The historical progress and basic trend of

reform in China’s economic institutions

Hengshan Fan

(May, 2006)

Reform and opening up policy is a major and crucial choice that is shaping the
destiny of contemporary China. With this policy, China has taken on a new look and
made continued progress in economic and social development. We must continue to
unsewingly deepen the reform and open China wider to the outside world if we want
to fulfill the development task in the new stage and further advance socialist program
with Chinese characteristics.

The first section: The progress, achievement and

experience of China’s economic system reform.

To some extent, China was forced to try the new way of developing socialist
market system under the objective the pubilic sector with market sector of economy.
China’s reform not only brings great changes for China, but creats a new way of
developing human society.

First, The process system of the reform of Chinese

economies

The reform of Chinese economies started in 1978, which has a glorious history
of 28 years since then. The 28-year reform could be divided into four stages in
general.
 The first stage (1978-1984) the beginning period and partial experiment stage.
Marked by holding the Third Plenary Session of the CPC, the prologue of Chinese
reform was pulled open. Rural economic system reformed first, the household
contract responsibility system, the dual combination of Unification at the operating
system Cen instead of “all three levels, team-based” people’s commune system, had
been prevail all around the country. This reformation utimately stimulated the
peasants’ initiatives and greatly promoted the development of agriculture and rural
economy.
Simultaneously, the reform experiments of other aspects also have started. The
government added the experiment units to extend the autonomy of enterprises,
implemented the two-step of replacement of profit delivery by taxes, advanced the
reform of fiscal system about partition of income and expenditure as well as
classification and assignment of duties, abolished the monopoly for purchase and
marketing system of agricultural and sideline products, rejuvenated and developed the
falling collective economy and the rare individual economy, and established four
special economic zones ,including Shenzhen, Zhuhai, Shantou, Xiamen.
The second stage: It is a stage of exploratory reform from all dimensions (1984
to 1992). The focus of the reform on the second stage was transferred from rural areas
to cities. In the October 1984, the CPC went through The Decision of the Economic
System in the Third Plenary Session of Twelve. It definite the socialism economy is "a
commodity economy, which is based on public ownership and precise plan. It also put
forward the objectives of the reform, which were the establishment of a vigorous
socialist economic structure with Chinese characteristics. In the October, 1987, we
further developed the theories, the "socialist planned commodity economy system, it
should be planned and market system of internal unity," and "new economic operating
mechanism for the whole country are regulating the market, market-led enterprise
"mechanism, at The Thirteenth National Congress of the CPC. Theoretically, we
confirmed the role of the market mechanism's central position, in order to further
deepen the reforms specified in the direction and to lay the theoretical basis.
 In the last October, the Fifth Plenary Session of the Sixteenth Central Committee
of the Communist Party of China passed the the development of the national economy
and social development of the tenth Five-Year Plan's recommendations. The National
Economic and Social Development Five-Year Plan outline , gave a comprehensive
explanation and the overall deployment to the present five-year economic the
economic system and the overall deployment ， that formulated according to
Proposal , discussed and passed by the Fourth Session of the Tenth National People's
Congress. The central requirements that to accelerate reform with greater
determination, so that the major system reform involved in the development of overall
economic and social, could achieve the breakthrough progress. Want to transform
government functions and deepening of enterprises, taxation, finance reform, focusing
on, speeding up the socialist market economic system, form in favor of changing the
mode of economic growth, and promote comprehensive, coordinated and sustainable
development of institutional mechanisms. Adapt to the new situation demands, the
next step should be to actively promote the following reform.

In the last October, the Fifth Plenary Session of the Sixteenth Central Committee
of the Communist Party of China passed the the development of the national economy
and social development of the tenth Five-Year Plan's recommendations. The National
Economic and Social Development Five-Year Plan outline , gave a comprehensive
explanation and the overall deployment to the present five-year economic the
economic system and the overall deployment ， that formulated according to
Proposal , discussed and passed by the Fourth Session of the Tenth National People's
Congress. The central requirements that to accelerate reform with greater
determination, so that the major system reform involved in the development of overall
economic and social, could achieve the breakthrough progress. Want to transform
government functions and deepening of enterprises, taxation, finance reform, focusing
on, speeding up the socialist market economic system, form in favor of changing the
mode of economic growth, and promote comprehensive, coordinated and sustainable
development of institutional mechanisms. Adapt to the new situation demands, the
next step should be to actively promote the following reform.

The reform practice takes the stimulation of the state-owned business as the
center link. Such practice focuses on the exploration of establishing an enterprise
system, which operates independently, assumes self-financing and has rich vigor and
efficiency. By implementing a contracting system, a rental system and other measures,
the reform practice will further the expands of the enterprise autonomy. We should
also take the reform of management system such as factory manager responsibility
system, linking ergonomics and the labor contract system which concern the
enterprise’s leadership, assignment, employing labor reforms, etc, as a way to enhance
the enterprise’s intrinsic vigor.

