Home ›› 13 Jul 2022 ›› Editorial
On October 1, 1949, Mao Zedong declared the creation of the People’s Republic of China, a communist country. Subsequently, the leadership has realized the demand of change from the society and economy. They have taken quick decision regarding economic reforms without delay unlike the Soviet Union. The transition to a ‘socialist market economy’ began in 1978 when Deng Xiaoping introduced his programme of socialism with Chinese characteristics. Since its reform and opening-up, modern China has recorded a series of remarkable historic achievements, especially its miracle of high-speed economic growth over a long period. Socialism with Chinese characteristics, under which these achievements have been registered is a new theory of a socialist system, and has helped China enter a new era of national prosperity and greatness under the leadership of President Xi Jinping. The reform has taken a new dimension with President Xi Jinping’s thought on Socialist Economy with Chinese Characteristics for a New Era has been advancing with the times, steering the Chinese economy ahead amid a changing world full of uncertainties.
The era of Deng Xiaoping and was largely associated with Deng’s overall programme of adopting elements of market economics as a means to foster growth using foreign investment and to increase productivity, especially in the countryside where 80 per cent of China’s population lived. The Communist Party of China (CPC) retained both its formal commitment to achieve communism and its monopoly on political power. They have adapted the socialistic policy with Chinese characteristics i.e. Marxism–Leninism adapted to Chinese conditions and a product of scientific socialism. The theory stipulated that China was in the primary stage of socialism due to its relatively low level of material wealth and needed to engage in economic growth before it pursued a more egalitarian form of socialism, which in turn would lead to a communist society described in Marxist orthodoxy.
President Xi Jinping’s has further reformed and his economic thought, unveiled at the Central Economic Work Conference held in December 2017, is mainly based on the new development philosophy put forward by him in 2015 and features innovative, coordinated, green, open and shared development. His economic thought has shed light on a dilemma facing all policymakers globally: dealing with the relationship between the government and the market. In a pivotal CPC meeting presided over by Xi in 2013, China acknowledged the market’s “decisive” role in allocating resources, changing tone from the “basic” role it has played since 1992.
In line with the programme of new era, the bureaucracy, party high up and the regulatory authorities nationwide stepped up cutting administrative red tape and minimized direct intervention in market activities. The government plays an active role where needed, helping the country withstand external shocks and creating a sound business environment. The “invisible hand” (free markets will determine an equilibrium in the supply and demand for goods without intervention of the regulatory authority) and the “visible hand” (regulatory function of the market mechanism by government intervention) have since generated more synergy in boosting growth. The core of China’s economic system reform is to handle the relationship between the government and the market appropriately.
In order to bring about changes in the operations of government business, it has considered three tasks necessary: (1) transforming state-owned enterprises; (2) promoting private enterprises; and (3) establishing the rule of law to govern the government-business relationship.
A wide range of reforms are needed in contemporary China. The tasks given highest priority and urgency are the reform of state-owned enterprises, the reform of the financial system, and the reform of administrative organizations. This report explores the current situation of these “Three Reforms,” and considers the future outlook.
The “Three Reforms” are more important than the many other reform programmes in China. This is because the state-owned enterprises, the financial system, and the administrative organizations are the three pillars of state administration; all these areas are closely interwoven; and successful reform in one of these areas brings progress in the others. If the “Three Reforms” are even marginally successful, there will be improvements in administrative efficiency and the international competitiveness of major state-owned enterprises, and China will make significant progress in its evolution into a modern superpower. However, the Communist Party will still need to establish an identity that will mould China’s new generation. That will depend on the extent to which it can reshape socialism and adapt it to suit contemporary needs. Unless it can make these changes, the benefits of the “Three Reforms” will be limited.
The reform of organizations has becomes an urgent priority. Bureaucratic organizations and systems are out of step with contemporary needs, while state-owned enterprises and banks have fallen far behind the world-class technology and management skills of foreign-owned and private enterprises. With the adaption of these reforms and open-door policy, China began to move toward a market economic system. The authorities established a number of areas for foreign investment, including the special economic zones, open coastal cities, the economic and technology development zones, the delta open zones, the peninsula open zones, the open border cities, and the high-tech industry development zones. The establishment of these zones provided the trigger for massive inflows of foreign investment, primarily from companies in Hong Kong and Taiwan. China has never opened up the country for investment from the disputed territory of Taiwan. It resulted in the emergence of huge numbers of entrepreneurs and venture businesses within mainland China.
A remarkable achievement has been made over the years and the reforms initiated by the government have been testified as successful and effective for guiding China’s economic upliftment. The policy works remarkably despite the challenges from de-globalization, protectionism, Covid-19 pandemic and others. The economy has grown close to 100 trillion yuan (about 15.27 trillion U.S. dollars) with a per capita GDP exceeding 10,000 U.S. dollars, contributing enormously to world economic growth.
One result was an influx of foreign companies with resources that made them powerful competitors in the international marketplace. The changes also triggered an upsurge of entrepreneurial activity within China. Private and individual enterprises staked their survival on business efforts that enhanced their competitiveness. Meanwhile, the state-owned enterprises were unable to modify their corporate cultures that had evolved in China’s controlled economy. In the face of this onslaught, many lost their advantage in such areas as manufacturing, production, domestic sales channels, and exports.
China has maintained a one-party socialist dictatorship on the political level, while moving to a market system on the economic level. Party and government agencies no longer function as monitors and arbiters of the market. Instead, these agencies have been given leeway to participate in business activities as direct players in the market.
According to the Center for Policy Dialogue (CPD)’s Bangladesh Business Environment Study 2020 report, noted that due to bureaucratic red-tapism, policymakers need to focus on the availability and quality of government services. There are lack of transparency, accountability, and weakness in public services. Bangladesh may learn from President Xi Jinping’s thought on Socialist Economy with Chinese Characteristics for a New Era to the change in relationship of the government business, may consider to transform state-owned enterprises; promote private enterprises; and establishment of the rule of law to govern the government-business relationship without much intervention in the market mechanism.
The writer is a legal economist and adviser, Bangladesh Competition Commission. He can be contacted at mssiddiqui2035@gmail.com
