Balancing the Relationship between an Effective Market and a Proactive Government

The 2024 Central Economic Work Conference proposed that “we must balance the relationship between an effective market and a proactive government, forming an economic order that is both ‘able to let go’ and ‘able to manage well’.” This elucidates the internal logic of better integrating the roles of government and market, reflects a profound grasp of economic laws, represents a theoretical innovation and expansion of the relationship between government and market, enriches and develops Marxist political economy’s theory of the market economy, and provides directional guidance for building a high-level socialist market economy and correctly handling the relationship between government and market.

2024年中央经济工作会议提出“必须统筹好有效市场和有为政府的关系，形成既‘放得活’又‘管得住’的经济秩序”。这阐明了政府和市场关系更好结合的内在逻辑，体现了对经济规律的深刻把握，是对政府和市场关系的理论创新和拓展，丰富和发展了马克思主义政治经济学关于市场经济的理论，为构建高水平社会主义市场经济体制、正确处理政府和市场关系提供了方向指引。

Balancing the relationship between an effective market and a proactive government is of great significance.

统筹好有效市场和有为政府的关系具有重要意义

The efficient synergy between an effective market and a proactive government is the core requirement for building a high-level socialist market economy. A high-level socialist market economy is an important guarantee for Chinese-path modernization. The “Decision of the Central Committee of the Communist Party of China on Further Deepening Reform Comprehensively to Advance Chinese Modernization” [1]1 The “Decision” refers to the key policy document adopted at the Third Plenary Session of the 20th Central Committee of the CPC in July 2024, outlining comprehensive reforms to advance Chinese modernization. (hereinafter referred to as the “Decision”), reviewed and approved at the Third Plenary Session of the 20th Central Committee of the Communist Party of China, places the construction of a high-level socialist market economy in a prominent position, emphasizing “giving full play to the decisive role of the market in resource allocation and better leveraging the role of the government.” Since reform and opening up, China has gradually established a socialist market economy, achieving an organic integration of the advantages of the socialist system with the general laws of the market economy, demonstrating Chinese wisdom and Chinese solutions for handling the relationship between government and market. Through price signals and competition mechanisms, the market mechanism can optimize resource allocation, stimulate economic vitality, and drive economic growth and technological progress. However, market regulation can also lead to problems such as information asymmetry, insufficient supply of public goods, and disorderly development of capital, requiring the government to play a role in shoring up weaknesses, strengthening weak links, consolidating foundations, and leveraging strengths through scientifically formulated policies and optimized institutional design, creating a market-oriented, law-based, and internationalized first-class business environment to empower market entities and economic development. To build a high-level socialist market economy, both government and market are indispensable. In the New Era and on the new journey, we must take economic system reform as the driving force to achieve a positive interaction between an effective market and a proactive government, allowing the “visible hand” and the “invisible hand” to each leverage their strengths and jointly contribute to economic growth.

有效市场和有为政府的高效协同，是构建高水平社会主义市场经济体制的核心要求。高水平社会主义市场经济体制是中国式现代化的重要保障。党的二十届三中全会审议通过的《中共中央关于进一步全面深化改革、推进中国式现代化的决定》（以下简称《决定》），把构建高水平社会主义市场经济体制摆在突出位置，强调“充分发挥市场在资源配置中的决定性作用，更好发挥政府作用”。改革开放以来，我国逐步确立了社会主义市场经济体制，实现了社会主义制度优势与市场经济一般规律的有机融合，展现了处理政府与市场关系的中国智慧和中国方案。市场机制通过价格信号和竞争机制，能够优化资源配置、激发经济活力，推动经济增长和技术进步。然而，市场调节也会导致信息不对称、公共产品供给不足以及资本无序发展等问题，需要政府通过科学制定政策、优化制度设计，发挥补短板、强弱项、固底板、扬优势的作用，营造市场化、法治化、国际化一流营商环境，为市场主体和经济发展赋能。构建高水平社会主义市场经济体制，政府和市场缺一不可。新时代新征程，我们须以经济体制改革为牵引，实现有效市场和有为政府的良性互动，让“看得见的手”和“看不见的手”各展其长，共同助力经济增长。

