Important Original Contributions of Xi Jinping’s Economic Thought to the Theory of the Socialist Market Economy

The first volume of *Selected Works of Xi Jinping on the Economy*, published recently, systematically reflects the rich connotations and original contributions of Xi Jinping’s economic thought, and also profoundly embodies its theoretical style and practical character. Xi Jinping’s economic thought has opened up new horizons for the political economy of socialism with Chinese characteristics and has made important original contributions to enriching and developing Marxist political economy. To thoroughly study and implement Xi Jinping’s economic thought, and to more consciously use it to arm the mind, guide practice, and promote work, this journal has again invited scholars to conduct readings from different perspectives on the content of the first volume of *Selected Works of Xi Jinping on the Economy*, in order to promote the study of the Party’s innovative theory to go deeper, become more practical, and reach the heart.

Deepened Understanding of the Laws of the Socialist Market Economy

Original contributions in doctrine or theory refer to new ideas, new viewpoints, and new methods that are first proposed; they are the most important contributions that are decisive for the formation and development of a doctrine or theory. The publication note of the first volume of *Selected Works of Xi Jinping on the Economy* points out: “Xi Jinping’s economic thought is an important component of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. It is a systematic theoretical summary of the practical experience of economic development in the New Era, a precious intellectual crystallization formed by the Communist Party of China in its unremitting exploration of the path of socialist economic development. It has opened up new horizons for the political economy of socialism with Chinese characteristics, made important original contributions to enriching and developing Marxist political economy, and provided a sharp ideological weapon for promoting China’s high-quality development, scientifically responding to major risks and challenges, and comprehensively building a modern socialist country.” The original contributions of Xi Jinping’s economic thought to Marxist political economy are multi-dimensional. One particularly important aspect is its original contribution to the theory of the socialist market economy.

Marx’s theory of the operation of a socialist economy held that in a socialist society, the commodity economy would wither away, and social production would develop in a planned and proportionate manner according to social needs—that is, what we call a planned economy. Although this theory reveals important characteristics and the general trend of change in the mode of operation of a socialist economy, it is not entirely consistent with the actual economic conditions of the first socialist country, the Soviet Union, where commodities and money still existed, and it is even less consistent with the actual economic conditions of China’s primary stage of socialism. This is caused by historical and practical limitations. In his era, Marx did not see that socialist development is a long historical process, passing through multiple stages of different levels of development—primary, intermediate, and advanced—and that the mode of economic operation in each stage is not entirely the same. He was even less able to foresee China’s primary stage of socialism, where, even after basically establishing a socialist economic system, it is impossible to eliminate the commodity economy. Besides adhering to the planned and proportionate development of the national economy, it is also necessary to implement a socialist market economy.

After the founding of New China, the Communist Party of China attached importance to developing the commodity economy and leveraging the role of the law of value. After reform and opening up, the Communist Party of China, seeking truth from facts, summarized the experiences and lessons of socialist economic development at home and abroad. Based on the conditions of the times and China’s national conditions, it advanced with the times and created the theory of the socialist market economy. This is a brand-new theory of the market economy, found in neither Marxist political economy nor Western economics. The theory of the socialist market economy is not only the most important theory guiding China’s reform and opening up and achieving tremendous successes, but also a major original contribution to world economics. Especially since the 18th National Congress of the CPC, the Party Central Committee with Comrade Xi Jinping at its core has further innovated and developed the theory of the socialist market economy, proposing a series of new concepts, new ideas, and new strategies, making important original contributions in major aspects such as deepening the understanding of the relationship between the government and the market, building a high-level socialist market economy system, and strengthening macroeconomic planning and regulation.

Deepened Understanding of the Relationship between the Government and the Market

Handling the relationship between the government and the market is the core issue for the effective operation of a market economy, and it is also the core issue of China’s economic system reform. Reviewing the history of economic thought, Western economics has never proposed a theory and method for reasonably and effectively handling the relationship between the government and the market. It long adhered to laissez-faire, advocating that the market should decide everything and that the government should only act as a “night watchman.” Even when Keynes later advocated state interventionism and the use of macroeconomic policies to regulate social and economic activities, he did not propose a theory and method that could leverage the advantages of both the government and the market. This is a major defect in the market economy theory of Western economics.

In 1992, the report of the 14th National Congress of the CPC proposed that “the goal of China’s economic system reform is to establish a socialist market economy system” and “to let the market play a basic role in resource allocation under the macroeconomic regulation of the socialist state.” This was a major breakthrough in the theory of socialist economic operation and played an extremely important guiding role in reform and opening up and economic and social development. Since the 18th National Congress of the CPC, the Party Central Committee with Comrade Xi Jinping at its core has further deepened the understanding of the roles of the government and the market and their mutual relationship, proposing the new viewpoint that the socialist market economy should “let the market play a decisive role in resource allocation and better play the role of the government,” making an important original contribution to the theory of the socialist market economy.

