The Underlying Principles of China's Midterm Economic Reform, 1988-1995

Abstract

Abstract What guiding principle should govern China's economic structural reform over the next eight years? This question must be answered before we can determine a plan for reform. Viewed from the perspective of the current national economy, the developmental trends, and the practice of economic structural reform, the following principles must be clarified before we can strengthen the reform movement: 1. An organic unity between controlling the economic environment and pushing structural reform forward must be firmly maintained. In the past nine years, China's national economy has developed steadily, economic strength has markedly increased, and the general trend is good. However, problems still exist. Structural contradictions in the economy have not been resolved; the basic industries lag seriously behind; processing industries, especially the more common ones, are developing too quickly; there are serious contradictions in the areas of energy, raw materials, transportation, and communications; the structure of the processing industry is not rational; consumption demand has increased too quickly; the scale of fixed investment is too large; the tendency for general demand to exceed supply is very prominent; economic efficiency, although improving, is still far from ideal; and the economy is still unstable, which is reflected in the enormous rise of commodity prices. This economic environment is a critical factor restricting the progress of structural reform. If we do not consider these factors and quickly decide on a realistic reform plan, economic reform will be frustrated. We must recognize, however, that improving the economic environment depends not only on correcting developmental policies but also on deepening reform. Unstable factors in economic life, viewed from the perspective of the management structure, are primarily due to the friction caused by the coexistence of the new and old structures. If we slow down in our reform, then the friction between the new and old structures will only increase and the economic environment deteriorate. It can be said that advancing reform under conditions in which the economic environment is in turmoil is the only choice that exists. Thus, reform measures must proceed despite the instability of the environment.