On the Breakout of Chinese Economy

We all agree that the decision to comprehensively deepen the reform made at the Third Plenary Session of the Eighteenth CPC Central Committee and the decision to rule the country by law at the Fourth Plenary Session are correct. If there are any concerns or misgiving, it is about whether or not these decisions will be effectively implemented and achieve effective penetration. This penetration is bidirectional: Not only must decisions from the top penetrate down to the bottom, but also the actual situation at the bottom and the reform experience created at the bottom also percolate up toward the top. The penetration power has a decisive significance for a large country’s reform. As to how to enhance the penetration power of China’s reform, different people might have different views. I personally believe the following points will probably be helpful.

First, reform goals must be clear and simple. Only when the goals are clear and simple can the penetration power be strong. Taking the economy as an example, the goal of the reform is for the market to play a decisive role in resource allocation. This is a general outline which drives all aspects, including a better role from the government. In the fields of politics and society, the goal is democracy and the rule of law; in particular, public or government power should be put into the cage of institutional constraints to bring the country onto the track of rule of law and to motivate more members of the society to participate in social governance. The market, democracy, and the rule of law as goals are adequately simple and should not be burdened by adding more and more complications. What is passed on from China’s culture is also actually quite simple; this is because China is a very large country, and it is difficult for too-complicated things to have penetration power. From the top to the bottom, too-complicated things might change as they pass along the way and can thus be difficult to be truly implemented.

When the goals are correct, adequately simple, and adequately clear, the only thing left is persistence. Only when the simple and clear reform goals are upheld can the penetration power be strong. Not all changes can be called reforms; a reform must have a clear direction and clear connotations. It cannot be willy-nilly, heading east for a while, then going west. The reform of a large country must follow with perseverance an exceptionally simple and clear direction, and only by doing this can the penetration be powerful.

In fact, at the bottom, there are many moves toward the direction of marketization and many actions toward the expansion of democracy and the rule of law. To give an example, in 1999 when the internet started to become popular, internet telephony appeared on the scene. The regulatory departments in place at the time were of the opinion that network communications conducted directly by the private sector was violating relevant communication laws and regulations; as a result, the innovator not only got his property confiscated but also lost personal freedom for a while. Fuzhou Intermediate People’s Court tried this case and decided that the judgment by the court of first instance had no legal basis and that the case should be returned for retrial. The implication from this case is clear: For things not expressly prohibited by law, some space can and should be left for innovation behaviors.

This is a good case. If it gets transmitted to the super structure, it will provide a substantial push to many things, such as preventing administrative monopoly, strengthening market competition, and following the same rules of the game in interest distribution. It is often said that China does not have many excellent judges or many excellent lawyers, and that the number of people with the concept of the modern rule of law is even smaller. However, we still have some, even if “not many.” Sometimes, a single counter-example has great penetration power. If we can seize such counter examples and instigate a discussion in the whole society, the penetration power of the reform can be enhanced.

Fourth, new systems should be formed in some critical locations. Currently, the general belief is that China’s product market is better developed than its factors market. What exactly is the factors market, though? Take the land market as an example: It isn’t necessary for every village to become a place for land transactions, because factors trading and their price discovery need to be relatively concentrated at certain locations. “Global oil prices” are often discussed in the news. What are global oil prices? Are they something decided by the whole globe? No; they are decided at a small location, namely the high-end oil market. To enhance the penetration power of China’s reform, we must seize key locations, namely high-end markets, because as long as the new system can stand on its own and successfully operate in these locations, the original system can be broken and the new system will have a huge radiation power.

Fifth, remove some difficult obstacles. Currently, administration according to law is being emphasized; this means that administration should follow existing laws and legal regulations. However, some of the content of existing laws and regulations conflicts with the reform decisions made by the Third Plenary Session of the Eighteenth CPC Central Committee. To move toward the market mechanism and build a country governed by the rule of law, it is imperative to touch some previously formulated laws and regulations; frictions will therefore be unavoidable, which is a significant difference in comparison with the reform of the early 1980s. Therefore, the current reform should go hand in hand with legal revisions. It would be best to have a list of legal revisions together with a timetable. If the existing laws and regulations do not get changed at all, the reform cannot be advanced.