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REFORM and opening-up was established as a ba- sic national policy of China at the Third Plenary Session of the 11th CPC Central Committee held in 1978. Since then， China has been transforming its economic system from a planned economy to a market economy， giving the market a fundamental role in resource allocation within macroeconomic regulation. Meanwhile， the country has been opening up to foreign investment， advanced technology and best world practices. Today， China’s vigorous growth has secured its place as the world’s second largest economy and made it a magnet for international attention.
In the course of reform， new policies and programs are usually test-driven to gauge their viability and effectiveness. If proved successful at the pilot stage， they are then extended to a larger scale. Otherwise new approaches are explored. As reform is simultaneously played out on multiple fronts， twists and turns are unavoidable.
China is now entering a vital stage of economic transformation and industrial upgrading. The Third Plenary Session of the 18th CPC Central Committee in November is expected to start a fresh round of reform and inject new impetus into China’s growth.
Problems and Challenges
The domestic and international environment for China’s development has undergone profound changes over the past years. Factors hindering sound growth are increasing and becoming more complicated； the existing reform model and philosophy can no longer maintain sustainable and rapid growth. In a word， China’s economy and society have stepped into a new stage， and reform has reached uncharted waters from whose depths new problems and challenges are arising. When reform and opening-up began， the investment-led growth pattern sustained rapid economic development over a considerable period of time. Export-oriented policies made it possible for exports to compensate for insufficient domestic demand. However， the very same policies have also created problems， including high foreign exchange reserves， increasing pressure on RMB appreciation， excessive liquidity and an asset bubble resulting from soaring funds outstanding for foreign exchange.
The international financial crisis has caused slumps in the world’s major economies that have forced China to adjust its economic policies， in light of new market conditions， and reduce its over-dependence on export. This adjustment entails larger domestic demand， more job opportunities and higher living standards. As a result， it is essential for China to transform the extensive growth model driven by resource input and foreign demand into an intensive one fueled by advanced technology and improved efficiency. To achieve this transformation， a sound institutional environment is needed.
After 30 years’ reform， it has become an irreversible trend that the planned economy will eventually be replaced by a market economy， where rule of law regulates the behavior of all participants with the paramount goal of fairness and justice. In 2011， China announced its establishment of a socialist system of laws with Chinese characteristics that provide a legal guarantee for the orderly development of a market economy. However， due to long dominance of the planned economy in China， administrative orders and arbitrary decisions by individual officials still exert residual influence every now and then， hindering the implementation of rule of law.
The Way Out
It is normal for a reform to encounter difficulties. The key issue here is how to overcome such obstacles. As a large， developing country with a 1.3 billion-strong population， China must seek development independently through innovation and reform. Following the beaten track will lead China nowhere. In his report at the 18th CPC National Congress then General Secretary Hu Jintao pointed out that deepening reform is crucial to accelerating the change of China’s growth model. The core issue of economic reform is to properly address the relationship between the government and market， government and society， top-level design and people’s initiatives， incremental reform and stock optimization， innovation and administration by law， as well as relations among reform， development and stability， in order to promote smooth and effective reform. The government should actively transform its function on the basis of respecting market rules so as to play a better role in the market economy.
More specifically， the government should streamline administration and delegate power to lower levels， act by law and exert no random intervention in the market. At the micro level， the government should widen market access and introduce competition mechanisms to prevent and break monopoly in order to create a healthy， competitive market. It should not be preoccupied with excessively lengthy pre-business permission examinations and investigations but instead shift its priority to supervising and regulating the competition， price， product quality， waste discharge and other links in the operation of the market. Only then will the market’s vitality and enterprises’creativity be promoted to the optimum extent and drawbacks avoided. At the macro level， the government should improve the fiscal， taxation and financial systems to ensure stability and security of the national economy. It should raise economic efficiency and boost GDP growth. But most important is ensuring that all fiscal funds are generated rationally and used legally and that social wealth is distributed fairly. Thus， a sound mar- ket environment can be established for businesses， and the government’s behavior can be audited.
Based on the above analysis， reform should be advanced at both micro and macro levels， with market mechanism playing a larger role and the government bettering its regulation and supervision. More emphasis should be given to social equality besides economic efficiency so as to ensure sound and orderly development of China’s economy.
Since the 12th National People’s Congress last March， the new government has made bold moves to simplify administrative procedures and delegate power to lower levels – a promising start.
Guarantee of Reform
Deepening reform means further improving the economic system and regulating government practices to make sure the market generates maximum profit with minimum government intervention. The key issue is how to better control and exercise power. Past experiences show that the best answer lies in the rule of law based on democracy， which constitutes a precondition for efficient operation of modern market economy.
As a vital component of modern civilization and political culture， rule of law is the only way of checking power in a systematic manner and protecting the rights of individual players. Therefore， the state should attach due importance to the value and efficacy of rule of law in deepening reform and maintaining reform achievements. Educational programs should be introduced to promote the awareness of rule of law in officials at various levels， instilling the consciousness that the law has supreme authority and must be observed by all citizens and organizations.
The socialist legal system should be improved， explicitly defining and protecting basic rights of market players while clearly demarcating the government’s power to prevent it from infringing private rights. Efforts should also be made to improve the judicial system in order to achieve independent adjudication and honest enforcement of law – the basic requirements of rule of law. A sound legal system can stave off such problems as judicial corruption， administrative intervention and “localization” of judicial power and so safeguard the market’s efficiency and legal justice.