Changing the market’s “basic role” to a “decisive role” and proposing that the market play a decisive role in resource allocation is because a market economy is, in essence, an economy where the market decides resource allocation; market determination of resource allocation is a general law of the market economy. Emphasizing the decisive role of the market is conducive to establishing correct concepts regarding the relationship between the government and the market throughout the entire Party and society, to transforming the economic development model, to transforming government functions and preventing “government failure,” and to curbing negative and corrupt phenomena. At the same time, proposing to better play the role of the government is because “market failure” exists. The market plays a decisive role in resource allocation, but not the entire role. China implements a socialist market economy system and must adhere to leveraging the superiority of the socialist system and the positive role of the Party and the government to effectively overcome “market failure.”

General Secretary Xi Jinping proposed: “We must adhere to dialectics and the ‘two-point theory,’ continue to work hard on the integration of the basic socialist system and the market economy, leverage the advantages of both sides, and strive for both an ‘efficient market’ and a ‘competent government,’ working hard in practice to solve this worldwide problem in economics.” To truly achieve an efficient market and a competent government, complementary advantages between the government and the market, and to leverage the advantages of both sides, the key, under the premise of forming a unified, open, competitive, and orderly complete market system, is to: First, whatever the market can do and solve, let the market decide and solve; second, for economic activities that are unclear or uncertain in the short term, let the market decide, regulate, and experiment first; if practice proves it does not work, then the government can regulate; third, effectively solve the problems of excessive government intervention and inadequate supervision. What the government should manage must be managed well, and what it should not manage must resolutely not be managed, neither absent nor overstepping or misplaced, implementing scientific overall planning and macroeconomic regulation, and clean and efficient government governance.

Proposing to Build a High-Level Socialist Market Economy System

In 1993, the “Decision of the Central Committee of the Communist Party of China on Several Issues Concerning the Establishment of a Socialist Market Economy System,” adopted at the Third Plenary Session of the 14th Central Committee of the CPC, clearly defined the connotation, extension, and characteristics of the socialist market economy system. After more than 30 years of development, China has established a relatively complete socialist market economy system, but it is still not mature or perfect. Since the 18th National Congress of the CPC

What is a high-level socialist market economy system, and what are its basic features and main contents? According to the *Decision of the Central Committee of the Communist Party of China on Further Deepening Reform Comprehensively to Advance Chinese-Path Modernization* (hereinafter referred to as the *Decision*), a high-level socialist market economy system is an economic system that can better leverage the role of market mechanisms, create a fairer and more vibrant market environment, achieve optimal allocation of resources and maximum efficiency, be both "flexible in releasing" and "capable of managing," better maintain market order and remedy market failures, smooth the circulation of the national economy, and stimulate the endogenous driving forces and innovative vitality of the whole society. In terms of ownership, it is necessary to adhere to and implement the "two unswervinglys" [2], namely, unswervingly consolidate and develop the public sector of the economy, and unswervingly encourage, support, and guide the development of the non-public sector of the economy, ensuring that all forms of ownership can equally use factors of production according to law, participate fairly in market competition, and receive equal legal protection, promoting complementary advantages and common development of all forms of ownership; in terms of the market system, it requires building a unified national market; in terms of macroeconomic regulation, it implements scientific macroeconomic regulation and effective government governance; in terms of distribution, it builds a system of institutions for coordinated primary distribution, redistribution, and tertiary distribution, and continuously improves the income distribution system; in terms of social security, it emphasizes improving the social security system. In particular, the *Decision* clarifies that basic institutions of the market economy, including property rights systems, market information disclosure systems, trade secret protection systems, market access systems, social credit systems, and regulatory systems, are also important components of a high-level socialist market economy system. These are new viewpoints and new requirements not seen before.

Strengthening Macroeconomic Planning and Regulation

Market economies inevitably suffer from "market failures," and the state must implement necessary macroeconomic management and regulation. Since reform and opening up, China has formed a relatively systematic theory and means of macroeconomic management, greatly enriching and developing Marxist political economy. Determining the general tone of macroeconomic regulation and conducting reasonable and effective management of both the supply and demand sides are the basic contents and principled requirements of macroeconomic planning and regulation in a socialist market economy. The Party Central Committee with Comrade Xi Jinping at its core established the general tone of seeking

First, pursuing progress while ensuring stability. General Secretary Xi Jinping points out, “The focus of ‘stability’ should be placed

(Authors: Jian Xinhua and Nie Changfei are respectively Distinguished Professor of the School of Economics and Management, Nanchang University, and Professor of the Center for Economic Development Research, Wuhan University; Associate Professor of the School of Economics and Management, Nanchang University.)

Online editor: Tongxin