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Establishment of the Diversified Ownership Economy Economic Restructuring The Trend Toward a Coordinated Economic Structure


Introduction : Along with the coming of 2000, the PRC had undergone a glorious yet tortuous course of 50 years, amid great changes in Chinese society. Before the founding of New China in 1949, China’s highest yearly outputs of major industrial and agricultural products were 445,000 tons of yarn, 2.79 billion meters of cloth, 61,880,000 tons of coal, 320,000 tons of crude oil, 6 billion kwh of electric energy production, 150 million tons of grain, and 849,000 tons of cotton. Since the founding of New China, especially in the 21 years after the start of the reform and opening to the outside world in 1978, China has made great achievements in economic construction and social development. In 1999, the GDP was 8,205.4 billion yuan, an increase of 6.4 times over 1978, at constant prices; the outputs of some major industrial and agricultural products, such as grain, cotton, meat, edible oil, coal, steel, cement, cloth and TV sets, leapt from a backward position to first place in the world.

In accordance with Deng Xiaoping’s theory of building socialism with Chinese characteristics, the 13th National Congress of the CPC, held in 1987, adopted the strategy of three stages for China’s economic construction: First, doubling the GNP of 1980 to end shortages of food and clothing, which was basically completed at the end of the 1980s; second, quadrupling the GNP of 1980 by the end of the century, which was achieved in 1995, ahead of schedule. Thus, the Chinese government worked out the Ninth Five-Year Plan for National Economic and Social Development and the Long-Term Objectives for the Year 2010, which put forward new objectives: Those for the Ninth Five-Year Plan (1996-2000) were as follows-Complete the second phase of the strategic plan for the modernization drive in an all-round way and quadruple the per capita GNP of 1980 in 2000, when the population will have increased by about 300 million over that of 1980; raise the people’s living standard to that of a fairly comfortable life, with poverty practically eradicated; and expedite the formulation of a modern enterprise system and initially establish the basis of a socialist market economy. Third, basically realizing modernization in the mid 21st century, the GDP per capita reaching the level of the moderately developed countries, and people living a well-off life. The objectives for the year 2010 are to double the GNP of 2000 so that the people will enjoy even more comfortable lives, and bring a more or less complete socialist market economy into being. With the fulfillment of these goals, China’s productive forces, overall national strength and the people’s living standards will have gone a big step further, and the country’s social and economic aspects will have undergone historic changes, laying a solid foundation for the realization of modernization.

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Establishment of the Diversified Ownership Economy

Before the introduction of the policies of reform and opening to the outside world, China had a unitary public ownership economy, which lacked vitality. But since the putting into practice of the reform and opening to the outside world, the Chinese government has encouraged the development of diversified economic elements while insisting on the primacy of public ownership. As a result, both the individual and private economies have developed rapidly. By the end of 1998, the registered industrial and commercial enterprises of individual and private ownership amounted to 32.4 million, and they had 78.24 million employees; Chinese-foreign joint ventures, Chinese-foreign cooperative enterprises and foreign ventures numbered 325,000, absorbing 265.6 billion yuan of foreign direct investments, the development and expansion of these enterprises have played important roles in many aspects, such as bringing convenience to people’s everyday lives, making up for the deficiency of construction funds, and introducing advanced technologies and management from abroad. At the same time the control of the public-ownership economy has been further strengthened. In 1999, the increased value of state-owned enterprises and industrial enterprises above a certain scale made up 24.7 percent of the nation’s total gross domestic. Now the mutual development pattern for diversified ownership with the public ownership economy as the mainstay has been basically formed.