The dual-wheel drive of an effective market and a proactive government is the fundamental support for promoting high-quality development. High-quality development is the hard truth of the New Era and the primary task of building a modern socialist country in all respects. The market, this “invisible hand,” through efficient allocation of production factors, promoting the formation of market entities, and driving enterprise technological innovation, becomes an important driving force for economic growth and technological progress. Fully leveraging the role of the market mechanism can form an innovation system with enterprises as the main body, thereby promoting the improvement of total factor productivity. At the same time, increased market openness creates favorable conditions for the domestic economy to integrate into global industrial and supply chains. However, relying solely on market forces is insufficient; the government, this “visible hand,” needs to play a better role. The government can coordinate the allocation of resources, make forward-looking plans, and implement targeted policies. By establishing a macroeconomic governance system, providing public services, strengthening market supervision, and actively preventing and resolving various risks and challenges, it can effectively compensate for market failures and provide basic support for the effective operation of the market. It is evident that for the market to be more effective, the government needs to be more proactive. At the same time, an effective market and a proactive government jointly serve high-quality development, ensuring consistency in macro-policy orientation and promoting coordinated and orderly economic development.

有效市场和有为政府的双轮驱动，是推动高质量发展的根本支撑。高质量发展是新时代的硬道理，是全面建设社会主义现代化国家的首要任务。市场这只“无形的手”，通过高效配置生产要素、促进市场主体形成、推动企业技术创新，成为经济增长和技术进步的重要动力。充分发挥市场机制的作用，可以形成以企业为主体的创新体系，进而推动全要素生产率的提升。同时，市场开放程度的提高还为国内经济融入全球产业链和供应链创造有利条件。但单纯依靠市场力量是不够的，政府这只“有形的手”需要发挥更好作用。政府能够统筹调配资源、前瞻布局、精准施策，通过建立宏观经济治理体系、提供公共服务、加强市场监管以及积极防范化解各种风险挑战，有效弥补市场失灵，为市场有效运行提供基础支撑。可见，让市场更有效，需要政府更有为。同时，有效市场和有为政府共同服务于高质量发展，能够确保宏观政策取向一致性，促进经济协调有序。

Important relationships that need to be handled to promote the better integration of an effective market and a proactive government.

推动有效市场和有为政府更好结合需处理好的重要关系

Handle the relationship between vitality and order. General Secretary Xi Jinping pointed out, “Chinese modernization can and should achieve a dynamic balance of being lively without chaos, active yet orderly.” [2]2 A quotation from Xi Jinping’s speech on the dynamic balance required in Chinese modernization, emphasizing order alongside vitality. In the process of Chinese modernization, while stimulating the vitality of market entities, it is necessary to maintain market order, requiring both being “able to let go” and being “able to manage well.” This not only requires relaxing market access and reducing institutional transaction costs to stimulate the innovation and entrepreneurship enthusiasm and investment confidence of market entities, but also requires ensuring market order by improving the rule-of-law environment and regulatory system. The government should focus on strengthening the rule of law and credit system construction. While strengthening anti-monopoly efforts and preventing unfair competition, it should ensure fair competition for enterprises by optimizing the business environment and perfecting market rules. It should be noted that we must adhere to the direction of market-oriented reform, minimize direct government intervention in market activities and direct government allocation of resources, continuously deepen the reform of “delegating power, improving regulation, and upgrading services,” [3]3 “Delegating power, improving regulation, and upgrading services” (放管服) is a reform slogan referring to streamlining administration, delegating authority, strengthening oversight, and improving government services to the public and businesses. improve the mechanism for ongoing and ex-post regulation, ensure that the market plays a decisive role in resource allocation and the government plays its role better, continuously stimulate the vitality of market entities, and enhance their confidence.

处理好活力和秩序的关系。习近平总书记指出，“中国式现代化应当而且能够实现活而不乱、活跃有序的动态平衡”。在中国式现代化进程中，激发市场主体活力的同时必须维护好市场秩序，既要“放得活”，也要“管得住”。这不仅需要放宽市场准入、降低制度性交易成本，激发市场主体的创新创业热情和投资信心，还需通过完善法治环境和监管体系，确保市场秩序。政府应着力加强法治和信用体系建设，在加强反垄断和防止不正当竞争的同时，通过优化营商环境和健全市场规则，保障企业公平竞争。需要注意的是，必须坚持市场化改革方向，最大限度减少政府对市场活动的直接干预、减少政府对资源的直接配置，不断深化“放管服”改革，完善事中事后监管机制，确保市场在资源配置中发挥决定性作用，更好发挥政府作用，不断激发市场主体活力、增强市场主体信心。

Handle the relationship between efficiency and fairness. The relationship between efficiency and fairness is an eternal proposition in economic and social development. General Secretary Xi Jinping scientifically elucidated the relationship between efficiency and fairness, pointing out that Chinese modernization should “better achieve the balance, mutual promotion, and unity of efficiency and fairness,” emphasizing that “while promoting high-quality development and making the ‘cake’ bigger and better, we must further distribute the ‘cake’ well.” [4]4 A paraphrase of Xi Jinping’s remarks on balancing efficiency and fairness, using the metaphor of making and distributing a cake. Efficiency implies the optimal allocation of resources by the market and the maximization of economic benefits, and is key to promoting rapid economic and social development; fairness implies that promoting social fairness and justice and enhancing people’s welfare must be the starting point and ultimate goal, and is related to the realization of sustainable development and common prosperity. Correctly handling the relationship between efficiency and fairness can not only ensure the sustainability of economic development but also enhance social cohesion.