We should focus on stimulating the enterprise, establishing the market system,

which is unity, opened and operated, reforming the macroscopic indirect supervision
system, which is mainly adjusted, be economic means. We should adopt such methods
as combining "adjust, let, manage" to straighten price ratio relations, reforming
business management system, developing the non-state-operated circulated
enterprises, diminishing the prescriptive plans, reforming the banking organization
system, implementing a variety of financial concluded system, changing a single tax
system to a complex tax system, implementing on a separate part of town, reducing
management layers and expanding local autonomy. At the same time, the reform of
such fields as politics, technology, education and culture has started to adjust to the
economic system restructure.

The opening to the outside world also stepped out an important step. The opened
14 port cities along the coast, which established economic development zones at the
Yangtse Delta, the Zhujiang Delta, southeast of Fijian province, and the district
around the Bohai Sea .The government authorizes Hainan to construct the province
and to become the economic development zone which carries on a beneficial attempt
to the usage of overseas funds, technology, managerial experience in developing the
Chinese economy.
 The third stage: the stage of preliminarily establishing the socialist market
economic system (from 1992 to 2000). Taking the reform goal of establishing a
socialist market economy which was decided on the China’s Fourteenth National
Congress as the symbol, the China's economic structural reform enters a new stage, as
the system innovations were the primary coverage. Some decisions about several
problems during the establishment of socialist market economy, which was passed in
the Third Session of the China’s Fourteenth National Congress, pointed out that “to
establish socialist market economic system means that it must make the market under
the national macroeconomic regulation and control play a foundational role in the
resources deployment”, and proposed the basic frame of the socialist market
economic system. In 1997, the Chinese Fifteenth National Congress established basic
economic system to keep public ownership in a dominant position and have diverse
forms of ownership develop side by side, realizing a series of new breakthroughs on
the ideology and theory, impelling the reform targeted at establishing a socialist
market economic system to develop further in depth.

The reform of this stage still took the State-owned business as the center link,
the systems’ innovations obviously enlarged. According to the direction of
establishing modern enterprise system, the central government and the local chose
certain representative state-owned enterprises to carry on the establishment of
modernization system for trial, one batch of state-owned large and middle scale
enterprises were re-organized into the state-owned sole ownership company, the
limited liability company or the joint stock system limited company; many nationwide
profession corporation was changed into the holding company, and developed one
batch of large enterprise groups which were inter-industry and inter-regional; the
numerous small state-owned businesses, through the reorganization, the combination,
the annexation, leasing and other forms such as contracted management and stock
cooperation system, carried on the reform. The government advanced positively and
encouraged to merger, standardize bankruptcy, lay off and reassign redundant
workers, streamline for higher efficiency and implement reemployment, promoting
the formation of the mechanism of selection whereby superior enterprises will prosper
and inferior ones be eliminated.Adjust the distributions of the state-owned economy
in terms of the strategy, which makes the state-owned capitals concentrate on the
essential industries and vital fields, which relate to the lifeblood of national economy.
In order to match the need of state-owned enterprises’ revolution and state-owned
economy’s distribution of structure changing, various kinds of attempts on
supervising systems of state-owned assets have been successful conducted.

Revolutions in other fields are still put forward. Revolutions concerning systems
of finance, tax, banking, plan, investment and money aggregation have been deepened
further. The frame of new financial system paying attention to tax-sharing system is
established and the turnover tax system which depends on value added tax is built;
intensify the central bank’s functions of controlling monetary supply and finance
supervising begin to separate political banking from commercial banking; set up the
simplex, controlled, fluctuating exchange rate regulation which based on market
supply and demand and realize the exchange of RMB in checking account. National
planning management has been change from general mandating planning to general
guided planning; try to build the project legal person system, fund system and bidding
system, strengthen the restriction in investment risks. The revolution in market
circulation fields has been developed deeply. Commercial markets develop further,
while factor markets form gradually.

Fourth Stage ： The stage that perfects socialism marketing economy （ since

2000 ）。 With the basis of achieved progress ， the Sixteenth National Congress in

2002 raised that the key mission of revolution at the two decades early in the century

is to improve the system of socialism marketing economy 。 That means it needs to

accomplish consummate socialism marketing economic system and more energetic

and open economic setup in 2020. 《 Policy decisions on perfecting some problems in

the system of socialism marketing economy 》 approved of by the Third Session of

Sixteenth National Congress makes arrangements in all aspects on how to build such

consummate economic system。The Central Committee of Chinese Communist Party

claims vital strategy theory of setting up scientific developing ideas and building

socialism harmony society，which provides theory guidance for improving socialism

marketing economic system 。 According to the request of planning the development

about city and town、regions、economy、harmony between human and nature、internal

and external，revolutions must be pushed aggressively in every field.

