Dong Zhiyong: Reform and Opening Up as a Gradual Process of Energizing Market Entities

·         The development of Chinese economics has been characterized by internationalization and standardization, and also faces three major problems.

Over the past 40 years, the development of economics has become increasingly international. Chinese scholars have demonstrated a growing presence in international journals, global exchanges and studies, multilateral organizations, and world-renowned universities. Meanwhile, the development of economics has grown increasingly standardized as the platforms for academic exchanges, the process for publishing papers, the development and dissemination mechanisms for academic achievements, and the rules for obtaining tenure in colleges and universities have all become more uniform. However, the development of Chinese economics also faces three major problems:

First, China has a limited voice within economic academia at the global level. Since January 2015, the proportion of papers on China’s economy in the world’s top economics and finance journals has been much lower than that of China’s GDP in the world’s total, as well as China’s contribution rate to the world’s growth.

Second, there is a lack of cutting-edge research and theoretical innovation. Research on China’s economy is disoriented, often using Chinese economic data to prove Western theories without regard for China’s unique experience. Additionally, the distorted evaluation mechanisms and orientation within this field require deliberation and improvement.

Third, Chinese economics demonstrates a failure to root itself in China’s economic practice with the goal of serving the real economy. The goal of summarizing and distilling a universal theory from China’s economic development remains a daunting task within the field of Chinese economics.

·         In the future, we should focus on energizing market entities and examining the relationship between the government and the market.

The government’s administrative strength in response to emergencies has become clear during the process of pandemic prevention and control. However, in the post-COVID era, we should draw clear boundaries between the powers and responsibilities of the government, businesses, and the market. This will allow us to foster an exterior environment favorable to the resumption and development of production for businesses.

There are seven major issues that require our reflection. Are there still certain instances of protectionism and mercantilism? Does the government directly or indirectly intervene in resource allocation through ownership or financial support? Are the means of production priced and distributed based on market principles? Do major enterprises in essence have non-market properties? Have too many tools been used to achieve industrial goals? Do these policies lead to serious and persistent overcapacity? How will overcapacity affect the global economy?

Besides, these questions, the academic community should further analyze three major issues.  First, why are the central government and local governments more willing to make large-scale and long-term constructive investments? Second, why has the question of whether to encourage domestic consumption or expand investment reemerged as a hot topic? Third, why has the Keynesian school become newly popularized since 2008, following its decline in the 1960s?

·         The role of entrepreneurship and the private sector in economic development should be highlighted.

Looking back at the history of Western development, the US economy has thrived for 150 years. In the industrial era, steel magnates, oil tycoons, and automobile barons emerged. In the consumption era, Hollywood, Disney, and Coca-Cola were born. In the new technology era, great entrepreneurs such as Bill Gates and Steve Jobs rose to fame. The US has advanced its national progress through waves of industrialization, consumption, and scientific and technological development.

Over the past 40 years of China's economic development, entrepreneurs have played a leading part in China’s transition from a traditional planned economy to a market economy. Entrepreneurs work with tenacity and diligence, and have the courage to take risks and embrace innovation. However, under the new pattern of government-enterprise relations, entrepreneurs who do not follow the rules or who are not tough enough to make it on their own are forced to back down. Furthermore, in an economic downturn, financial regulations will reverse the trend of diverting resources from the real economy to the financial economy. Entrepreneurs must be prepared for these changes.

Meanwhile, the private sector has experienced cycles of vigorous development and restraint over the past 40 years of reform and opening up. At present, the private sector still faces many policy barriers as well as barriers to industry entry. To develop the private sector, it is necessary to break the administrative monopoly, reduce the five essential costs (land, communication, energy, logistics, and financing), and relax access to fundamental industries. Using capital management as the breakthrough point, we should deepen the reform of state capital and state-owned enterprises while reducing personnel, taxes, subsidies, regulations, and privileges.

China's future depends on the development of the market economy. Only by stimulating market vitality can we promote economic development and enhance our national competitiveness. If our belief in the market is shaken, China will face more turbulence and roadblocks in the future. Instead, if we strengthen our confidence in the market and push forward with reforms to improve it, we can lead China into an even brighter future.