Editorial: Reform helped China through brutal 2020, but nation cannot rest on its laurels

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Humanity is about to say goodbye to a year decimated by the Covid-19 pandemic and to consider a year 2021 characterized by a mixture of hope and risk.

China’s economy has rapidly stabilized and recovered thanks to appropriate disease prevention and control measures, the solid foundation laid by 40 years of reform and development, and the Chinese government’s unwavering commitment to support reform and openness. People sincerely hope that the New Year will bring the normalization of pandemic control and further advances in reform.

For China and other countries, 2020 has been an extremely difficult year. The pandemic has hit the global economy hard, but China is expected to become the only major economy to grow this year. The battle for poverty reduction was won, the 13th five-year plan ended smoothly and a wealthy society was built globally.

These are hard earned achievements. At the end of 2019, China was devastated by its first Covid-19 epidemic. Its GDP fell 6.8% year-on-year in the first quarter of 2020 and 1.6% year-on-year in the first half of the year. The Chinese government has adopted strong measures to control the epidemic, including a number of fiscal and monetary relief policies. The economy has shown strong resilience, largely built on 40 years of reform and opening up; our rapidly expanding production capacity for medical products would have been unimaginable without it.

The good news is that in 2020, even under the shadow of the pandemic, China continued to introduce further reforms, especially for the economy and especially in the financial and capital markets sectors.

There were many highlights. China has made significant progress in reforming the stock market, including the pilot registration system and changes to the delisting system. The government also approved a three-year program for the reform of public enterprises and advanced changes in “delegation of control and service”, the land management system, the household registration system, science and technology systems and the medical insurance system.

Most notable was the notion of “promoting reform through openness”. China has expanded its number of pilot free trade zones to 21, promoted the construction of the Hainan Free Trade Port, joined the Regional Comprehensive Economic Partnership and said it plans to join the Comprehensive Agreement and progressive transpacific partnership.

More importantly, during the first half of the year, the Central Committee and the Council for State Affairs released two high-level papers outlining views on improving market allocation systems and mechanisms for productive forces, and on improving the socialist market economy in the Xi era. The recently concluded Central Economic Labor Conference reiterated that “a high level socialist market economy system must be built”.

Obviously, this means that China should more deeply embody the principles of making government more efficient and letting the market play a decisive role in resource allocation. China has established a framework for the market economy, but the system still has several weaknesses and flaws, mainly concentrated in resource allocation and fair competition. For this reason, further reform is necessary.

In addition, demands for action against monopolies are becoming more and more urgent. Currently, the central government is intensifying its efforts to fight monopolies. Relevant departments are to open investigations into industry giants, especially internet platforms, for alleged monopoly behavior. The results of these surveys should be consolidated by strong laws and regulations.

We must recognize that reform and opening-up are advancing more slowly than popular expectations and China’s urgent need for social and economic development. Many of the difficulties we face are in large part due to a lack of reform.

In 2021, the Chinese economy will continue to linger. Amid the shock of the pandemic, the macroeconomic leverage ratio has increased, financial risks can “explode” with increasing frequency, and countless small, medium and micro enterprises are in need of support. As a result, national reformers still face difficult tasks. We urgently need to advance pension reform, land reform, household registration reform, tax and tax reform, and scientific research system reform. If the pandemic has taught us anything, it’s that we must also prioritize changes to the public health system.

Future reforms should pay more attention to comprehensiveness. The term is frequently used in the phrase “comprehensive deepening of reform” and covers our economic, political, cultural, social and other systems. While reforms have different priorities in different areas, their effectiveness ultimately depends on whether they work together. Progress with reforms in some areas is difficult precisely because reforms in other areas have been slow to follow or even lagged behind.

In the early stages of reform and opening-up, policymakers often turned to systems theory as a theoretical tool, focusing on studying the relationships between individual elements and the system as a whole. This methodology is still valuable today. It should be noted that our socio-economic system contains many interrelated subsystems.

The Central Economic Work Conference identified eight key tasks for government, including the need to strengthen national strategic science and technology power and improve the self-reliance and controllability of industrial supply chains.

Obviously, the intention is to maintain the security of national supply chains and avoid technological “bottlenecks”. This is neither the result of a campaign by companies and research institutes similar to the Chinese military-industrial complex, nor a reflection of the state of Chinese manufacturing or investment. Instead, it represents a breakthrough in the long-standing stagnant reform of education and technology systems to create a relaxed, tolerant and generous environment for the influx of domestic talent.

Looking ahead to 2021, China must balance the arduous tasks of reform and development with enormous external uncertainties. As the pandemic shows, so-called black swan incidents can occur. Continuing to deepen reforms and widen openness can give us a precious sense of certainty in these uncertain times.

Contact the translator Matthew Walsh ([email protected]) and editor-in-chief Michael Bellart ([email protected])

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