China’s 40 Years of Economic Reform and Development: How the Miracle Was Created

By Xinli Zheng

This book aims to explain the secret to China’s rapid growth over the last 40 years from the viewpoint of a firsthand witness. Zheng Xinli was enrolled as a graduate student of economics 40 years ago, at a time when very few Chinese people could enroll in higher-level education, let alone graduate school. Since 1978, he has been engaged in the study of macroeconomic theory and economic policy. He has worked with the economic group of the Research Section of the Secretariat of the Central Committee of the Communist Party of China, the State Information Center, and the Policy Research Office of the State Planning Commission, as well as other organizations. His work serves to help Chinese leaders in making economic decisions. In 2013, Zheng Xinli appeared on the list of China’s Top Ten Economists. With the addition of several up-to-date articles, this book is mainly a condensed version of a 16-volume collection of essays selected from among the more-than-500 articles published by Zheng between 1981 and 2016. Addressing some of the major issues in China, namely, Reform and Development, Development Patterns, Macro Regulation, Balanced Urban and Rural Development, Innovation, and Industry Revitalization, the book, as Zheng himself puts it, visualizes the birth process of different policies and measures which have catered to the different stages of reform. As an insider, and also partly as a designer and architect, Zheng Xinli provides readers with a view of China’s reform from the top. 

• Language: English
• Publisher: Springer
• Release date: Oct 12, 2018
• ISBN: 9789811327278

Book preview

Part IReform and Opening Up

© The Commercial Press, Ltd. and Springer Nature Singapore Pte Ltd. 2018

Xinli ZhengChina’s 40 Years of Economic Reform and Developmenthttps://doi.org/10.1007/978-981-13-2727-8_1

1. The Mixed-Ownership Joint Stock System Is a Major Way to Realize Public Ownership

Xinli Zheng¹  

(1)

China Center for International Economic Exchanges, Beijing, China

Xinli Zheng

Email: [e-mail]

This article originally appeared in Party Building, no. 11, 2003.

The Decision on Issues concerning the improvement of the Socialist Market Economy (the Decision) adopted at the Third Plenary Session of the 16th CPC Central Committee stated that China will adapt to the trend of continuous development of the economic market, further enhance the vitality of the public sector of the economy, vigorously develop mixed ownership in the form of state-owned capital, collective capital, and non-public capital, realize investment diversification and make the shareholding system the primary platform for realizing public ownership. This important decision represents not only a breakthrough in our understanding of how we should realize public ownership, but also a step forward in the theories of socialist market economic reform. Conscientiously studying and understanding this decision is of vital importance for deepening reform in state-owned enterprises, improving the socialist market economic system, and further fulfilling the development potential of China’s economy.

1.1 The Proposal that Mixed Ownership Is the Most Vital Form of Public Ownership Continues and Further Develops the Related Theories of the Communist Party

The shareholding system is the result of the emergence and development of socialized mass production. As a form of capital organization and allocation, the shareholding system has played a major role in promoting the development of mechanized production and modern industry, and has progressively been improved through practice. Under a socialist market economy, adopting a shareholding system to develop socialized mass production is both inevitable and essential. Of course, the environment and conditions for developing such a system in China differ from those in countries with a more developed market economy. The main difference lies in the process of capital accumulation. The five plus decades since the founding of the People’s Republic of China is a period that has seen the accumulation of more than ten trillion yuan of fixed assets consisting of more than seven trillion yuan of operational assets. These assets are the common wealth of generations of Chinese people accumulated as a result of hard work, and are where the common benefit of all Chinese people lies. Apart from accumulated assets, there are also publicly owned assets. The sum of these assets must be carefully protected in promoting their appreciation, and under no circumstances can they be subject to any form of embezzlement or erosion. Mixed shareholdings for state-owned capital, collective capital, and non-public capital naturally creates mixed ownership, which is an important characteristic of the ownership structure of China’s shareholding economy. In terms of operational mechanism, China will adopt a form of shareholding system in common with that of developed market economies, in order to see that the social-economic mechanism stimulates productivity. Since beginning of reform, we have actively explored the system of mixed ownership and made progress through innovations in theory and practice. The conclusion of the Decision adopted by the 16th CPC Central Committee’s Third Plenary Session to develop mixed ownership represents a new development on the basis of the CPC’s relevant theories. As early as a decade ago, the Decision of the CPC Central Committee on Certain Issues concerning the Establishment of a Socialist Market Economy stated that through the circulation and reorganization of ownership, the number of mixed ownership economic entities will increase, thus giving rise to a new structure of asset ownership. The CPC’s 15th National Congress held that share ownership is not exclusively applicable to capitalism. Socialism could also adopt this system because it would be public in nature, whereby assets would be owned and shared by the state and the public, respectively. The 15th CPC Central Committee’s Fourth Plenary Session decided that large and medium-sized state-owned enterprises, especially preponderant ones, would reorganize themselves into shareholding enterprises under optimum conditions, thus developing mixed ownership through listings on the stock market according to related regulations, joint ventures, and mixed shareholdings. The CCP’s 16th National Congress then required that, with the exception of those enterprises that must be owned by the state, enterprises shall complement the shareholding system by developing mixed ownership. The 16th CPC Central Committee’s Third Plenary Session has now further confirmed that actively developing mixed ownership and instituting the shareholding system is the primary way to realize public ownership. This is a new breakthrough in ownership theories, reflecting the party’s deeper understanding of how to achieve public ownership.

Making mixed ownership the primary path for realizing public ownership requires various investment resources in order to transform enterprises into shareholding companies. Within an enterprise, all varieties of ownership, including state-owned shares, collective shares, individual shares, foreign shares, and corporate shares, are equal, with benefits varying in proportion to the ownership of stock rights. All forms of shareholding for state-owned capital, including dominant or simple participatory forms, can be considered to be methods for realizing public ownership. Only on the basis of ownership diversification can a board of shareholders be established to create a body with the highest authority within an enterprise. In a policy-making organization, the board of directors should also come from the board of shareholders. And the managers, appointed by the board of directors, should serve as the executive organizers of the enterprise. Only by ensuring checks and balances between these three entities—the board of shareholders, board of directors and the manager—can an appropriate corporate governance structure be formed and a modern corporate system be truly established. If all of our state-owned enterprises were wholly state-owned or controlled by the state as a dominant shareholder, then there would be no necessity for maintaining the board of shareholders and board of directors. Such a situation would make it virtually impossible to form a corporate governance structure with appropriate checks and balances. Without these three entities, the modern enterprise system would nothing more than empty words. The Decision requires that mixed ownership be made the primary channel for realizing public ownership, and, in doing so, paves the way for the establishment of a modern corporate system. Thus, the Decision essentially guides enterprises along the path of establishing a modern corporate