This period pays more attention to the revolution of administration setup, and
spears no efforts to promote it in terms of certain targets including building
administration systems which are good in behavior, go harmonic, keep

fair 、transparent、honest and effective. The changing of government duty has gained

immense developments, and the obligation of social regulation and the public service
has been strengthened further; the government revolution runs continueously, and
State Council sets up and organizes a batch of institutions for conditioning and

supervising economy，which elevates administration levels of some departments and

makes managing systems of many departments like state-owned assets faculty

better 。 Centering on perfecting administration system lower than province ， local

governments have intensified the strength of both country institution revolution and

expanding the authority ranges of country administration 。 The reforming step of

administration examining and approving projects in three turns 。 Advocate legal

administration in overall ， and then publish and manage many rules and laws about

administration just like The law of administration permission and The law of public

servant。

Mean while, reforms in rural areas are still being pushed forward. The basic
economic regulations of such areas have been consolidated much more, the trail of tax
reforms begins all over the rural, and the whole state calls off the agricultural tax
which has continued for almost 2600 years absolutely. The revolution of food
circulation systems has been deepened further. Cotton circulation system based on
market has been founded in general. Reforms of state-owned enterprises take on a
new look. Nationalized capital concentrates on some important industries and key
fields relating to national security and national economy lifeblood, and the power to
control and compete of nationalized economy is stronger than before. The reforming
force of share-holding system in national huge enterprise goes powerful, and progress
has been attained in the aspect of perfecting the work of administrating structure by
legal persons, also the revolution referring to how to elect and employ people strides a
great pace, the reforms about distribution of stock tight among national share-holding
enterprises on the market is stable to run.
The government has set up a specialized state-owned assets supervision and
management institution improve the supervision to the operational condition of the
assets belongs to the state-owned enterprises, especially the large and the especially
large ones .the institutional environment in which the non-public economy develops
has been further improved. The restriction to the non-public economy’s market-enter
has been relaxed and the government has permitted the non-public capital to enter into
the industry and the field which the laws and regulations don’t ban. The government
has cleaned and amended the legislations 、 regulations and political provisions which
limit the development of the non-public economy , set the laws to protect private
property rights ， and provide an institutional guarantee for the development of non-
public economy. The structural reform of taxation, finance, and investment continues
to deepen. The public finance system is continuously improved, the transformation of
value-added tax and export tax rebate mechanism are steadily promoted. The reform
of the financial system is intensified, joint-stock reform of state-owned commercial
banks is accelerated. Exchange rate formation mechanism reform makes a major
stride forward. The scope of government investment is further narrow, the decision-
making power of business investment gradually expands, and the Investment approval
system is constantly standardized. The pace of construction of the market system has
further accelerated. The variety and quantity have increased year by year in the
commodity markets, the factor markets of land 、 labor 、 technology 、 property

right 、capital have further developed, the pace of the marketization for the price of the

essential resources such as water 、 electricity、 oil and gas and so on has accelerated.
The social security system has been constantly improved. The coverage of social
security system has expanded the urban basic old-age insurance system has been
established basically ， the reform of the basic medical insurance system has been
comprehensively pushed forward, the construction of the unemployment insurance
system has significantly speeded up. The reform of science, education ,culture and
hygiene system has steadily carried out . More than 1,200 scientific research institutes
that belong to the state and the locality convert in two batches. Promote the reform of
the fund security mechanism for rural compulsory education actively, and encourage
and support the development of private education. Promote the reform of the internal
mechanism of the non-profit cultural institutions; launch the transformation to
enterprises of the business cultural institutions. New rural cooperative medical system
reform has been steadily pushed forward.

Second, China's major achievements in economic system

reform
After 28 years of reform and opening up, the traditional planned economic system
has been broken, a new type of socialist market economic system has been
established, showing a new look.

As the result of Constant improvement of the ownership structure and the

establishment of basic economic system where Public ownership acts as the mainstay
and diversified economic elements develop together, structure and layout of the state-
owned economy has been significantly improved, state-owned capital keeps the
superiority and controlling status in the key industries which matter national security
and national economic lifelines.
Although the number of State-owned and state-holding enterprises reduced by 40
percent, the total operating incomes and the total net assets are increasing steadily.
In addition, plenty of changes take place in the forms of public ownership, the
continuous development of mixed ownership economy mutually participated by state-
owned capital, collective capital and non-public capital turn out to be the main
manifestations of public ownership.
At the same time, because of the development of the individual, private and
foreign investment and other non-public economy, the quantity and the size of non-
public economy had been rapidly expanded.

At present, 1 / 3 of GDP and 4 / 5 of the new jobs are provided by non-public

ownership economy.
The development of diversified economic elements contributes a lot to the
competition promotion, economic development, convenient living, and job
resettlement.

State-owned enterprise reform has made important breakthroughs, state-owned

continuously improve the competitiveness of the economy. At present, more than 50%
of key state-owned enterprises carried out the standard corporate system reform, the
power of institutions, decision-making bodies, supervisory agencies and the operators
and managers of checks and balances between the gradually formed, the vast majority
of small and medium-sized state-owned enterprises in various forms of reform.
Electricity, telecommunications, civil aviation and other enterprises to break the
monopolistic situation of the basic, market competition shape. Competitive areas the
proportion of state-owned economy declined significantly, a group of left over by
history through difficult policy bankruptcy exit the market, through asset
reorganization to form a group with strong competitiveness of large group of large
companies. State-owned assets supervision and management of the institutional
framework has been established. In 2005, the national implementation of state-owned
enterprises amounted to 11.5 trillion Yuan sales income, up 19.2 percent; achieve
profit 904.72 billion Yuan, up 25.1 percent; achieve tax 995.71 billion Yuan, an
increase of 20%.