We should faithfully follow the Constitution to protect the basic rights of citizens， improve the electoral system and gradually broaden democracy. Comprehensive reform requires implementation of the Constitution， rule of law and a limited but efficient government. This is the only path to promoting reform and safeguarding its fruits.
In the course of reform， new policies and programs are usually test-driven to gauge their viability and effectiveness. If proved successful at the pilot stage， they are then extended to a larger scale. Otherwise new approaches are explored. As reform is simultaneously played out on multiple fronts， twists and turns are unavoidable.
China is now entering a vital stage of economic transformation and industrial upgrading. The Third Plenary Session of the 18th CPC Central Committee in November is expected to start a fresh round of reform and inject new impetus into China’s growth.
Problems and Challenges
The domestic and international environment for China’s development has undergone profound changes over the past years. Factors hindering sound growth are increasing and becoming more complicated； the existing reform model and philosophy can no longer maintain sustainable and rapid growth. In a word， China’s economy and society have stepped into a new stage， and reform has reached uncharted waters from whose depths new problems and challenges are arising. When reform and opening-up began， the investment-led growth pattern sustained rapid economic development over a considerable period of time. Export-oriented policies made it possible for exports to compensate for insufficient domestic demand. However， the very same policies have also created problems， including high foreign exchange reserves， increasing pressure on RMB appreciation， excessive liquidity and an asset bubble resulting from soaring funds outstanding for foreign exchange.
The international financial crisis has caused slumps in the world’s major economies that have forced China to adjust its economic policies， in light of new market conditions， and reduce its over-dependence on export. This adjustment entails larger domestic demand， more job opportunities and higher living standards. As a result， it is essential for China to transform the extensive growth model driven by resource input and foreign demand into an intensive one fueled by advanced technology and improved efficiency. To achieve this transformation， a sound institutional environment is needed.
After 30 years’ reform， it has become an irreversible trend that the planned economy will eventually be replaced by a market economy， where rule of law regulates the behavior of all participants with the paramount goal of fairness and justice. In 2011， China announced its establishment of a socialist system of laws with Chinese characteristics that provide a legal guarantee for the orderly development of a market economy. However， due to long dominance of the planned economy in China， administrative orders and arbitrary decisions by individual officials still exert residual influence every now and then， hindering the implementation of rule of law.
The Way Out
It is normal for a reform to encounter difficulties. The key issue here is how to overcome such obstacles. As a large， developing country with a 1.3 billion-strong population， China must seek development independently through innovation and reform. Following the beaten track will lead China nowhere. In his report at the 18th CPC National Congress then General Secretary Hu Jintao pointed out that deepening reform is crucial to accelerating the change of China’s growth model. The core issue of economic reform is to properly address the relationship between the government and market， government and society， top-level design and people’s initiatives， incremental reform and stock optimization， innovation and administration by law， as well as relations among reform， development and stability， in order to promote smooth and effective reform. The government should actively transform its function on the basis of respecting market rules so as to play a better role in the market economy.
More specifically， the government should streamline administration and delegate power to lower levels， act by law and exert no random intervention in the market. At the micro level， the government should widen market access and introduce competition mechanisms to prevent and break monopoly in order to create a healthy， competitive market. It should not be preoccupied with excessively lengthy pre-business permission examinations and investigations but instead shift its priority to supervising and regulating the competition， price， product quality， waste discharge and other links in the operation of the market. Only then will the market’s vitality and enterprises’creativity be promoted to the optimum extent and drawbacks avoided. At the macro level， the government should improve the fiscal， taxation and financial systems to ensure stability and security of the national economy. It should raise economic efficiency and boost GDP growth. But most important is ensuring that all fiscal funds are generated rationally and used legally and that social wealth is distributed fairly. Thus， a sound mar- ket environment can be established for businesses， and the government’s behavior can be audited.
Based on the above analysis， reform should be advanced at both micro and macro levels， with market mechanism playing a larger role and the government bettering its regulation and supervision. More emphasis should be given to social equality besides economic efficiency so as to ensure sound and orderly development of China’s economy.
Since the 12th National People’s Congress last March， the new government has made bold moves to simplify administrative procedures and delegate power to lower levels – a promising start.
Guarantee of Reform
Deepening reform means further improving the economic system and regulating government practices to make sure the market generates maximum profit with minimum government intervention. The key issue is how to better control and exercise power. Past experiences show that the best answer lies in the rule of law based on democracy， which constitutes a precondition for efficient operation of modern market economy.
As a vital component of modern civilization and political culture， rule of law is the only way of checking power in a systematic manner and protecting the rights of individual players. Therefore， the state should attach due importance to the value and efficacy of rule of law in deepening reform and maintaining reform achievements. Educational programs should be introduced to promote the awareness of rule of law in officials at various levels， instilling the consciousness that the law has supreme authority and must be observed by all citizens and organizations.
The socialist legal system should be improved， explicitly defining and protecting basic rights of market players while clearly demarcating the government’s power to prevent it from infringing private rights. Efforts should also be made to improve the judicial system in order to achieve independent adjudication and honest enforcement of law – the basic requirements of rule of law. A sound legal system can stave off such problems as judicial corruption， administrative intervention and “localization” of judicial power and so safeguard the market’s efficiency and legal justice.
We should faithfully follow the Constitution to protect the basic rights of citizens， improve the electoral system and gradually broaden democracy. Comprehensive reform requires implementation of the Constitution， rule of law and a limited but efficient government. This is the only path to promoting reform and safeguarding its fruits.