Enrich the Thought on the Socialist Economy in the New Era* 

December 18, 2017 

Historic achievements and transformations have been made in the work of the Party and the country since the 18th CPC National Congress in 2012. The same has also happened in the economic field, creating solid material conditions for reform and development in other sectors.

After the 18th CPC National Congress, China was confronted by a complex economic situation both at home and abroad, facing many challenges that had rarely been seen since the launch of reform and opening up in 1978. The underlying impact of the international financial crisis persisted, with the world economy suffering a sluggish recovery, world trade in the doldrums, and protectionism widespread. With mounting downward pressure on the domestic economy, excess production capacity was becoming a salient issue, industrial product prices were in steady decline, and potential financial risks were increasing. All of these required us to think about the direction of our economic development, and solutions to problems on which we found it hard to reach agreement.

At that time, our major challenge was to come to a sound judgment on the economic situation and make the right decisions on how to carry on with our economic work. In the past five years, the Standing Committee of the Political Bureau of the CPC Central Committee, the Political Bureau of the CPC Central Committee, the Leading Group for Further Reform under the CPC Central Committee, and the Leading Group for Financial and Economic Affairs under the CPC Central Committee have held over one hundred meetings at which major decisions and judgments concerning overall national economic development have been made. This process – from practice to understanding and from practice to understanding all over again – is extraordinary, helping us to constantly sum up the underlying laws of the economy, enhance our understanding, unify our thinking, and make the right decisions. Practice is the sole criterion for testing truth. Practice has proven that the Central Committee's assessment of the economic situation, its decisions on economic work, and its adjustments on development ideas are sound, and this has guided us to achieve historic transformation and results in economic development.

First, our economic strength has reached a new level. In the past five years, our annual economic growth has averaged 7.1 percent, reaching over RMB80 trillion this year and making up 15 percent of the world total – 3.5 percentage points higher than five years ago. Our contribution to world growth was over 30 percent on a yearly basis, exceeding the US, Europe and Japan combined. Our country has become the major engine and anchor of world economic growth. Our market has expanded and attracted investors at an unprecedented rate.

Second, major changes have taken place in the economic structure. We have advanced supply-side structural reform, cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas of weakness. These measures were taken to reduce excess capacity, clear goods from the market, and promote balance between demand and supply. New technologies, new products, new industries and new business models have flourished, and innovation has played a more obvious role as the major driving force of the economy. The agricultural sector has witnessed stable growth and further structural adjustment. As a result of our concerted efforts, our economic growth now relies more on industry and services combined rather than industry alone, and more on consumption and investment combined rather than investment alone, and China has changed from a major exporter to both an importer and exporter. We have finally achieved long sought-after major structural changes.

Third, more vitality and resilience have become apparent in our economy. We have stated that we will let the market play the decisive role in allocating resources, let the government play its role better, and drive deeper reform in the economic system. On the whole we are making gradual and steady progress and have made breakthroughs in certain areas. The Leading Group for Further Reform under the CPC Central Committee reviewed and approved 105 major measures in structural economic reform. This reform was then rolled out across the board and major breakthroughs were made in key and fundamental fields, which served to emancipate the productive forces immensely.

Fourth, China has opened up further to the outside world. The Belt and Road Initiative, the Asian Infrastructure Investment Bank, and the Silk Road Fund that we have initiated and promoted, and the win-win cooperation philosophy we have advocated, have expanded our space for development. Foreign trade and foreign direct investment have seen stable growth. The Renminbi was included in the International Monetary Fund's special drawing rights (SDR) basket, a major step towards the internationalization of the Renminbi. Towards the goals of promoting free trade and investment, we have actively guided economic globalization onto the right path. Our influence on global economic growth and our voice in global economic governance have markedly increased.

Fifth, people's sense of gain and happiness has been heightened. Over the past five years, a total of over 65 million jobs have been created in urban areas. Income growth surpassed the overall rate of economic growth, and decisive progress was made in eliminating poverty, with over 66 million people helped out of poverty. The quality of education has improved. A social security network covering rural and urban residents is in place. Access to health and medical services has significantly improved, and basic public services have become equally accessible to more people. China now has the world's largest middle-income population.

Sixth, noticeable progress has been made in protecting the eco-environment. In the past five years, we have been firm in accelerating the pace of eco-civilization, leading to greater initiative and awareness of green development within the Party and the nation. Tangible results have been seen in the control and prevention of air, water and soil pollution. The average concentration of PM2.5 declined by 30 percent in key areas, energy intensity fell by 20.7 percent, and forest acreage and stock volume increased by 10.87 million hectares and 1.9 billion cubic meters respectively. Regarding the eco-environment, our commitment, measures and achievements are unprecedented.

These historic economic achievements and transformations of the past five years have been made under the strong leadership of the Party Central Committee, and with the joint efforts of the Party and the whole country.

In the past five years, we have raised a series of new concepts, ideas, and strategies through observing general development trends, assessing the overall situation, and engaging in hard work, which can be summed up as follows:

First, we have strengthened the centralized and unified leadership of the Party over economic work. We have made it clear that the Central Committee must take overall responsibility and full leadership over economic work as it is the central task in state governance. The Central Committee is not a place for empty talk but a place for decision-making. All its decisions must be carried out to the letter. To steer our economy on the right course we have improved the Party institutions that lead economic work, enhanced the Central Committee's ability to analyze and assess the situation with regard to development, formulated major guidelines and strategies, made important decisions and work plans in a timely manner, and ensured they are implemented under the Party's leadership.