A unified, open, competitive and orderly modern market system has taken shape,
the basic role of the market mechanism in resource allocation markedly increased. A
commodity market which is multi-level and has many categories and different forms
has taken shape. The modern circulation mode represented by chain operation,
logistics distribution, E-commerce has developed rapidly. The level of marketization
of the production elements market included capital, land, labor has obviously
improved. Multi-level capital market system is developing continuously. The system
in which laborers choose job by self-determination and by the adjustment of the
market has been established. The market of compensated transfer of land-use rights
developed rapidly, the scale of the exchange of intellectual property rights extends
rapidly. The price of products is primarily determined by the market.

At present,in total sales valume of goods retailing, acquisition of agricultural and

sideline products and the means of production.Market regulation percent has reached
to 95.6%,96.5% and 87.4%.Market play a basic role on resource deployment
obviously.

The transform of government function makes an active progress.The socialist

market economy system which is related to administration system is taking form
progressively.It is turning into economic regulation,market supervision,society
management and public service gradually.The economic regulation and control
system which is mainly by indirect means trends to be mature.The system that
national plans,financial policy and monetary policy cooperate mutually has initially
formed. Law enforcement administration, industry self-regulation,public opinion
supervision,public participation system has been built.The government supervises and
manages the main part of market,attacts the people who make fales goods and those
who sell them and also attacks business fraudulent conduct by the laws.The
government provides social security and creates conditions for social public life and
the participation of social economy,politics and culture activities .providing public
products and services such as education,technology,culture,health and physical
training by drafting social policy and regulation,managing and standardizing social
organisations and objects according to law ,resolve social contradiction ,defend social
justice,order and statement,as well as holding directly,franchise and so on.
The social security system building is strengthened gradually.The social system
that mostly includes urban old-age workers,medicine,unemployment insurance has
been built basically. On the aspect of old-age insurance,the old-age pension and
insurance systerms were formed which combining social plan with personel account
.On the aspect of unemployment insurance ,the unemployment insurance systerms
were built which facing town business staff,it achieved that make basic living
insurance of state-owned enterprises’ laid-off workers into unemployment
insurance.On the aspect of basic medical insurance,a series of insurance systerms
were built such as basic medical insurance ,enterpsise additional medical insurance
and commercial medical insurance .The lowest living insuance systerms of town
gained further improvement .By the end of 2005,the number of peple who took part in
town basic old-age pension and insurance ,unemployment insurance,town basic
insurance was 17.4 million ,10.7million ,13.7million successively throughout the
country , the number of peple who received unemployment insurance was 3620
thousand ,so in total there are 22330 thousand town resident received the lowest living
insurance in the whole year.
The level of legal systerm of economic society increased obviously,laws and
regulations which in accordance with sociel market economy was set up initially.
Since reform and open, China has implemented a series of economic system and
enhanced the market main body, property system , market transaction system ,
economic adjustment and supervision and so on.. China has get down fixedly some
quite mature systems with laws and regulations’ forms. There have been formed more
than 200 steps of laws and 300 administrative rules and regulations and several
thousand local code and regulations and administrative regulations. They have
composed more complete laws and regulation systems.

Constantly improve the level of opening up an all-round multi-layered and wide

ranging opening pattern has been formed, continuous improvement of foreign trade
management system. All sectors of the economy in the formation of a common
foreign-funded enterprises to participate in the diversification of the pattern of import-
export operations, central and local governments set up a common burden of the
export tax rebate mechanism. Substantial reduction in foreign investment restrictions
on the formation of geographical and industry better foreign investment and foreign
investment management system; Trade integration with the steady progress of state-
owned enterprises in the regoranization and transformation of foreign trade and the
establishment of modern enterprise system have made positive progress. Established
in line with China’s national conditions and international practices and WTO rules
and foreign policies and regulations to adapt to system. Including foreign-related
economic system reform, including the economy as a whole continues to advance
greatly promoted the development of China’s rapid development of economy.
The transformation of he economy system has liberated and developed
productive forces dramatically and raised the living standard of the masses in material
and spirtual life.From 1987 to 2005,the GDP of China ranked the fifth in the world
increasing from 36.24 billion to 18.23 trillion by more than 9.4percent per year,and
the fincial revenue arose from 113.2 billion to 3.16 trillion.The import and export
income of foreign trade totally up to 1.42 trillion dollors ranking third in the world.
Foreign exchange reserve at the end of the year reached to 818.9 billion ranking first
in the world,and Annual actual use amount of foreign investment was 60.3 billion
ranking 2nd all over the world. Since reform and open policy 28 years is the very
period that residents’income rising dramatically and people favord most.During this
period,the income the township dwellers average per person may controled arose from
134 yuan to 10493 yuan .The countryside resident average per person net income
arose from 134 yuan to 3255 yuan. The city average per person residential building
area and country dweller even housing area was increased
from 6.7 square meter and 8.1square metre to 26 square metre and 29.7square
metre respectively,while the city and countryside residents’Engel’s coefficient was
down from 57.5% and 67.7% and 45.5% separately.

