Full Episode – 40 Years and Counting Ⅱ: A retrospective look at China’s economic reform

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By Robert Lawrence Kuhn

In this 40th year of China’s reform and opening up, President Xi Jinping calls for comprehensively deepening reform and further opening up. That’s why we title this series, “40 Years and Counting: Transforming Reform and Opening up for the New Era.” What lessons have been learned? What challenges lie ahead?

In this episode on economic reform, we explore rural reform, which was the cradle of reform, and state-owned enterprise, SOE, reform, an area of continuing controversy.

Why has rural reform taken so long? What is it about rural reform that, year after year, makes it a perennial topic at political meetings? Why have social disparities, especially gaps between rural and urban areas, been growing wider, creating China’s most invidious and intractable problems?

On SOE reform, what has been its history over the past four decades, especially in recent years, and what are the current SOE issues and questions? Both rural reform and SOE reform require new thinking for the new era. From China’s experiences of four decades of reform and opening up, what insights can be gleaned for what’s needed now?

As the first Special Economic Zone, Shenzhen is selected by many private tech companies as their headquarters — and now Shenzhen has become the innovative hub of China. / VCG Photo

Since 1978, China has become a laboratory for reform, a pioneer in the long process of transforming a planned economy, in which the state was supposed to own all the means of production, into a market economy, in which mixed ownership features a vibrant private business sector.

China’s economic success, in no small measure, can be attributed to a series of strategies: setting visionary goals; experimentation that allows local, bottoms-up innovation and variation; reassessment that includes a willingness to make changes; and the institutionalization of central, top-down policies based on experience. There is, of course, unfinished business.

At the 19th CPC National Congress in late 2017, the Party outlined a Plan for Rural Vitalization Strategy : By 2035, modernize the farm sector, boosting rural incomes and living standards. This will require fundamental reforms for farmers: both rural property rights and residency registration (hukou) rights.

While it was about 40 years ago when the household contract responsibility system in rural areas unleashed farmers’ productive power and ushered in China’s reform, it was about 30 years ago that ownership rights in state-owned factories injected vitality into industry, triggering the country’s high-speed economic growth.

But to maintain economic momentum today, to increase efficiency and productivity, new SOE reforms are needed: surely in management, establishing a mechanism for “the survival of the fittest”, and letting the market play its decisive role in resource allocation, can SOEs feel more motivated. That’s… Closer to China.