It is known to all that China has started its reforms and
Opening-up since the late 1970s, including the transformation
towards market economy, i.e., the so-called maketization. What
level did China's marketization reach in 2001? Was it up to the
five-key-factor criterion for market economy? This warrants our
careful and matter-of fact research. The analysis of this important
matter which is of great concern goes as follows in three
aspects.
(I ) 1978--2001: Rapid Progress of China's Market
Economy
China started to reform the system of planned economy in 1978.
In 1979, the household contracted responsibility system with
remuneration linked to out-put was promoted in the rural areas, and
the farming households were entitled to full autonomy in arranging
their production. In 1984, China made a decision to reform its
economic system. In October 1992, China made it explicit that the
objective of its reforms was to establish a system of socialist
market economy. In 2002, the 16th National Congress of the
Communist Party of China proclaimed to the world that China has
established a preliminary system of socialist market economy. China
will persevere in its reforms and opening-up, and will continuously
improve its system of socialist market economy.
Through over 20 years of efforts, China's achievements in
market-oriented economic reforms have attracted worldwide
attention.
The first priority was shifting the function of the government
from serving the planned economy to serving the market economy so
that it is the market that plays a fundamental role in the
allocation of resources. The product and the quantity to be
produced are decided by the producer at his own will according to
the demand in the market, meaning that the players in the market
have obtained autonomy in their business activities. The government
faded out step by step from direct involvement in the management of
numerous enterprises and becomes a macro regulator and a social
administrator. Since the reforms in taxation, financing, foreign
exchange and investment systems in 1994, China has established a
macro administrative system that matches the requirements of a
market economy.
Secondly, a pattern in which economic sectors of a diversity of
owner-ships are developing concurrently is taking shape.
Estimations made by the State Bureau of Statistics show that the
contribution to GDP in the form of the added value created by
China's non-state-owned sectors rose to 63.37 percent in 2001 as
compared to 53.57 percent in 1992. Further, according to the
assessment by the International Financing Company under the World
Bank, by the year 1998 the contributions to China's GDP by
enterprises from different sectors are: 37 percent by state-owned
sector, 12 percent by collectively owned sectors, 24 percent by
private sector, 6 percent by foreign funded businesses, 3 percent
by joint-equity companies and 18 percent by farming households
respectively. In other words, the private sectors took up 51
percent of the total GDP. This estimation is accepted
internationally. The non-state-owned sectors have become an
important force in supporting the national economy. The state-owned
enterprises have become much more market-oriented, under the ever
more intensified pressure for transformation of system in line with
accepted norms. "Clearly established ownership, well defined power
and responsibility, separation of enterprises from administration
and scientific management" are the important principles guiding the
transformation of state-owned enterprises. The reforms in
personnel, employment and distribution systems initiated the
spontaneous migration of the labor forces and the negotiated rate
of wages. The current phase of reform and restructuring of the
monopolized industries have been successful. The state-owned
enterprises are basically following the market rules in their
operations and have become participants of the market. Measures
taken by the Chinese government in encouraging direct investment by
the foreign businesses have resulted in a large number of foreign
invested enterprises making significant contributions. Of the
increased portion of the total volume of imports and exports for
the year 2001, 63 percent was contributed by foreign invested
enterprises. Many world-known transnational companies from Europe
and America such as Motorola, Siemens, Alcatel, Nokia and Phillips
have achieved fabulous successes in the Chinese Market, as the
market-oriented reform in China is a powerful statutory support to
their efforts in developing the Chinese market. These companies are
the witnesses of the development of China's market economy.
Thirdly, the market system has been better improved. A financial
market has been established from non-existence and is growing ever
more sophisticated. The labor market is developing rapidly in
recent years. The real-estate market is growing steadily. The
markets for technology and information are being formed step by
step. The prices of the most majority of commodities, productive
factors and services are determined by the market. The interest
rates are becoming more market-directed. A flexible exchange rate
system that is market-oriented and well-directed is playing an
effective role. The development of intermediary organizations is
accelerated and a preliminary system of intermediary organizations
has come into being with a variety of types, organizations and
method of services. Meanwhile the management and supervision of
market have witnessed constant improvement.
A fact particularly worth mentioning is that a basic legal
system for the market economy has been established in China. In the
past several years, the Constitution underwent three amendments and
modifications, so that it explicitly states that "China practices a
socialist market economy", establishing that all sectors in the
market economy are on an equal standing. In order to meet the
requirements for the development of a market economy, a series of
new laws were made, market rules established, behaviors of market
principals standardized and the State's function in controlling the
economy clarified.