Third,China economic restructuring basic experience

China's reform and open policy is unprecedented, we explore boldly, advances

with steady steps, passes through 28 years endeavor, not only has realized in the
economic system significant transformation and the economic society huge
development, moreover has formed about the socialist market economy rich
understanding, accumulated construction socialist market economy some important
experiences.Mainly has:
Firstly, innovates unceasingly the reform theory, by science theory instruction
reform practice.The reform first is to the traditional theory and the thought idea
revolution, must liberate people's thought through the theory innovation, the unified
people's understanding, provides the thought guarantee for the reform and open policy
practice.The reform practice proof, each important reform practice motion, all take the
thought theory unceasing development and the innovation as a forerunner.Thought
theory each innovation, has all brought the reform practice unprecedented
progress.The correct reform theory, not impossible not to have had the successful
reform practice.

Secondly, threads up economic development this center, unifies closely the reform
and open policy and the economical development.The reform goal is in order to
liberate with the development productive forces, we specially take the union which
reforms and develops, throughout take the economic development as the center, is
whether advantageous to the productive forces development, the promotion economy
reaches a new level, takes the choice reform measure the most basic basis.Uses the
productive forces development the standard to examine the reform throughout the
overall strategy and the concrete policy success or failure success and failure, and
unceasingly carries on the adjustment according to this kind of standard to the reform
measure and the policy.
Thirdly, respects the people fully the creativity, maintains the people benefit
throughout.In reform process a series of influence huge reform measure extrusion, all
is the concrete reform experience and the procedure which creates by basic unit's
people for the foundation and the basis.Not only that, the reform advancement pays
great attention to throughout maintains and promotes people's benefit, wants the
people, to satisfy, to comply to take the reform measure choice and the adjustment
datum and the rod.

Fourthly, take actions step by step from easier part first, making organic
integration of major breakthrough and overall promotion during the implementation.
Due to the complication and the obviously difficulty of the Chinese reform, the
government take the progressive overall reform strategy, which includes actions
basing on the reality, starting step by step from easier part. At the meanwhile, in order
to shorten the period in construction of the new economic system and to carry out the
reform measures smoothly as well, we focus on the breakthrough of some critical
aspects which promote a comprehensive reform. The reform strategy taken step by
step and the measures taken by overall promotion and breakthrough make the reform
both be kept with the necessary strength, speed, and continuity and gradually be
adapted to the bearing of the society, avoiding any big social unrest.
Fifthly, pilot projects should be launched in advance in order to ensure public
stability while breakthroughs in the reform being promoted. Since the reform is an
unprecedented cause and is thus explorative, selecting several representative regions,
trades, and enterprises to conduct reform related test is of assistance in precluding
serious zigzags and mistakes that may arise from reforming. In addition, the reform is
also a complicated systematic project, with the problem of pursuing harmony of
interests of different sides involved. If this problem, however, could not be dealt well
with, social turmoil and public instability are readily to occur. Therefore, launching
pilot projects is supposed to be the most effective method to confine the negative
effects caused by reformation within a minimum range. All in all, one of the most
significant reasons for the achievement of the reform is establishing pilot projects.

Sixthly, we should grasp the variation of social economic circumstance and

conditions, and adjust the measure of reform with good flexibility. When a reform is
carried out, particularly much attention should be paid to the social economic
circumstance. When it is better, we should seize the opportunity to carry out important
measures of the reform. While when the circumstance varies, we should
correspondingly regulate and perfect the published reform measures. Conversely,
when considering promoting reform measures, the government should also make
every effort to take effective methods to create advantageous social economic
circumstance.

Seventhly, the goverment administrates the regulation of market,and combine

basic action of effective disposal resource of the market with the strengthening and
improvement of the macro-control .Take the effective actions and manage the
relationship between the macro-control and the market effectively .Nothing take the
active action of the market ,make the economic activities to follow the law of value
,and present the principle of conpetitemt but also enhance and improve the macro-
control ,and promote the balance of the inventory of economy and optimise the
strutane ,hold the civil economy to develop healthy .The action make socilist market
system present the special superiority that is different of the other economic schema
and assure the procession that the planned economy turn into the market economy.

Eighthly, combine internal reform and opening to the outside world with
scientific absorb and use the resources and culture of the world .When we reform the
traditional planned economy ,we must carry out the policy of opening to the outside
world . Opening to the outside world not only combine internal economy with world
market and economy managing with run policy but also make new system cast off
old and closed-door policy .In othersides ,new policy ,new system reform promote the
develop of opening to the outside world in depth and scope .They are promote each
other ,complement each other .
Ninthly, regulating should be along with reformtion .Through making economy
law stimulates the institusons' of reform measures that economy legislation strengthen
the effect of reform is a most important step which ensure the economy reform to be
successed .In the reform exploring it is strengthen the weak step that ignore in the
early reform and pay attention to some reform measures which have good effect and
more grown-up .Their measures confirm with standard and system and law in time in
order to avoiding the change of good measure and build found ation for introducing
new reforms and developing new system.
Otherwise ,we take some efficiency measures in economic system reform ,such
as pay particular attention to reform village economic system and administration
because there are amounts of farmers in China, connect the economic system reform
with politics ,technology, education ,civilzation'sreform with politics ,technology
,education ,civilzation's reform ,in order to making essential progress in economic
reform ,when emphasize one new reform pay attention to unitary coordination and
harmony.All the above it's very important for the next reform.

