Kong Dan: The Chinese Communist Party has Long led the Market Economy; It Needs to Be Good at Controlling capital
Ideological Torch March 17
[Intro to the QQ public microblog account of Ideological Torch:]
This public account belongs to the National Cultural Security and Ideological Construction Research Center of the Chinese Academy of Social Sciences, the Chinese Historical Materialism Society and the Beijing Xifengtang jointly created the “Gathering Together Positive Forces and Spreading Good Ideology” official microblog. Our mission is to promote socialist ideology and promote our country’s mainstream values, safeguard our national security are our mission. We are committed to contributing to the great rejuvenation of the Chinese nation!
Editor’s Note: Socialism with Chinese characteristics emerged from over 90 years of practice of revolution, construction and reform, as well as the profound historical traditions of the Chinese nation. The Chinese idea is that “the people are what is most precious, society comes next, and the ruler is much less important.” Chinese people say that economy means “supporting the people from generation to generation”. Maintaining the people’s dominant position is the core value of socialism. The Communist Party’s purpose is to serve the people wholeheartedly. The essence of of socialism with Chinese characteristics is the leadership of the Communist Party of China. In a country as big as China, on the Communist Party is capable of maintaining national unity and social stability. Only the Communist Party can lead China down the socialist road. The leadership of the Party is a thread that runs through the entire socialist era.
Pay Close Attention to Important Documents From the Nineteenth Congress of the Chinese Communist Party
The report of the 19th National Congress of the Communist Party of China put forward, for the first time, the concept of the “new era of socialism with Chinese characteristics.” The Central Economic Work Conference held at the end of last year stated that since the 18th Congress of the Chinese Communist Party, we have successfully handled overall economic development. The main ideological fruit of this practice is Xi Jinping’s new era of socialist economic thought with Chinese characteristics. At it core are the Seven Principles to Uphold:
- Uphold the Party’s leadership over economic work,
- Uphold development thinking that makes people central,
- Uphold the principle of mastering and adjusting to the new economic situation,
- Uphold the principle of handling well the relationship between the government and the market,
- Uphold the principle of adjusting to the main contradictions and changes in our country’s economic development, improving macroeconomic adjustments, and reforms of the structures for economic supply.
- Uphold the principle of new problem-oriented economic strategies,
- Uphold correct work strategies and methods, seeking progress in stability and focusing on the bottom line.
This was another important document issued since the report of the Nineteenth Party Congress.
Later, on January 30, when the Political Bureau of the CPC Central Committee held its third collective study session, Comrade Xi Jinping further elaborated on the concept of a “modern economic system” in the report of the 19th Party Congress and the Central Economic Work Conference. He pointed out: building a modern economic system is the strategic goal of China’s development, and it is also urgently needed in order to change China’s mode of China’s development by optimizing the structure of growth and transforming and increasing the impetus for growth. This needs to be discussed in depth. There are seven parts to building a modern economic system:
- An industrial system of innovation-led and coordinated development,
- A unified and open, competitive and orderly market system,
- An efficiency-enhancing, fair-revenue income distribution system,
- An advantaged and coordinated urban-rural development system.
- A resource-saving and environment-friendly green development system,
- A diverse, balanced, safe and efficient comprehensive open system that gives full play to the role of the market and improves the role of the government.
- Addressing all the links, all the various levels and all the various fields of social and economic activities as a whole.
Understanding the Spirit of the “Three Consistents” of the Central Economic Work Conference
We should attach great importance to and seriously study the important speech delivered by General Secretary Xi at the Central Party School seminar of January 5. In this speech, Comrade Xi Jinping emphasized three “Consistents”:
- We must consistently insist on socialism with Chinese characteristics must be consistent,
- We must be consistent in adhering to the great task of building the Communist Party, and
- We must be consistent in strengthening our sense of urgency and avoiding major hazards.
First of all, General Secretary Xi emphasized that socialism with Chinese characteristics did not fall from the sky. It is derived from the practice of 40 years of reform and opening up. China has been probing and making discoveries that have developed this concept ever since the founding of the People’s Republic of China 69 years ago. It arose from the constant probing and discoveries made by the Communist Party of China during its past 97 years. The historical exploration of the decline and the end of the history of the 5,000 years of Chinese history also contributed to its development.
Socialist ideas with Chinese characteristics are also inseparable from these five sources. General Secretary Xi reviewed the history of the rise and fall of China for thousands of years from a grand historical perspective, reviewed the histories of the Communist Party of Chinese Communist Party of the Soviet Union, and finally came to the historical task of leading the great cause of socialism with Chinese characteristics. Comrade Deng Xiaoping said that the persistence and improvement of socialism need continue for several generations, and perhaps for dozens of generations, and the hard work of dozens of generations. Dozens of generations comes to a thousand years. This is looking at history from a very broad perspective.
Socialism with Chinese characteristics emerged from the practice of more than 90 years of revolution, national construction and reform, as well as the profound historical traditions of the Chinese nation. The Chinese concept advocates that “the people are what is most precious, society comes second, and the ruler is not so important.” The Chinese say that the word economy means “sustaining the people from generation to generation.” Upholding the centrality of the people is the core value of socialism. The purpose of the Communist Party is to serve the people wholeheartedly. The essence of socialism with Chinese characteristics is the leadership of the Communist Party of China. Only the Communist Party can maintain the unity of the country and social stability. Only the Communist Party can lead China down the socialist road. Therefore, the leadership of the Chinese Communist Party is the thread that runs throughout the socialist era.