All of the above has made it clear that a preliminary market
economy system has been established in China and it has become a
developing market economy country.
(Ⅱ)Measurement Results on the Development of China's
Market Economy
The five-key-factor criterion for the market economy and the
assessment of economic liberalization made by the two American and
Canadian research institutes are important references for us to
measure the extent of development of China's market economy. On the
basis of the five key factors, we select 11 sub-factors, under
which 33 variables are to be chosen. Through grading variables,
assembling and assessing, the research on the development of
China's market economy will come to a clear conclusion.
In the following table, we will in brief describe the 33
variables and their points, then introduce the 11 sub-factors,
analyze scores of the five key factors, and finally give a final
score to and succinctly comment on the extent of development of
China's market economy.
Among the 33 variables, there are five with 1 point, indicating
they have reached a high level in freedom and marketizaion; 11
variables with 2 points, showing they have reached a higher level
in freedom and marketization; 13 variables with 3 points,
indicating they get a lower level in freedom and marketization; 4
variables with 4 points, suggesting their level is low in freedom
and marketization, which will be given a special concern in our
further reform.
Now, on the basis of the 33 variables' values, we establish the
evaluation values for the 11 sub-factors, to be arranged from low
to high, e.g. the order of high degree of freedom and marketization
coming first and the lower the degree the further away of its
position. Thus we have: "Freedom in pricing of foreign trade
products" 1. 33 points;" Capital and land" 2.00 points;
"Contribution by non-state-owned sector" 2.40 points; "Government's
fiscal burden" 2.50 points; "protection of fair trade by laws" 2.50
points; "Labor and wages" 2.67 points;" Government's intervention
in economy" 3.00 points; "Interest rates and exchange rates" 3.00
points; and finally "freedom in foreign trade" 3.50 points.
Based on the point values of the 11 sub-factors, we establish
the evaluation values for the 11 sub-factors, to be arranged from
low to high, e.g. the order of high degree of freedom and
marketization coming first and the lower the degree the further
away of its position: "marketization of productive factors" 2.17
points, "liberalization of economic entity" 2.20 points, "fair
trade environment" 2.44 points, "standardization of governmental
behavior" 2.75 points, and the last one "rationalization of
financial parameters" 3.0 points.
Based on the point values of the five major factors, the
calculation brings us the comprehensive score of 2.51 points, or
approximately 69 percent if converted to percentage terms, which is
the assessment value of the development of China's market economy.
This value shows that China's market economy has been improved
greatly, but it is still far behind the level attained by the
developed market economies in Europe and North America.
(Ⅲ) Comparison of the Assessments Made by the Chinese
and the Foreigners Regarding the Development of China's Market
Economy
1. Our Conclusion on China's Market Economy as Compared
with Similar Results by Other Research Institutes in
China
In order to make a comparison between the conclusions drawn from
assessments on China's progress toward a market economy.
In the years after l992 there have been two types of
measurements used by the researchers on the development of China's
market economy. One is the measurement by absolute point values,
the other is the arrangement of relative positions in a sequential
order. Conclusions arrived at by absolute point value measurement
gave the lowest score of 38 percent with the highest being 65
percent. Of which, conclusions by three groups of researchers were
60 percent or above and one of them gave a score of 62 percent for
the year of 1992. An annual simple mean value of 52.5 percent was
obtained based on all these research results. These conclusions
show that the measurement conclusions made by these experts
regarding the attainments in China's development of a market
economy is slightly lower but close to our results. Considering the
fact that several years have past since the pioneering researchers
did their work, during which the marketization in China has been
rather speedy, then, our index of 69 percent for the year 2001
should be rather reliable. But we have to bear in mind that such
comparison was made in reference to the previous years, as the
research results for the year 2001 are not yet available in China.
Therefore this shall be simply a reference conclusion for analyzing
and comparing the evaluation results with respect to the
attainments in the development of a market economy.
(Ⅳ) China is a Developing Market Economy
Country
The years from 1978 to 2001 witnessed China experiencing a
course of re-forms and opening-up, a process of rapid development
of market economy and a historical period of transition from a
traditional planned economy towards a market-oriented economy. By
utilizing the rationale and methodologies of the freedom indices
worked out by the Heritage Foundation of the U.S.A. we estimate
that the development of China's market economy by the end of 2001
has reached 2.51, or 69 percent in the percentage system. Assuming
the criteria for a 100 percent market economy are available, with
the 69 percent marketization level we should arrive at the
conclusion that the market economy system would have already been
established. In fact our argument is that 60 percent should be a
critical level in determining whether an economy is market-oriented
or not. Once the 60 percent point is crossed, the minimum
requirement for a market economy is satisfied and the country
becomes a market economy. If all the countries between 80 percent
and 100 percent are regarded as mature market economies, then, a
country with 69 percent market economy should all the more be
accepted as a market economy country. In parliament voting, with a
favorable majority the law is made. Similarly, in determining
whether a country is a market economy, when most aspects are
market-oriented or one of the aspects is mostly market-oriented, it
may be safe for us to say that the country is on the whole a market
economy country.
