On November 14, 1993, the Third Plenary Session of the 14th CPC
Central Committee adopted the decision of the CPC Central Committee
on issues involving the establishment of the socialist market
economic system, ushering in a new phase in China's economic
restructuring and bringing along great impact on the nation's
economic and social development.
Although China built a framework of socialist market economic
system a decade ago, the system is still underdeveloped and
imperfect as deep-seated structural problems left from the planned
economy era have not yet been fundamentally solved. Consequently,
on October 14, 2003, the Third Plenary Session of the 16th CPC
Central Committee deliberated on and finally passed the decision of
the CPC Central Committee on issues regarding improvement of the
socialist market economic system.
Recently, Cao Yuanzheng, director and chief economist of BOC
International, had an online interview with xinhuanet.com to talk
about China's market economic reform over the past 10 years.
Ten years not a long time
Q: In 1993, you participated in the drafting of
the decision of the CPC Central Committee on issues concerning the
establishment of the socialist market economic system, which
affirmed the legal status of socialist market economy in China. Ten
years later, the decision of the CPC Central Committee on issues
regarding improvement of the socialist market economic system has
been publicized. In your opinion, where lies the significance of
the new decision?
A: The past decade has witnessed the gradual
improvement of socialist market economy. Ten years ago, China's
economic restructuring had just found the right track and was
facing many problems. After repeated discussions, a consensus was
finally reached, i.e., it's a must for China to establish the
socialist market economic system.
The socialist market economy demands a clear, perfect
macro-control system to ensure its normal operation. In this
regard, much headway has been made over the previous decade. The
new decision places emphasis on the improvement of market economic
system. By way of analogy, once the frame of a building is set up,
it's time to fit up the interior.
Q: It takes 10 years for the newly established
socialist market economic system to head for perfection. Do you
think it's too long?
A: Not really. On the one hand, it conforms to
the general patterns of economic development. On the other, we
should not forget that the "building" has been constructed by many
people in the sweat of their brows. In any case, historically
speaking, a decade is just a short instant.
Looking back, in the past 10 years, all in all, economic
restructuring was progressing smoothly, and it was even in excess
of our expectations in some areas. However, the work in some areas
has lagged behind, such as enterprise structural reform,
establishment of a social security system, and reform of the
monetary system. In particular, the readjustment of state-owned
assets has yet to be completed.
Harmonious development of economy and
society
Q: What in the new decision impresses you
most?
A: Well, as far as the new decision is
concerned, what impressed me most is the overall planning.
Specifically, the decision has clarified the five targets of
further improving the market economy, i.e., to coordinate urban and
rural development, regional development, economic and social
development, harmonious development of man and nature, domestic
development and the opening up to the outside world.
In my opinion, among the above five targets, the most important
is how to coordinate economic and social development. Compared with
the previous one, the new decision stresses harmonious development
of economy and society, making sustainable development a
distinctive theme.
Since China adopted the policy of reform and opening-up 25 years
ago, the focus of our work has been on economic development. After
25 years' reform and opening-up, it's time to put the issue of
sustainable development on the agenda. Only through sustainable,
harmonious development of economy and society can people's living
standards be raised and social development achieved in an all-round
way.
Citing state-owned assets readjustment as an example, if the
readjustment is not successful, it will not only bring about
difficulties for economic development but result in various social
problems such as unemployment.
In fact, harmonious development of economy and society is to
couple social progress with economic development. We used to lay
stress on economic growth. Nonetheless, strictly speaking, economic
growth and economic development are two different concepts.
Economic growth doesn't necessarily mean economic development, but
the latter can surely give rise to the former, depending on
simultaneous social development. Harmonious development of economy
and society must be sustainable, with social prosperity as the
ultimate goal.
Urbanization
Q: What do you think of the issue of
urbanization?
A: Unbalanced development between urban and
rural areas is a problem most developing countries are confronting
with. It has led to the existence of dual economy -- advanced
industry and underdeveloped agriculture. In the process of China's
reform and opening-up, initially we tried to establish township
enterprises to achieve industrialization in rural areas.
However, after some time we realized that unlike
industrialization in developed countries, which is linked with
urbanization, our rural industrialization is unsustainable. What's
more important is to coordinate urban and rural development.
Urbanization is the most effective way to tackle the thorny problem
of peasant employment. Along with urbanization, peasants will be
able to find jobs in non-agricultural industries.
Centering on urbanization, to coordinate urban and rural
development is conducive to further eliminating the dual economic
structure. The reform of household registration and employment
systems, as expounded in the decision, will make things easy for
peasants to get jobs in cities, which can in turn help narrow the
gap between urban and rural areas.