The Second Section: New situation and new tasks and

new requirements of China'economic reform

The reform of China has achieved a great success,but the final goal of the reform
hasn't come true .Catering to the future ,It is still very onerous to improve socialist
market ecomomy system.

First,The new situation of reform

Totally ,setting up a developed socialist market ecomomy system is at a critical

stage .In this stage ,the reform face a new situatinon and new features,its difficulty
,complexity,systemic and risks are greatly increased.

In addition, the solutions of many problems, including the deep self-reform

economic system, has been linked with the reform in political,cultural and social
aspects;and this has made the reform become a huge system engineering.

In terms of the driver of the reform ,at the beginning of reform ,the cupidity of
change and the well-expectation, which have made people enthuse over the revolution
.Also the closing combination between the social driving of the government has led
the reform moving rapidly .However, with the progressingly deep reform and the
existence of differences in sharing the reform’s fruits, to some degree, civilians have
been affected to apply their enthusiasm fully into work ,just attributed to some merits
and irregular behaviors during the progression of the reform .On the other hand ,with
the depth of the reform ,the government regarded as the organizer and driver of the
reform it has become the principal target .To rebuild oneself ,even to give up the
rights and benefits of their own ,it’s not only uneasy to reach ,but the initativity would
be affected.

From the way of reform ,at the beginning ,because there are differences in
advancing at the time and on geographical, the spaces of reform and policy
application are comparatively large ,the government can push forward reform by
giving preferential policies and authority to explore to some areas on the whole or in
certain aspects, the government’s dominant is strong. With wide range of reform
areas and universalization of the right to explore, with the diversity of socio-economic
composition, forms of organization, means of employment ,interests and mode of
distribution, the space of reform put forward by government’s preferential policies is
limited ,the government’s ability to dominate reform by means of administration is
facing challenges too.
From the request of reform ,people’s anticipation for the effect of reform has
improved universally ,the request to share fruits of reform has increased obviously
,the aim of the reform is becoming chear and strong .at this stage ,reform has changed
from mainly focus on “break” to focus on the balance between “break” and “set” and
resides “break” in “set”, its constructive requirements has increased obviously; has
changed from adjusting benefits mainly to adjusting and increasing benefits both
,from benefits lean to benefits cater , require to make all people can share the fruits of
the development of reform.
That the new trend of the reform confronting and the fresh characteristics arising
,requires us to hold the key aspects tightly ,to push the process of the reform rigidly
and stilly ;and it also requires us to perfect the modes to reform continurously , to
improve the science and the target of the reform.

Second , The main task in deepening reform

Last October ， the "the development of the national economy and social

development of the tenth Five-Year Plan's recommendations" was passed in the Fifth
Plenary Session of the Sixteenth Central Committee of the Communist Party of

China 。 The " National Economic and Social Development Five-Year Plan outline ",

had given the comprehensive explanation and the overall deployment to the present

five-year economic system and the overall deployment ，that formulated according to

"Proposal" , discussed and passed by the Fourth Session of the Tenth National
People's Congress.

Central Committee requirements that to accelerate reform with greater

determination, so that the major system reform involved in the development of overall
economic and society, could achieve breakthrough . To focus on transforming
government functions and deepening enterprises, taxation, finance reform ,speeding
up the socialist market economic system, forming in favor of changing the mode of
economic growth, and promote comprehensive, coordinated and sustainable
development of institutional mechanisms. Adapt to the new situation’s demands, the
next step should be to actively promote the following reform.
First, focusing on the innovation of promoting the administrative system. To
start with, to promote the transformation of government functions. In accordance
with the principles, namely the separation of government from enterprises, the
separation of government from funds, separation of government from public affairs
as well as the separation of government and the marketable intermediary
organizations, to definite the scope of the government responsibilities reasonably, to
strengthen the social management and public service functions of governments at all
levels. At the same time, further promote the reform of administrative examination
and approval system, to reduce and standardize administrative examination and
approval, and continue to improve government management. Second is to deepen the
reform of government institutions. Further adjust setting of government institutions,
strengthen and improve public services and social management institutions, reduce or
merge those agencies which interfere with microeconomic activity and social affairs.
Distribute power and duty between central and local government agencies at all levels
rationally, optimize organizational structure, reduce administrative level. Third is to
consummate government decision-making mechanism. To consummate scientific and
democratic decision-making mechanism, to improve collective decision-making on
important matters, expert advice, public proclaim and hearing of witness and
accountability system of errors in decision-making. To promote openness in
government affairs, to improve the government news release system, to improve
transparency of government work.