处理好效率和公平的关系。效率与公平的关系是经济社会发展中的永恒命题。习近平总书记科学阐明了效率和公平的关系，指出中国式现代化要“更好实现效率与公平相兼顾、相促进、相统一”，强调“要在推动高质量发展、做好做大‘蛋糕’的同时，进一步分好‘蛋糕’”。效率意味着市场对资源的优化配置和经济效益的最大化，是推动经济社会快速发展的关键；公平意味着必须以促进社会公平正义、增进人民福祉为出发点和落脚点，关乎可持续发展和共同富裕目标的实现。正确处理好效率与公平的关系，不仅能保障经济发展的可持续性，还能增强社会凝聚力。

Handle the relationship between development and security. Development is the core goal of the economy, and security is the foundation and prerequisite for development. The “Decision” proposes “achieving a positive interaction between high-quality development and high-level security, effectively ensuring the country’s long-term stability and security.” [5]5 A formulation from the “Decision” of the Third Plenary Session of the 20th Central Committee, linking high-quality development with high-level security. Against the backdrop of a sluggish global economy and geopolitical turmoil, how to ensure security while pursuing development has become a major issue commonly faced by all countries. Balancing development and security requires both achieving steady development under the premise of security and continuously consolidating the security foundation through development. The sustained development of an effective market can provide sufficient resources and means for maintaining security, while the secure environment created by a proactive government provides a solid backing and guarantee for development. In the future, we must both promote economic development by improving the systems and mechanisms for high-standard opening up and steadily expanding institutional opening up, and strive to build autonomous and controllable industrial and supply chains, promote high-level scientific and technological self-reliance and self-strengthening, smooth the domestic and international dual circulations, and stabilize the overall situation of national development. The positive interaction between high-quality development and high-level security is an inevitable result of the better integration of an effective market and a proactive government, and also creates favorable internal conditions and a stable external environment for Chinese modernization.

处理好发展和安全的关系。发展是经济的核心目标，安全是发展的基础与前提。《决定》提出“实现高质量发展和高水平安全良性互动，切实保障国家长治久安”。在全球经济低迷与地缘政治动荡的背景下，如何在发展中保障安全成为各国普遍面临的重大课题。统筹发展和安全，既要实现安全前提下的稳健发展，也要在发展中不断巩固安全基础。有效市场的持续发展能够为维护安全提供足够的资源和手段，有为政府营造的安全环境则为发展提供了坚实后盾和保障。未来，既要通过完善高水平对外开放体制机制、稳步扩大制度型开放推动经济发展，也要着力打造自主可控的产业链供应链、推动高水平科技自立自强，畅通国内国际双循环，稳固国家发展大局。高质量发展和高水平安全良性互动，是有效市场和有为政府更好结合的必然结果，也为中国式现代化创造良好的内部条件和稳定的外部环境。

The government’s “visible hand” and the market’s “invisible hand” must be consistently applied throughout all links of the national economic cycle.

将政府“有形之手”和市场“无形之手”始终贯穿国民经济循环的各个环节

The theory of social reproduction points out that the national economic cycle consists of four links: production, distribution, circulation, and consumption. A comprehensive understanding and full utilization of the roles of an effective market and a proactive government in these four links, consistently applying the government’s “visible hand” and the market’s “invisible hand” throughout all links of the national economic cycle, is crucial for achieving high-quality development.