Overheated economic growth?
Q: Is China's current economy facing inflation
or deflation?
A: The question of whether China's economy is
overheated set off a debate in 1988, and again in 1993. Now we're
confronted with the same question. Measuring in terms of money
supply, since paper money has been issued at a quick rate, the
economy seems to be "overheated." Nevertheless, judging from the
price index, it is not the truth.
As some people have defined, it's "a fever without temperature
rise." In my opinion, in the changed economical structure, we can
no more use old criteria to judge if the economy is overheated. In
recent years, it is investment that gives impetus to economic
growth. The pattern of residents' consumption has changed. For
example, housing and car are now the new hot spots of household
consumption, while the supply of daily necessities has less
influence on people's lives. So the criteria for price measurement
should be changed accordingly.
I feel that at present, despite the signs of potential
overheated growth, the national economy as a whole is normal.
Joint-stock system: major form of public
ownership
Q: We used to regard the sectors of state- and
collectively-owned economy as the major forms of public ownership.
Why has joint-stock system, as defined in the decision, become the
major form of public ownership now?
A: Actually, this is a forward-looking view,
marking a significant ideological change. To people's mind, both
property right and property relation are becoming important issues.
Joint-stock system is one of the forms of property relation, and
it's valid in any kind of market economy.
In the joint-stock system, strictly speaking, a property has
numerous owners. The proprietary right might belong to the state,
the collective, or individuals. These different ownerships have
been put under the joint-stock system which caters to the need of
the entire society. Since it has been proved to be the most
effectual organizational mode of assets in economic activities, we
have well-grounded reasons to regard the joint-stock system as the
major form of public ownership.
Golden opportunity for capital market
development
Q: What do you think of the perspective of
China's capital market?
A: The decision mentions to develop China's
capital market. As we know, financial activities are an important
link to keep modern economy running. So far China's monetary system
is relatively underdeveloped. Therefore, it's both necessary and
important for China to devote major efforts to developing capital
market.
In terms of financing scope and market standardization, compared
with developed countries, China's capital market is not on the same
level currently. Despite the problems, the Third Plenary Session of
the 16th CPC Central Committee has offered a golden opportunity for
the development of capital market in China.
Property right system
Q: Can you talk about the modern property right
system?
A: During the past decade, in succession we
have carried on restructuring of state-owned enterprises,
state-owned assets readjustment, and readjustment of the overall
arrangement of the national economy. In fact, the three are
interlinked. It's a mistake to think that the property right system
merely applies to state-owned enterprises. All forms of property,
state-owned or private, are under the protection of the Law.
Public and non-public ownership used to be two sharply
contrasting concepts. Now we have introduced the joint-stock
system. Not only the state has title to property, but we are all
stockholders. So to institute the modern property right system is
to protect all stockholders' equity.
Q: What's the role of private capital in the
socialist market economy?
A: The new decision has put state-owned
enterprises and those run by private citizens on an equal footing.
Private economy is of great importance to China's future economic
development. For instance, how to create more jobs is an
increasingly serious problem in populous China. To tackle this
issue, private economy is expected to provide a way out. So in my
opinion, the next few years will see vigorous growth of private
economy.
Non-public capital
Q: I want to know if non-public capital can
enter any field as long as it's not forbidden by the Law.
A: Legally permitting is one point, but we
might as well pluck up our courage in terms of the use of
non-public capital. This is very important for future economic
development.
Forbidden areas include defence industry, banking, and some
special fields. However, many infrastructural projects have been
opened up. For instance, water, electricity and heating supply, and
bridge and road construction, which used to be monopolized by the
state, have been opened to private sector.
Even banking is facing reform. Actually, the credit cooperative
in rural areas can be regarded as privately running. Currently the
four big commercial banks -- Bank of China, Industrial and
Commercial Bank of China, China Construction Bank and Agricultural
Bank of China -- are still state-owned. However, as mentioned in
the decision, if joint-stock restructuring takes place in these
state banks, circumstances permitting, private citizens can
purchase their stocks. Then it can be thought of as non-public
capital's entry into banking.
About the next decade
Q: Can you tell us about the trend of China's
socialist market economy in the next decade?
A: In the past years, both the steady economic
growth and improved living standards of the people benefited from
the establishment of the socialist market economic system. In the
next decade, if it is constantly perfected, this system will
continue to play a sustaining key role in the country's economic
development. Then by 2020 or so, China's economy may become one of
the world's strongest. Although per capita GDP will still be low,
relying on the powerful overall national strength, China is
hopefully to realize its century-long dream of becoming a powerful
nation with prosperous economy and well-off people.
(China.org.cn, translated by Shao Da, November 17, 2003)