Second, we must always remain committed to a people-centered philosophy of development. We have made it explicit that the people's aspiration for a better life is our goal and their role as the dominant player in our country is a major driving force. We have taken measures to ensure their wellbeing and improve their lives, building a moderately prosperous society in all respects by focusing on their major concerns. The people-centered approach should be integrated into the Five-sphere Integrated Plan and the Four-pronged Comprehensive Strategy. We have put forward a strategy of targeted poverty alleviation and eradication, and made comprehensive plans and determined efforts to win the fight against poverty and ensure that impoverished people enjoy a decent life together with the rest of the country.

Third, we have adapted to and steered the new normal in economic development. We believe that we have now entered a stage in which we have to shift the gear to slow down the speed of economic development, to bear the pain resulting from the structural adjustment, and to accept and mitigate the impact of stimulus policies adopted in the early days of reform and opening up. In this new normal stage we should emphasize the need to embrace the new development philosophy and advance supply-side structural reform. When assessing the economic situation, we must take into consideration the broad view, have a good understanding of long-term economic trends and laws, and in particular, we should know how to correctly assess the performance of our leading officials. GDP must not be the sole criterion in assessing an official's performance, nor should we be swayed by the short-term fluctuations of economic indicators. These judgments have served to clarify our attitude towards our economic situation and our tasks in economic work. They have also helped the whole Party and all our people to better understand the economic situation, unify our thinking, and stabilize market expectations.

Fourth, we have ensured that the market will play the decisive role in resource allocation and that the government will exercise its functions better. We have underlined that reform is the major driving force of economic growth. Reform is not a mission accomplished, rather it is an ongoing process. We must have the courage to tackle tough issues, break through logjams and venture risky areas to remove institutional barriers to economic development. Correctly handling the relationship between the government and the market is the key to economic reform. We have also made efforts to improve the market mechanism, break down monopolies, bring into play the pricing mechanism, stimulate the vitality of market entities, and take full advantage of the government's role in macro-control, public services, market supervision, social management and environmental protection. In the meantime, the economic vitality, dominance, and influence of the state-owned sector have been enhanced, and the vigor and creativity of the private sector stimulated. A clean and cordial relationship between government and business has thus taken shape, fostering entrepreneurship and breathing new life into economic growth.

Fifth, we have adapted to changes of key problems in economic development and improved our macro-control. We have stated that macro-control must be based on the characteristics of the present development stage and changes in the economic situation – expanding demand and adjusting supply when necessary, which requires us to make discretionary choices and issue corresponding prescriptions. At present, the biggest challenge confronting our economy is in its structure and particularly in the supply side, which manifests itself in the inability of supply to adapt to changes in demand. In this case if we stimulate demand blindly, it will only end up creating more risks and overdrawing future growth potential. Fortunately, we have addressed the principal challenge, in particular the key factor of such a challenge, by adjusting our approach to macro-control and taking supply-side structural reform as the general goal; and we have made the right decisions for the sound and sustained development of our economy.

Sixth, we have taken a problem-oriented approach in developing new strategies for economic growth. It is our belief that we should focus on major issues and have a long-term vision to maintain economic momentum. We have implemented key strategies in sectors concerning our future overall development. For example, we have decided to adopt the strategy of coordinated development of the Beijing-Tianjin-Hebei Region with a view to relieving Beijing of functions not essential to its role as the capital of our country. We have put forward the development strategy of the Yangtze River Economic Belt to strengthen environmental protection rather than seeking rapid growth at the cost of the environment, and we have put forward the Belt and Road Initiative to promote win-win cooperation. Other such strategies include:

• the development plan for the Guangdong-Hong Kong-Macao Greater Bay Area; 

• a new urbanization strategy with a focus on quality urban development and well-rounded development of the people; 

• an innovation-driven strategy that emphasizes stimulation; 

• a new food security concept highlighting basic self-sufficiency in grain and absolute grain security; 

• new thinking on water conservancy concerning coordinated management of water resources, water ecosystem, water environment and floods; and 

• a new energy security strategy to boost consumption, supply, and technological development in energy, reform the energy system, and strengthen international energy cooperation.

These important strategies have exerted and will continue to exert a profound influence upon our economic growth and transformation.

Seventh, we have realized that in addition to good guiding philosophy and policies we should have sound tactics and approaches if we want to boost sound and sustainable economic development. We maintain stability while making progress in our work, and strike a balance between the two by being prudent in macro-control and making it more targeted and precise. We are steadfast and unremitting in implementing strategies, stay true to our principles, take into full consideration any difficulties and problems, and are always prepared to deal with the worst-case scenario. Like a hammer driving a nail, we need to move forward step by step, taking each small step as a big success, and in the process, we do everything we can to counter every possible risk and particularly systematic risk.

In conclusion, we have successfully steered the economy on the right course since the 18th CPC National Congress and developed the thought on the economy of socialism with Chinese characteristics in the new era with the new development philosophy as its core. As a valuable asset of our Party and the country, this thought crystallizes the experience of our economic development over the past five years and is a theoretical summary of our political economics guided by basic tenets of Marxism. We must uphold this thought for a long time to come, keep enriching it, and bring about a more profound, extensive and historic transformation in our economy.

* Part of the speech at the Central Conference on Economic Work.

(Not to be republished for any commercial or other purposes.)