社会再生产理论指出，国民经济循环由生产、分配、流通和消费四个环节构成。全面认识并充分发挥有效市场和有为政府在这四个环节中的作用，将政府“有形之手”和市场“无形之手”始终贯穿国民经济循环的各个环节，对实现高质量发展至关重要。

In the production link, coordinate and advance supply-side structural reform. The production link is the core of economic development; supply-side structural reform is an important lever for optimizing the production system, and it is also an inevitable requirement and choice for stimulating new growth momentum, shaping first-mover new advantages, and achieving innovation-driven development, requiring coordinated advancement by the government and the market. On the new journey of the New Era, we should promote the free flow of production factors, the efficient allocation of various resources, and the full release of market potential by improving the systems and rules of the factor market. At the same time, focus on high-quality development and develop new quality productive forces according to local conditions. General Secretary Xi Jinping pointed out: “New quality productive forces require both the government’s forward-looking planning and guidance and scientific policy support, and the market mechanism’s regulation and continuous innovation by micro-entities such as enterprises; they are jointly cultivated and driven by the government’s ‘visible hand’ and the market’s ‘invisible hand’.” We should give full play to market forces to promote enterprise technological innovation and disruptive innovation; the government can adopt a series of measures to guide and promote the transformation and upgrading of traditional industries, accelerate the vigorous development of emerging industries, and allow the market to gather toward the goal of building a modern industrial system. In addition, the government should alleviate structural contradictions through effective intervention; in the process of reducing overcapacity and shoring up weak links, it should guide resources to flow to key areas such as green energy and emerging industries, achieving dynamic balance and optimization of supply and demand.

在生产环节，协同推进供给侧结构性改革。生产环节是经济发展的核心，供给侧结构性改革是优化生产体系的重要抓手，也是激发新增长动力、塑造先发新优势、实现创新驱动发展的必然要求和选择，需要政府与市场协同推进。新时代新征程，应通过完善要素市场制度和规则，促进生产要素自由流动、各类资源高效配置以及市场潜力充分释放。同时，聚焦高质量发展，因地制宜发展新质生产力。习近平总书记指出：“新质生产力既需要政府超前规划引导、科学政策支持，也需要市场机制调节、企业等微观主体不断创新，是政府‘有形之手’和市场‘无形之手’共同培育和驱动形成的。”应充分发挥市场力量，推动企业技术革新和颠覆性创新；政府可以采取一系列措施，引导和推动传统产业转型升级，加速新兴产业蓬勃发展，让市场朝着构建现代化产业体系的目标集聚。此外，政府还应通过有效干预缓解结构性矛盾，在去产能、补短板的过程中，引导资源流向绿色能源、新兴产业等关键领域，实现供需的动态平衡和优化。

In the distribution link, accelerate the formation of an income distribution system compatible with high-quality development. Income distribution is an important link in the operation of the social economy and directly concerns social fairness and stability. By improving the coordination mechanism of primary distribution, redistribution, and tertiary distribution, social fairness can be effectively promoted. In primary distribution, the market plays a decisive role, reasonably distributing production results in the form of wages, profits, rent, etc. The government, through means such as tax regulation, social security, and transfer payments, strengthens the redistribution function and effectively narrows the income gap. At the same time, the government and the market jointly guide social forces to actively participate in tertiary distribution, promoting the development of charitable undertakings and social welfare. Historical materialism holds that productive forces determine relations of production, and relations of production also exert a counteractive effect on productive forces. The distribution system belongs to the category of relations of production, and its construction must be determined by the objective conditions of the productive forces. In the future, with the effective incentives of market primary distribution and the effective regulation of government redistribution, we should accelerate the formation of an income distribution system compatible with high-quality development, ensuring sustained and stable income growth and effective protection of fair distribution, providing a continuous endogenous driving force for total social demand.

在分配环节，加快形成与高质量发展相适应的收入分配制度。收入分配是社会经济运行的重要环节，直接关系社会公平与稳定。通过完善初次分配、再分配和第三次分配的协调机制，可以有效促进社会公平。初次分配中，市场发挥决定性作用，通过工资、利润、租金等形式合理分配生产成果。政府则通过税收调节、社会保障和转移支付等手段，加强再分配职能，有效缩小收入差距。同时，政府和市场共同引导社会力量积极参与第三次分配，促进慈善事业和社会公益的发展。历史唯物主义认为，生产力决定生产关系，生产关系亦对生产力产生反作用。分配制度隶属于生产关系范畴，其构建必须由生产力的客观状况决定。未来，应借助市场初次分配的有效激励和政府再分配的有效调节，加快形成同高质量发展相适应的收入分配制度，确保收入持续稳定增长、公平分配得到有效保障，为社会总需求提供源源不断的内生动力。

