t a political bureau meeting chaired by the General Secretary of the Communist Party of China (CPC) Central Committee Xi Jinping on June 27, the Party leadership pledged to deepen reform to modernize China’s system and governance capacity and build a “high-standard socialist market economy” by 2035. In the run-up to the third plenary session of the 20th CPC Central Committee held between July 15 and 18, the meeting’s tone indicates that the Party leadership is ready to conduct a new round of economic reform.
China’s reform to build a market economy can be traced back to 1984, when the Party proposed a “planned market economy” scheme in the third plenum of the 12th CPC Central Committee. At the third plenary session of the 18th CPC Central Committee in 2013, the Party pledged to work to see that “the market plays the decisive role in resource allocation and that the government better plays its role.” More recently, in the report to the 20th National Congress of the CPC held in 2022, the Party announced its goal to build a “high-standard socialist market economy.”
After more than 40 years of reform and opening-up, China has experienced rapid economic growth. Now the country faces a new set of challenges, including insufficient demand, increasing urbanization and a major demographic shift characterized by a declining birth rate and a rapidly aging population.
In the meantime, the ongoing digital and AI revolution is set to reshape the industrial and technology systems of the world, while the international environment for China has become increasingly volatile and unpredictable. All of these challenges require China to make efforts to upgrade its economic system.
First, China needs to establish a highly integrated and powerful modern economic system with a solid public and private sector. While reform of State-owned enterprises is expected to enhance their competitiveness, the development of the private sector should be promoted through a better business environment and better protection of property rights and interests.
Second, there should be a high-standard legal and regulatory system with minimum direct government intervention in the market.
Third, the government needs to further advance the establishment of a national unified single market by eliminating regional business barriers, standardizing market regulations across the country, optimizing infrastructure and promoting the free flow of goods, capital, human resources and information.
Fourth, China should establish an efficient macroeconomic governance system that can coordinate long-term and short-term goals and integrate fiscal, monetary, industrial, technological and social policies.
Finally, China needs to continue promoting an open global market. Currently, China has over 930 million urban residents and a middle class of more than 400 million people, making it one of the most important and attractive markets in the world.
China should deepen its opening-up policy to create an open institutional environment and reinforce domestic and international circulations. This also calls for a competitive market.
A high-standard market economy that is more open and integrated will not only allow China to tackle the various internal and external challenges but also boost the development and well-being of the global economy.
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