Some would argue: what you are talking is about a bucket more
than half full while I am actually worried about the part without
water. It is true that China is not yet completely
market--oriented. But what is a 100 percent market economy? Is
there any 100 percent market-oriented country? Suppose you want to
invest in China, is the 69 percent marketization level
insignificant to you? As to the fact that there are still some
aspects remaining below the critical level for market economy, it
is not to be taken that these aspects are insulated from
marketization. In fact marketization is being propelled rapidly
forward.
That China is a developing market economy country has two
implications: on the one hand, China as a preliminary all economy
is advancing towards a mature market economy. It implies an
emphasis on statutory reform and renovation, and an emphasis on the
reform and opening up of China's economic system for a full extent
transition. This is the principal connotation of "a developing
market economy country". It took us only over 20 years to realize
the transition from a planned economy to a market economy. History
has proved that the crucial issue of a market economy is the
establishment of market principals, and that the speed in building
a market economy depends directly on the selection of the statutory
objectives. The reason that China was not able to develop into a
market economy more than 20 years ago lies in the fact that market
economy was not our initial choice. On the peripheries of China,
some rising industrial countries and regions accomplished the
development from natural or agricultural economy into industrial
economy within a mere couple of decades, at the same time realizing
the transition from controlled economy to market economy, all
because they preferred market economy. Market economy as the most
flexible economy among all types of economic systems, once chosen
its speedy development is ensured, especially against the
background of the current economic globalization. The fact that
China as a large developing country has launched on the road of
market economy is a manifestation that China has realized that
market economy is the most vigorous economic system in today's
world.
On the other hand, it also implies that China as a developing
country has now adopted a system of market economy. Here the word
"developing" is used in the same sense as it is in the term
"developing economics". It is emphasized that the term "a
developing market economy country" is to be understood in terms of
development of economy. The stages of development undoubtedly are
heavily dependent on the economic system. The market economy system
is established only when the development of economy has reached a
certain stage. Therefore, the level of economic development is to
some extent related to the economic system, although they are not
identical. It is true that it is relatively easier for a country
with a higher level of development to practice market economy; or,
to put it in a reverse way, the practice of a market economy system
will benefit the development of economy. While the expressions
"developing" and "developed" mainly denote the level of
development, they imply a difference in the systems as well. Based
on this understanding, we are able to realize the distance between
our level of economic development and that of the developed
countries. Further efforts are required of us in order to maintain
a rapid, stable and healthy development of economy for a sooner
realization of modernized economy, preparing a material foundation
for the realization of a full-fledged market economy system.
Obviously, a developing market economy country would judge a
country's economic system from a point of view that combines
development with reforms. Meanwhile what we call "development" and
"reforms" are mutually supplementary in this sense: a market
economy system can only be established and developed when the
economy has developed to a certain level; and the establishment of
an all-round market economy system is an important foundation in
propelling the rapid development of economy.
On?April 7, 1998, the EU passed a resolution to delete
China from a list of "non-market-economy countries", the list
itself being a component part of its anti-dumping policy, and China
was granted the treatment of "special market economy country",
Which is an intermediary status between the "non-market economy
countries" and the "market economy countries". This showed that the
EU had been concerned about the development of China's market
economy and was prepared to timely modify its judgment of the
marketization level in China. The word "special", as we take it,
was meant to express our foreign friends' surprise at China's rapid
development of market economy. However the "special" country, as it
seems fit, should not be a country of a third category, beyond the
categories of "non-market-economy countries" and "market economy
countries". The "special" country is a market economy country that
is a bit special. One expert made a witty remark: a child, although
immature, is still a human being in the full sense. It follows that
a developing market economy country is still a market economy
country. Being "special" is not being "alien", so to speak. There
should be no discriminative policies when what we need is fairness
in trade.
The conclusion is that China's national economy is already
operating under market economy conditions, as it has long since
crossed the critical threshold for a market economy. This is a
result achieved by the Chinese people who spared no effort in the
course of reforms and opening up, and a result that cannot be
achieved without the participation, encouragement and contribution
by all economic forces worldwide. China is willing to share its
achievements in reform and development with all countries of the
world.
(China.org.cn November 7, 2003)