In the circulation link, accelerate the construction of a unified national market. The circulation link, as a bridge connecting production and consumption, is the capillary of the national economic cycle. Accelerating the construction of a unified national market helps to improve the efficiency of market operations and expand market potential and space. The government should play a leading role in this process; by formulating and improving unified market rules and standards, promoting the construction of logistics infrastructure and deepening the reform of the circulation system, it can reduce the logistics cost of the whole society, improve the circulation efficiency of goods and services, pave the way and build bridges for the market, and promote the free flow and efficient allocation of production factors such as goods, labor, and capital nationwide. Adhere to high-level opening up, steadily expand institutional opening up, and actively align with high-standard international economic and trade rules; deepen the reform of the foreign trade system, actively develop service trade, green trade, and digital trade, build commodity trading centers and global distribution hubs, encourage and support various market entities to orderly lay out overseas circulation networks, support qualified regions in building international logistics hub centers and commodity resource allocation hubs, and smooth the major logistics channels for opening up. Give play to the “dual-wheel drive” role of the market and the government, accelerate the construction of a unified national market, and form a new development pattern with domestic circulation as the mainstay and domestic and international circulations reinforcing each other.

在流通环节，加快构建全国统一大市场。流通环节作为连接生产与消费的桥梁，是国民经济循环的毛细血管。加快构建全国统一大市场，有助于提升市场运行效率，拓宽市场潜能和空间。政府在这一过程中应发挥先导作用，通过制定和完善统一的市场规则和标准，推动物流基础设施建设和深化流通体制改革，降低全社会物流成本，提升商品和服务的流通效率，为市场铺好路、搭好桥，促进商品、劳动力、资本等生产要素在全国范围内自由流动与高效配置。坚持高水平对外开放，稳步扩大制度型开放，主动对接国际高标准经贸规则；深化外贸体制改革，积极发展服务贸易、绿色贸易、数字贸易，建设大宗商品交易中心和全球集散分拨中心，鼓励并支持各类市场主体有序布局海外流通网络，支持有条件的地区建设国际物流枢纽中心和大宗商品资源配置枢纽，畅通对外开放的物流大通道。发挥市场和政府“双轮驱动”作用，加快构建统一大市场，形成以国内大循环为主体，国内国际双循环相互促进的新发展格局。

In the consumption link, improve the long-term mechanism for expanding consumption. Consumption is final demand and a lasting driving force for economic growth. Through the synergistic effect of an effective market and a proactive government, improving the long-term mechanism for expanding consumption can further release the potential of domestic demand and boost consumer confidence. The role of the market in the consumption link is mainly reflected in the innovative upgrading of consumption scenarios and the continuous optimization of product supply, providing consumers with richer, more diverse, convenient, and efficient consumption experiences, and continuously meeting the people’s aspirations for a better life. The government, on the other hand, needs to focus on optimizing the income distribution structure through policy guidance, effectively improving the social security system, and promoting the overall improvement of residents’ consumption levels. Specifically, this can be achieved by creating more employment opportunities, promoting income increases and burden reductions for middle- and low-income groups, and enhancing their consumption capacity, willingness, and level. Appropriately raise the basic pension for retirees, raise the basic pension for urban and rural residents, and raise the financial subsidy standards for urban and rural residents’ medical insurance. Intensify and expand the implementation of the “two new” policies [6]6 The “two new” policies refer to large-scale equipment renewal and the trade-in of consumer goods., innovate diversified consumption scenarios, expand service consumption, and promote the development of the cultural tourism industry. Actively cultivate emerging consumption hotspots and growth points such as the debut economy, the ice and snow economy, and the silver economy, quickly adapt to the changing trends of consumption structure, ensure efficient matching of consumption supply and demand, and provide strong impetus for sustained and healthy economic development.

在消费环节，完善扩大消费长效机制。消费是最终需求，是经济增长的持久动力。通过有效市场和有为政府协同作用，完善扩大消费的长效机制，能够进一步释放国内需求潜力，提振消费信心。市场在消费环节的作用主要体现在消费场景的创新升级和产品供给的持续优化，为消费者提供更加丰富多元、便捷高效的消费体验，不断满足人民对美好生活的向往。政府则需通过政策引导，着力优化收入分配结构，切实完善社会保障体系，促进居民的整体消费水平提升。具体而言，可通过创造更多就业岗位，推动中低收入群体增收减负，提升消费能力、意愿和层级。适当提高退休人员基本养老金，提高城乡居民基础养老金，提高城乡居民医保财政补助标准。加力扩围实施“两新”政策，创新多元化消费场景，扩大服务消费，促进文化旅游业发展。积极培育首发经济、冰雪经济、银发经济等新兴消费热点和增长点，快速适应消费结构的变化趋势，确保消费供给与需求的高效匹配，为经济持续健康发展提供强劲动力。

(Author: Hong Junjie, President and Professor of Shandong University of Finance and Economics)

（作者：洪俊杰，系山东财经大学校长、教授）

Online Editor: Huihui

网络编辑：慧慧