We should fully improve the legality of government work, comprehensively

implement law enforcement and introduce the Accountability System. Fourth, deepen
the reform of the system for investment. Implement and give enterprises more
decision-making power about investment, narrow gradually the licensed extension.
Better and improve the rules and procedures of policy decisions, establish the system
of accountability for decision-making on government investment programme.
Second, stick to and improve the basic economic system. The first is to further
consolidate and develop unswervingly the public sector of the economy. Continue to
promote government capital to concentrate on the fields relating to the state security
and lifeline of the nation economy on important and key sectors, perfect the state-
owned capital to advance and retreat properly and the rational flow mechanism.
Quicken the reform of the state-owned large and medium enterprises, focus on

improving the share capital structure 、 the company management structure and

incentive and restraining mechanism, we should establish lots of large, competitive

companies or enterprise groups. Increase the reform momentum of the wholly state-
funded companies and monopoly industries, wider market access, and push forward
the diversification of investors and property rights. Promote collective-owned
enterprise innovation, and develop multiform collective economy. The second is to
continue to develop and actively guide non-public sectors of the economy (NPSOE).

Conscientiously implement all policies and measures that encourage 、 support and

guide the development of NPSOE, encourage and support NPSOS to participate in the

reforms of state-owned enterprises, enter the fields of finance 、 public utility

enterprise, etc. Strengthen and improve the service and regulation of non-public
sectors companies.

Third, push forward the reform of the government financial system and taxation:
The first is to improve the government financial system in which to adjust the
structure of financial expenditure, to quicken the development of public financial
system, to improve the system of financial transfer-pay both in the central and
provincial governments, to arrange financial management system in under-provinces.
And go on deepening the reform of the budget of department, the concentration on
revenue and expenditure in national treasury, the two aspects of the government
purchasing and revenue-expenditure. And establish the performance appraisal of
financial budget, strengthen the government debts management, improve the system
of revenue except tax. The second is to improve the taxation. Push forward the reform
of value-added tax (VAT) from the type of production to the pattern of consumption,
the regulation of resources and the study and integration of the taxation.

Fourth, speeds up the reform of monetary system. First, deepened finance

enterprise reform. Advances the state-owned Commercial bank comprehensive
reform, determined reasonably the policy-type bank function localization, develops in
with steady steps many kinds of systems of ownership the small financial enterprise,
the positive safe advancement financial industry comprehensive management
experiment site, speeds up the financial asset management company to reform the
step, the deepened insurance utilization of capital management system reform.
Second, speeds up the development direct finance. Develops capital markets
positively and so on stock, bond, develops the futures market with steady steps,
establishes multi-layered the capital inferior market system, the development
undertaking investment, enhances the direct finance proportion. Third, perfect
financial regulation system. Establishes the sound money market, the capital market,
the insurance market organic synthesis, the coordinated development mechanism, the
advancement interest rates liberalization reform, the consummation has the
management floating exchange rate system. Fourth, perfect financial supervision
system. The establishment finance risk recognition, the early warning and the control
system, raise the financial supervision level, establishes the perfect bank, the
negotiable securities insurance supervision organization as well as with the
macroeconomic regulation and control department's coordinated mechanism.

Fifth, perfect modern market system. Firstly, perfect national unification

opening market, make a progress of breaking the administrative monopoly and the

local blockade ,and perfect commodity market while develop capital 、technology and

labor force and so on production elements markets largely. Secondly, improve the
resource product price redorm safely and positively, and perfect the resource product
price forming mechanism. Third ,standard the market order .standard the behavior of
major players in market and the market competition order, and clean up unreasonable
service while strengthen the price supervision .concentrating attention on perfecting

the credit record of the credit ,the tax payment 、 keeping a contract and the product

quality, prompt the construction of society credit system and perfect the punishment
disciplinary of breaking a promise.

Sixth, comprehensive deepening rural reform. First, comprehensive

advancement countryside grand total reform carries on the villages and towns
organization safely and positively ,speeds up the countryside compulsory education
organizational reform, a-dvancement country township financial control
organizational reform.Second,perfect land system .Stable and perfectly management
system taking household responsibility system as foundation , combination of
centralization and decentralization.Safeguards the farmer's each right to land
contracting management.The place has the condition can circulation the land
management right of legally ,developing many kinds of moderate large-scale
managements ,according to voluntarily, the paid principle .Third, deeping rural
financial reform. Standard develop the financial organization suits the countryside
characteristic ,establishes the perfect rural finance system .
Seventh, increase employment, social security and income distribution system.
Firstly, we should deepen the reform of the employment system. Continuing to
improve the employment environment and encouraging self-employment and expand
employment are also needed. All kinds of employment monopoly must be further
broken. We also should guarantee the right of the members of society to fair
employment . It is important to carry out an active policy of employment ,make a
unified plan for rural and urban employment and try our best to bring the
unemployment scale under control. Secondly, we will expand the urban basic pension
insurance coverage, gradually fully fund Personal accounts and improve the level of
Social co-ordination, to advance Government organizations and institutions’ Pension
insurance system reform and improve the multi-level medical security system. We
will perfect the subsistence security system for urban residents and set up a special
social relief system for citizens who are in extraordinarily straitened

circumstances 。Thirdly, development of the reform of the income distribution system

shall be accelerated. We should rectify and standardize the order of income

distribution, pay more attention to make adjustment to income distribution and
maintain the process of distribution and fair opportunity. We should intensify efforts
to establish the standard wage system of civil servants at the same time rigorously
standardize duty consumption. We will perfect the state-owned enterprises’ income
distribution regulationand supervision mechanism and control and regulate the
income level of some monopoly industries .

