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.
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.
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)