The year 2022 marks the 30th anniversary of China's declaration of economic system reform to establish a “socialist market economy system(社会主义市场经济体制)” Over the past 30 years, China has strengthened the role of the market in resource allocation and economic operation, and has promoted ownership reform in which both the public – the core of China's socialist economy - and the non-public sectors of the economy develop together. China has continued to build a “basic economic system of socialism(社会主义基本经济制度) with Chinese characteristics”, in other words, an economic system which is based on fundamental socialist institutions but combines market economy mechanisms. At the same time, however, entering his third term Xi Jinping has stressed a Dual Circulation Strategy aimed at common prosperity and domestic consumption (“internal circulation”), leading to forecasts that China may be strengthening the socialist nature of its economic system. Therefore, from the perspective of completing the socialist market economy system that China is pursuing, this study aims to infer changes in China's economic system in the 3rd term of Xi Jinping, specifically by analyzing tasks related to economic system reform included within China's mid- to long-term development strategy and the direction of its promotion.
The reformation process of China's economic system following the implementation of reform and opening policy can be understood as one of establishing a basic economic system of socialism with Chinese characteristics. This process can be comprehended as changes in the relationship between the three elements of the basic economic system of socialism: joint development of public and non-public sectors of the economy (ownership relationship); the coexistence of various wealth distribution methods, with labor income as the main body (distribution relationship); and the socialist market economy system (relationship between market and government). In addition to reforming its economic system, China's opening and trade policies to connect the domestic economy and the world economy have played an important role in promoting domestic reform. From this aspect, China has pursued a strategy of linking reform and opening, which means to promote reform through opening. During his official report to the 20th National Congress of the Communist Party of China, Xi Jinping announced the goal of reforming the economic system, while also reaffirming that accomplishing the socialist market economy system lies at the foundation of the “Basic Economic System of Socialism” In addition, reforming current wealth distribution systems for the realization of common prosperity, promoting Dual Circulation as a new development structure, and institutional opening-up with regard to rules, regulations and standards were presented as important tasks for the next five years.
This study focuses on analyzing these issues. First of all, the key to completing the socialist market economy system is to complete market-based allocation of production factors. It includes the market supply of land, free labor mobility, and marketization of raising capital, together with marketizing transaction and standardization of new production factors like technology or data. In this study, we identified the areas of land system reform, “hukou(户口)”system reform, interest rate and capital market reform as the most representative tasks related to this goal. Second, as it advances toward a new development structure through dual circulation, China will accelerate reforms to eliminate obstacles blocking the virtuous circle of production, distribution, and consumption. To promote a virtuous circle within the domestic economy, reform tasks have been presented to allocate production factors at the stages of production, distribution, and consumption. Third, achieving common prosperity is a key goal of Chinese modernization pursued by China and thus will be further promoted as an important goal in the 3rd term of Xi Jinping. In order to realize common prosperity, reformation of the wealth distribution system is inevitable. Common prosperity will be pursued in two aspects: strategies to increase the size of the economic “pie,” and those to ensure a fair share for participants. The former is to form an olive-shaped income structure by maintaining a stable income for workers while fostering a middle class, while the latter is to reduce relative wealth inequality through redistribution and tertiary distribution. Fourth, more opening efforts will be made to connect the domestic economy and the international economy, in the form of institutional opening-up that connects rules, regulations, management, and standards related to investment and trade globally. However, there is a need for caution when considering how the strategy links safety and openness in response to risks arising in the opening-up.
The Chinese economic reform and opening-up aimed at achieving China's socialist market economy will continue in the third term of Xi Jinping. This study performed an in-depth forecast, based on the criteria of marketization and privatization, on the direction of China's future economic system reform. Marketization reform is expected to be pushed ahead, focused on market-based allocation of production factors, while privatization centered on reformation of mixed ownership is also likely to be gradually advanced. However, while such reform is taking place in the Chinese economy, the possibility of competition between China's socialist market economy system and the Western capitalist economic system continues to escalate amid the strategic competition between the U.S. and China. Under this situation, it will be an important task for a middle power like the Republic of Korea to firmly establish its principles and directions for competition issues as they arise.