Eighth, we should deepen structural reform in the social field.First, reform of the
system for science and technology. we accelerate the step of the application research
and development institutions foundation to modern corporate system,drive non-profit
research institutions building and improving the research academies and institutes
system, drive to establish a enterprises as the mainstay, market-oriented employment ,
combination of industrial research mechanism.Second, we should intensify the
reform of the management education system . Establishing and improving the
management system for rural compulsory education in which the county authorities
play the principal role, under governments at all levels ,fiscal system with division of
revenue, enhanced financial stability . We will strengthen and consolidate compulsory
education. Advance the dual management system at both central and provincial levels
, the system for managing colleges and universities with the provincial government
playing the principal role, continue the establishment of a modern schools system
Improve the vocational education system, vigorously develop vocational education.
Continue to push forward the reform of the educational administrative system,
change management approach.Third, we will expedite the reform of the education
system. Drive the enterprise-oriented reforms of the profit-making cultural units
,drive the internal personnel of labour of the public cultural institutions, the
establishment of income distribution system ,drive the readjustment of ownership
structure in culture field, drive the change functions and improve the methods of
management of cultural administrative department . Forth, we will expedite the
reform of basic medical insurance system.Reform the hospital system classifically ,
Strengthen the main of public health care services ,promote the public hospital
system of property rights and the internal management system, promote the social
capital and the medical resources to organize the medical institutions of various

nature ； Deepen the reform of the circulation system of drugs, separate of the

progressive realization of medicine, further control the drug prices; devote energetic
efforts to develop the rural health service, promote the new rural cooperative medical
scheme actively.
Besides, we would also like to further expand opening-up efforts, Speed up the
political system, social aspects of the management system reform.

Third, the new requirements of reform

Overall, more and more emphasis on the task of reform, the requirement

become higher and higher ， the difficulties become higher and higher ， the risk

become very great . This new situation calls for further innovation and improve the
reform of the way, push forward reform actively and steadily. Mainly:
 First , We should pay attention to the effect , base on the "pragmatic" to promote
the reform process, touched on areas of reform, the more difficult ,more requirements
should put focus on the achieve tangible results . In order to achieve tangible results,
we must pay more attention to the promotion of pragmatic reform.more attention
should be paid to those:First, while we bring forward the general approach and the
principles for the reform, we should clearly define the responsible entities 、 the
objectives and requirements and the finishing time .And strengthen tracking
supervision and check up on evaluation.Second, while we bring forward the guiding
principles and basic principle for the reform,we should offer the Concrete 、
substantial 、 maneuverable reform measures.Third ， while we offer the Concrete
reform measures.We should offer or establish the convertibility and the system to
ensure deepening the measures reform.
Second, we will divert effectively, relying on “coordination”to enhance the
Reform.When the reform drive deeper and deeper ,It will ask the stronger
impetus.Based on Current situation, increasing the impetus reform, accelerating the
process of reform.We should focus on revolving around interest between Institutional
coordination and Policies guidance.The impetus to the current: Frist , we should lose
no time in tackling the problems which the broad masses of the people are concerned
about most, most direct and most real,Especially, we should effectively do the works
such as employment、social security、medical care and safety in production.We should
resolutely remove the problem which is harmful to the benefits of publics happened in
land transfer 、house demolition 、restructuring of enterprise related and enable the
people to constantly obtain tangible reform and development benefits. Especially, to
enjoy the equal rights and fair opportunities. Second, through strong and clear
constraint rules and pragmatic and effective coordination mechanisms, we will
promote all aspects. In particular, the relevant government functional departments
stand in a high state of social development and fairness, actively scheming and
steadily advancing all parts of reform. Third, we will take effective measures, keeping
our eyes on increment and the structure in order to improve and adjust the interest
patterns. We will resistance transmute into impetus so that mobilize all positive
factors as much as possible.
 At last, we should reasonably consider all the aspects,be established in beneficial
concept in all parts of the life to achieve the breakthrough of reformation.Take care of
the existing basic of benefit aptly and,guiding a matter along its course of
development to put forward some plans of reform where the shoe pinches.By this
way,it can not only gain the purpose of deeping the reformation,but also reduce the
cost and venture of the reformation largely,and avoid the social shake which cause by
the extremely reform.When the reformation coming into the most important time,the
beneficial relationship become more and more complicated and,the reaction to the
beneficial relationship adjustion become more and more intensively.All of these cause
by changing of the social economic composition,the form of organization,and
identity of citizen.Reform needs considering the recent interest basic fully and
regulating the relationship between authority and interests on the basic of benefiting
each side,so that material breakthrough of reform could come ture.

During the past28 years,we overcomed many difficulties, and created a reform
way step by step.Today,the condition of reform is much better than what it is in past
28 years.Though there are many difficulties in future reform ,we have confidence and
power to overcome new difficulties and to make the final goal of founding perfect
socialist market economy come ture,