Why is deepening reform so important for China?

Editor's note: Reform and opening up policies hold the key to the destiny of contemporary China and is a crucial move that determines the success of Chinese modernization. CGTN rolls out a series of special reports to show how China is comprehensively deepening reform and opening wider to the world.

In the National Museum of China, there is a special collection of 109 official seals. The stamps, which are from the Binhai New Area of Tianjin Municipality, were scrapped in 2014 after the local government set up an administrative examination and approval bureau and incorporated hundreds of examination and approval units into one department, replacing 109 official seals with one official seal.

In 2014, though the concept of building a socialist market economy had been introduced more than two decades earlier, doing business remained a challenging endeavor. A lawmaker from Tianjin Municipal People's Congress revealed that a single investment project, from acquiring land to completing all administrative approval procedures, required more than 30 government approvals and over 100 stamps. The entire process took a minimum of 272 working days. 

The 109 seals displayed in the national museum demonstrated China's determination to deepen institutional reform. Over the years, to facilitate businesses, China's State Council has canceled or delegated to lower-level authorities the power of administrative approval for over 1,000 items and slashed the number of investment items subject to central government approval by over 90 percent.

Why deepening reform matters

China launched reform and opening up in 1978. Over 40 years of development, China has transformed from a poor and underdeveloped economy into the world's second-largest economy.

"Reform and opening up is a major reason why China is able to catch up with the times," Chinese President Xi Jinping said at a symposium in 2023. He added, "To promote Chinese modernization, we must further comprehensively deepen reform and opening up, continuously liberate and develop social productive forces, and unleash and enhance social vitality."

Experts have said reform and opening up has greatly accelerated China's modernization and improved Chinese people's livelihoods, while risks and challenges have also accumulated in the process, such as corruption, environmental issues, imbalanced economic structure and gap between urban and rural development. To solve these problems, the experts added, China must comprehensively deepen reform to further promote social justice, improve state governance and boost modernization.

Fan Weiqing, an associate professor at Wuhan University, said that deepening reform is also vital for China's technology innovation, which is "decisive" for the country's future. And a new round of sci-tech revolution and industrial transformation is taking shape around the world, and the sci-tech competition is becoming fiercer.

"To resolve the series of outstanding contradictions and challenges facing China's further development, we must deepen reform and opening up," said Xi, adding that reform and opening up is a crucial policy direction that will determine China's destiny and the great rejuvenation of the Chinese nation.

How is China deepening reform?

Xi attaches great importance to deepening reform. One year after he took the helm as the general secretary of the Communist Party of China Central Committee in 2012, the central government adopted a decision to comprehensively deepen reform, with goals of improving and developing the socialist system with Chinese characteristics and modernizing China's governance system and capacity.

Since then, China's leadership has put forward the main direction, roadmap, major measures and tasks for deepening overall reform, and the country has also rolled out over 2,400 reform plans covering the Party and state institutional reform, rural land reform, state-owned enterprise reform, financial reform, green transformation and medical system reform.

Of all the reforms, economic reform is the central focus. Xi has advocated letting the market play the "decisive" role in resource allocation, which is a strong signal of policy adjustment as the word "decisive" was "basic" in the previous official statement.

Under Xi's instruction, China established a private economy development bureau to assist private enterprises, promoted financial reforms to facilitate financing for private enterprises, advanced state-owned enterprise (SOE) reform to further improve the modern enterprise system, and implemented the system of a negative list for market access, allowing entry into areas not explicitly prohibited by the list.

The results of the reforms have been remarkable. A three-year action plan for SOE reform (2020-2022) converted over 165,000 SOEs into limited liability companies or companies limited by shares and some 38,000 SOEs established boards of directors. From 2012 to 2023, the number of private enterprises in China more than quadrupled, and the number of private enterprises as a proportion of the total number of enterprises increased from less than 80 percent to over 92 percent.

A World Bank report released in 2020 stated that due to its steady and strong reform, China has witnessed an unprecedented improvement in its business environment, and it was included among the top 10 global reformers for two years in a row.