General Secretary Xi also pointed out that our party is not only the ruling party, but also the revolutionary party, and a party that is constantly revolutionizing itself. We must consistently insist on the great task of building the Communist Party.
Finally, we need to cultivate a sense of urgency and avoid major hazards. General Secretary Xi cited a number of risks in many different areas. Regarding economic risks, first, the world economy is recovering slowly, protectionism is on the rise, and Sino-US economic and trade frictions will continue over the long-term. The United States is launching a “301 investigation” against China and is using sanctions against China. Second, the interaction between China’s domestic finance and international finance are becoming closer and more frequent. Since 2008, the overall debt level in the West has been high, and the leverage ratio has continued to rise. Now they are gradually moving away from their policy of unconventional quantitative easing. This will increase global asset flows and result in a new allocation of assets.
The risk of spillover effects from their domestic monetary and fiscal policies has intensified and so we must pay attention to international financial security. The third is the domestic debt problem. In the past few years, we have effectively reduced the risk by taking various measures. However, we must continue to issue warnings about risk in this areas; the risk of failure of small and medium-sized financial institutions has risen along with the possibility of bond defaults. Shadow banking is difficult to supervise, and the real estate market is tightly linked to the financial markets. Household debt is heavy there is a great deal of large hidden local hidden debt. Major changes are likely to occur. Fourth, China’s opening up to the outside world and the construction of the “Belt and Road” have affected relevant overseas strategic interests around the world. However, instability, uncertainty, and geopolitical changes in the world poses risks to our strategic interests.
General Secretary Xi’s speech on January 5 was directly related to his “Three Tough Battles” at the Economic Work Conference. The first of the Three Tough Battles is to guard against major risks, including implicit debt and the vulnerability of financial institutions.
Ever since the policy of reform and opening up began, the Chinese Communist Party has faced a new challenge: how to effectively supervise the market economy and in particular, how to control capital. I would like to make a few points: First, about capital issues. What is the logic of capital? The Communist Manifesto states that since the capitalist society must be divided into two distinct classes of capitalists and proletarians, capitalism must inevitably produce its own grave-diggers, so the historical logic of capitalist development must end in the elimination of private ownership. But they did not realize that it would take thousands of years for socialism to develop. This is an extremely long process. In the process of unfolding of the logic of the development of capital, complicated situations have arisen. For China, just as it did for the former Soviet Union, this historical process has had its frustrations and its ups and downs.
During this process, the Communist Party of China must lead the market economy for a long time but the nature of the Communist Party itself and its values are revolutionary. Although some people are very disgusted with those who are bringing up the topic of revolution again, the Party’s ultimate goal is the elimination of private ownership. However, our market economy currently includes a very large non-public sector economy. Capital is at the core of the market economy. The values of capital and those of the Communist Party are at odds.
The nature of capital is value-added, capital is the soul of the capitalists. Capitalists are merely the embodiment of capital. Its value orientation is the pursuit of personal interests or the interests of market entities. So within the logic of capitalism lies its ability to digest socialism. The challenge we face today is serious. As far as the actual operations are concerned, we continue to talk about the positive role of capital, but the negative effects of capital are rarely mentioned. More than three years ago, when I was interviewed on the Shuipi Forum, I said that capital should be kept in a cage. In 2015, at the root of the stock market disaster was capital, both foreign capital and domestic capital. Therefore, we must maintain our whip hand over capital, not only to take advantage of its positive role, but also to effectively control and constrain its extremely negative effects. This is a great challenge for our Party.
Second, on the relationship between the respective roles of the government and the market. There are two possibilities: the combination of the government and the market is “market mechanisms are effective: vitality at the micro economic level and appropriate controls at the macro level”. The bad combination is that market mechanisms do not play a role, the there is no vitality at the micro economic level and control at the macro level is either absent or excessive. If market controls are not done properly, the latter situation may also occur.
The fundamental idea of the so-called “market faction” is that China should further marketize. They always think that “loosening” has not gone far enough. First, the report of the 18th National Congress clearly pointed out that the overall goal of the reform is to promote the modernization of the national governance system and governance capacity, rather than the “marketization” that some people, oversimplifying, this is the goal. Moreover, just what is “appropriate”? We have forty years of experience and lesson about this. When the two mesh well, the economy develops smoothly and the situation is better than it is in the West. Of course, the government has frequently intervened and the enterprises have not been able to realize their full potential. People who run enterprises naturally want to see them realize their full potential. However, the combination of the three do not mesh property. The degree of macro-control “degree” is wrong problems also arise because of a disorderly market. Therefore looking at it from a control perspective, this is a very difficult problem.
In short, we need to clearly understand the problem of capital and strictly control it. Economic operations work better when the role of government and market mechanisms mesh well. When they don’t, economic operations don’t do well.
(Author: Kong Dan, chairman of the CITIC [note: formerly known as China International Trust Investment Corporation. CITIC is a state-owned investment company] Reform and Development Research Foundation)