Chinese edition, No. 18, 2024)