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China's Socialist Market Economic Reform and its Strong Theoretical Consciousness and Confidence

(People's Daily Online)

13:40, October 17, 2012

In June 1992, Comrade Jiang Zemin explicitly put forward the concept of "socialist market economic system" for the first time on the basis of Comrade Deng Xiaoping’s southern talk. The Communist Party of China clearly proclaimed establishing the socialist market economic system as the goal of its economic reform at its fourteenth conference. The great and unprecedented initiative, namely the concept that combines socialism with market economy, marks a major breakthrough in the development economic theory of socialism. After 20 years, it is necessary for us to review the actual outcomes and the more profound connotation of China's socialist market economy.

The remarkable success as gained from China's practice of socialist market economic practice in the past 20 years proved the economic system a great innovation of contemporary human. Seen from economic aggregate, China's catch-up coefficient relative to US (US for 100%) has increased from 36.6% in 1990 to 53.8% in 2000, and again to 112.9% in 2010, if calculated by the Purchasing Power Parity (PPP) method of Angus Maddison, has increased from 6.2% in 1990 to 12.1% in 2000 and again to 39.6% in 2010 if calculated by the Current Exchange Rate (CER) method of the World Bank (See Table 1). And seen from the Human Development Index (HDI)-including the health index, education index and GDP per capita index-China’s catch-up coefficient relative to US has increased from 54% in 1990 to 74% in 2010, according to date provided by the United Nations Development Programme (UNDP). More quantitative indicators can be listed for comparison to show China's success in catching up with the US that results from the fundamental reason underlying in the great superiority in China's socialist market economic system. On the contrary, as to either Russia or other countries of Eastern Europe which adopted capitalist market economy, there has been a decrease in these catch-up indices by varying degrees.

In addition, the 20 years of theoretical innovation also reflected a high degree of theoretical consciousness and confidence of the Communist Party of China. The 20 years can be divided into two stages. The first stage started with the Decision of the CPC Central Committee on Issues Concerning the Establishment of the Socialist Market Economy adopted at the Third Plenary Session of the 14th Central Committee of the CPC in 1993. The Decision, with 50 items in total, marked the beginning of the "Establishment" phase and provided direct guidance to the first 10-year reform of the economic system. The second stage started with the Decision of the CPC Central Committee on Issues Concerning the Improvement of the Socialist Market Economy adopted at the Third Plenary Session of the 16th Central Committee of the CPC in 2003. The Decision, with 42 items in total, marked the beginning of the "Improvement" phase and provided direct guidance to the second 10-year reform of the economic system. The socialist market economy is based on dominant public ownership with co-development of diverse forms of ownership economy; it is a market economy based on distribution according to the work as the chief distribution mode with co-existence of a variety of distribution modes; it is a market economy making full use of both means of regulation and market; it is a market economy actively involved in economic globalization insisting on mutual benefit and win-win opening-up policy. The high degree of theoretical consciousness and confidence is the fundamental reason for the people of China in making the China Miracle under the guidance of the CCP. "Theoretical consciousness" means "consciousness of necessity and negation of the spontaneity". "Theoretical confidence" means persistence and insistence on theoretical innovation. Compared with other countries, the greatest feature of China in building a socialist market economy system is "Socialism". China has been carefully studying the historical lessons of the “Great Divergence” period of capitalism, and will not repeat or copy their pathway to avoid huge domestic and international costs. China's theoretical consciousness and confidence is distinguished by being able to consciously and independently innovate in the socialist market economy to solve the worldwide problem.

As Comrade Deng Xiaoping pointed out, "The essence of socialism is to liberate and develop productivity, to eliminate exploitation and polarization, and ultimately achieve common prosperity." The ultimate goal of the reform of socialist market economic system also points to "common prosperity". Therefore China should continue to shape its path for structural reform by this goal. Two aspects of China's economic reform are thus highlighted. The first is to further enhance the efficiency of the market by introducing market mechanisms, and the second is to provide better public service by reforming the means of planned economy, improving the capacity of macro-control and facilitating transformation of government functions since the capacity of public service provision is the primary ability in building a society of "common prosperity".

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