ISSN 2330-717X

Different Models Of Economic Leadership In China – Analysis

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By He Jun*

Over the past 40-plus years of reform and opening-up, what has been China’s greatest success in economic reform? There is no doubt that the implementation of the socialist market economy in China.

Historically, the market economy in China has gone through a process of intense ideological struggle and conceptual change. As early as in 1979, Deng Xiaoping has pointed out that, “it is wrong to maintain that a market economy exists only in capitalist society and that there is only ‘capitalist’ market economy. Why can’t we develop a market economy under socialism? Developing a market economy does not mean practicing capitalism. While maintaining a planned economy as the mainstay of our economic system, we are also introducing a market economy. But it is a socialist market economy.” In the spring of 1992, Deng Xiaoping further pointed out in his southern talk: “The proportion of planning and that of market forces is not the essential difference between socialism and capitalism. A planned economy is not equivalent to socialism, because there is planning under capitalism too; a market economy is not necessarily capitalism, because there are markets under socialism too. Planning and market forces are both means of controlling economic activities. In foreign countries, it carries the characteristics of capitalism and in China, socialism.”

Deng Xiaoping’s thoughts on the socialist market economy have fundamentally lifted the ideological constraints that set socialism against the market economy, which greatly promoted China’s economic revamping and became the basic theoretical basis for the formulation of the reform direction and objectives. The socialist market economy combines the market economy with the basic socialist system, emphasizing that the market plays a decisive role in the allocation of resources under the state macro-control. The theory of the socialist market economy is a highly innovative component of Deng Xiaoping’s theoretical system. On the basis of this theory, China has set the goal of establishing market economy and embarked on the unprecedented great practice of promoting China’s reform and opening up.

The fundamental of the socialist market economy itself is market economy. Against the backdrop of the unpredictable international situation, the increasingly fierce geopolitical issues as well as the increasingly domestic economic problems in China, we have revisited this concept to have a better understanding of China’s economic reform theory.

Based on the historical experience, ANBOUND’s scholars believe that the rise and fall of China’s economy have been closely linked to two models of economic leadership. The first model is the regulation model under the market economy, whose essence is the socialist market economy with Chinese characteristics. In our opinion, this model is a market model under macro-control. Under this model, the market economy and market competition are the main body of the economy, which jointly determines the quality of economic development as well as the quality of enterprise development. In addition, under this model, the government can also maintain stable economic growth through its macroeconomic policies. Different from a perfect free market economy, macro-control should also take into account the pertinence of policies as well as the plans and priorities of regulation, which are the important contents and direction of regulation. Generally speaking, China has been following this pattern for decades since reform and opening up. We believe that when it comes to the “Chinese experience”, this economic leadership model based on the market and supplemented by regulation deserved a great deal of credit.

Another model of economic leadership is the task economy model under unified leadership. The main feature of this model is to complete one development task after another. In the face of complex situations and challenges, in order to effectively solve some short-term problems, the priority must be given to the completion of those urgent, focused tasks. These tasks are mainly derived from the requirements of the superior, and the important things identified by the superior will become the important work to be completed within a period of time in the system. The economic work under the task model highlights specific tasks. However, whether the relationship between each task and the market system reflects the systematization of the macro-economy and whether it is compatible with the characteristics of equality, rule of law, competition and openness required by the market economy is not a priority. Sometimes these issues are often put aside in order to complete the task.

Objectively speaking, the task model has been strengthened in recent years and has become an important model of leading economic work. In much of the work of the current domestic economic development such as the supply-side structural reforms, capacity reduction, de-stocking, deleveraging, cost reduction, improving underdeveloped areas, mass entrepreneurship and innovation, the development of Yangtze River Delta Economic Belt, the integrated development of the Yangtze River Delta region, Xiong’an New Area, the Greater Bay Area, poverty alleviation, prevention of systemic financial risk, strict control of environmental pollution and so on, are all key tasks under the task model. From the perspective of a single task, the task model has a good intention and clear policy objective, Whereas, the results of the task model with multiple tasks are uncertain as to whether multiple tasks lead to systematic improvements. 

It should be pointed out that the transition from the market regulation model to the task model is an important transformation of China’s economic leadership model and objective reality. Is the shift in economic leadership model good or bad? This requires continued observation, and no conclusion can be reached at this time. However, from the perspective of policy efficiency, since the task model pays more attention to the achievement of each task and ignores the realization of system goals, it consumes more resources, time and energy than the regulation model.

Some market participants worry that the change in China’s economic leadership model will lead to the resurgence of the planned economy. We believe that China will not return to the planned economy. First of all, the Chinese reform’s practices, theories and concepts are inconsistent with that of the planned economy. Return to the planned economy is actually a retrogression of its reform. Second, from the perspective of resources and organizational structure, there is no possibility to return to the planned economy. The planned economy required the state to provide all kinds of social services, ranging from labor insurance to health care and even from birth to death. Without sufficient funds and a mature system, it is simply impossible for the state to cover all the above-mentioned social services. Therefore, it is impossible for China to return to the planned economy system.

So, what will happen when the state shifts from a regulation model to a task model? Objectively speaking, the results remain unknown. In fact, the regulation model is also a kind of “mixed” model and not a perfect market economic model. As long as it goes a little too far, it will become a task model. In our view, this approach is now being adopted, perhaps because of the “distortion” of the model caused by the lack of options and the excessive internal and external pressures. From the perspective of an independent think tank, this “distortion” should be faced squarely, and it could be important to China’s future economic development model. We believe that under the leadership of the party, there is still enough room for the operation of the market economy system and the market-oriented reform. The party’s leadership will not replace entrepreneurs, market mechanisms nor consumers. Economic work has its own rules. It is still necessary to act in accordance with economic rules in order to achieve good results.

Final analysis conclusion:

The major task for China in the future is to develop the economy. Doing a good job of the economy has an important relationship with the economic leadership model. If the economy fails, any task will be superficial and meaningless. China has already had successful experiences in developing a socialist market economy, and we believe that its future development will not deviate from this course.

*He Jun is a master in the Institute for the History of Natural Sciences, Chinese Academy of Sciences, majoring in intellectual history of science and is a senior researcher at Anbound Consulting, an independent think tank with headquarters in Beijing. Established in 1993, Anbound specializes in public policy research

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Anbound

Anbound Consulting (Anbound) is an independent Think Tank with the headquarter based in Beijing. Established in 1993, Anbound specializes in public policy research, and enjoys a professional reputation in the areas of strategic forecasting, policy solutions and risk analysis. Anbound's research findings are widely recognized and create a deep interest within public media, academics and experts who are also providing consulting service to the State Council of China.

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