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Economic Restructuring

The Third Plenary Session of the CPC 11th Central Committee, held in 1978, made the decision to shift the policy stress to socialist modernization, and implement the strategic decision on reform and opening to the outside world. The reform began in the countryside: The contracted household responsibility system linking remuneration to output and the two-layer management system featuring the integration of centralization and decentralization began to be implemented; centralized and assigned purchases of agricultural and sideline products were gradually eliminated, and controls on the prices of most agricultural and sideline products were relaxed; the adjustment of the industrial structure in rural areas, the development of diversified operations and township enterprises mobilized the peasants’ socialist enthusiasm for production. The Third Plenary Session of the CPC 12th Central Committee, held in 1984, adopted the Decision on Restructuring the Economic System, which signaled the elevation of the reform of China’s economic system to an urban-centered stage. The 14th National Congress of the CPC held in 1992 established Deng Xiaoping’s theory of building socialism with Chinese characteristics as the guiding policy in China, and put forward the goal of China’s economic reform as establishing a socialist market economy system. Its principal contents may be summarized as follows: Adopting a series of macro-adjustment and control measures to carry out the reform in depth and in all aspects, public ownership will continue to be the main form of ownership as various types of ownership are jointly developed; the operation mechanism of state-owned enterprises will be further transformed to meet the requirements of the market economy; the property rights and responsibilities of enterprises will be clearly defined, the functions of the government separated from those of enterprises, and enterprises scientifically managed; an open and unified national market system will be established, closely integrating urban and rural markets, providing for reciprocal flows between domestic and international markets, and promoting the optimization of resource allocation; changing the government's functions in economic management and establishing an optimal macro-regulatory system chiefly employing indirect means; an income distribution system based on distribution according to work will be established in which efficiency is given precedence and fairness in distribution is taken into account; a multi-tier social security system will be set up to accelerate the development of China’s economy. The 15th National Congress of the CPC, held in 1997, put forward the viewpoint that the non-public- ownership sector is an important component part of China’s socialist economy. Encouraging essential production factors, such as capital and technology, to participate in the distribution of gains enables the reform of China’s economic system to take bigger steps. By 1999, the reform had gone smoothly in every aspect, and remarkable progress had been made. For instance, much work had been done to deepen the reform of the grain circulation system, the reform of state-owned enterprises and the reform of the banking system, and new achievements had been made. Reforms had been proposed for the housing and medical insurance systems; and plans for the reform of the investment, banking, financial and taxation systems were being formulated. The institutional restructuring of the State Council has been going smoothly, and has achieved important results. Now, China’s socialist market economy system is being set up, the basic functions of the market in resource allocation have been obviously strengthened, and the initial framework of the macro-adjustment and control system has taken shape. Moreover, the form of economic growth is changing from the extensive to the intensive type. By 2010, China will have established a comparatively sound socialist market economy, which will be comparatively mature by 2020.

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The Trend Toward a Coordinated Economic Structure

Before 1978, China’s economy had a weak foundation in agriculture, and the ratio between light and heavy industries was unbalanced. Since 1978, China has adopted a series of policies and measures giving priority to the development of light industry, expanding the import of top-quality consumer goods, strengthening the construction of basic industry and facilities, and devoting major efforts to developing tertiary industry, so as to make China’s economic structure more coordinated, optimized and balanced. The relations between different industries and within industries in terms of proportion have clearly been improved; the proportion of primary industry has declined, while that of the secondary and tertiary industries has grown; the growth of the overall national economy was driven formerly by the primary and secondary industries, but now it is being driven by the secondary and tertiary industries. Actually the growth of secondary industry becomes the main engine of rapid development for China’s economy.

While the whole industrial structure is changing, the internal structure of every industry has also changed greatly. In the total output value of agriculture, forestry, animal husbandry and fisheries, the proportion of pure-agricultural output value has declined, while that of forestry, animal husbandry and fisheries has grown; the structure of light and heavy industries has escalated from the light-pattern structure stressing “consumption compensation” to the heavy-pattern structure of “investment guidance”; within the tertiary industry the proportion of the traditional industries, such as communications, transportation and commerce, has declined, while real estate, banking and insurance, and telecommunications, have developed rapidly.

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  Information provided by China National Tourism Administration.


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