On the Two Main Lines of China’s Economic Reform

Abstract

In the autumn of 1987, the State Commission for Restructuring the Economic System organized eight units including the Research Group of the Chinese Academy of Social Sciences (CASS) to submit reports providing an outline economic reform plan for China for 1988-1995. The CASS Research Group recommended that enterprise reform and pricing and ownership reforms and their operational mechanisms should be carried out alongside each other in a two main lines approach. China’s deepening economic reforms have adhered to these two main lines throughout the last forty years. The first main line includes the revival and development of the individual economy, followed by the private economy, the introduction and utilization of foreign capital, and the reform of public ownership, including the state-owned system. In 1997, the 15th National Congress of the Party proposed the establishment of a socialist basic economic system with public ownership as the main body and simultaneous development of multiple forms of ownership. “Public ownership as the main body” is reflected in the dominance of public assets among total social assets and the fact that the state-owned economy controls the lifeline of the national economy and plays a leading role in economic development. The dominant role of public ownership has not changed in the forty years of reform and opening up. The second main line covers price reform, building a modern market system, reforming macro-control mechanisms and perfecting the macro-control and regulation system. From 1979 to 2017, our GDP grew at an average annual rate of 9.5 percent, while the CPI grew at an average annual rate of less than 5 percent: a perfect match. The two main line approach is in line with the provisions of economic reform in the new era proposed in the report at the 19th National Party Congress, which focuses on improving the property rights system and market-oriented factor allocation. There is no distinction of primary or secondary in the role of the two main lines; both are equally important. They are united in the establishment and improvement of the socialist market economic system.