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Guangming Daily: State-Ownership Is Crucial for China

[Editor’s Note: In an effort to rebut a suggestion to reduce state-ownership, Xinhua republished a Guangming Daily article that discussed the importance of state-ownership to China’s economy. The article argues that a public economy, especially an economy with state-owned enterprises (SOEs), is the keystone of the socialist system. State-ownership enables China to use SOEs to maintain a quick control of the direction of the market, to compete globally, and to achieve its strategic goals. The authors of the article are from the Marxism Institute of the Chinese Academy of Social Sciences (CASS). The following are excerpts from the article.] [1]

The society’s fundamental economic system directly determines the nature of our society and ensures the success of our socialist development. Since the reform and opening up of China, the rapid development of the private sector, as well as the active exploration and continuous development of the public sector, have both contributed to the great achievements of our socialist economic development, which has attracted worldwide attention. However, some people believe that our economic success since the reform and opening up should be entirely attributed to the private sector. They think the “public sector, as the dominant player,” has now become irrelevant or even harmful. There are others who view the two economic sectors of the initial stage of the basic socialist economic system as opposites and consider the enhancing of the basic economic system as the “state giving up ownership to private owners.” Some have even proposed, “The key to reform is to change public ownership to private ownership.” These views greatly confuse right from wrong and depart from the provisions of our Constitution and the Party’s policies. It is therefore necessary to clarify the theoretical principles.

1. Public Ownership Is the Basis of the Socialist Economic System with Chinese Characteristics

The main economic characteristic of a socialist system is the establishment of a strong public-owned economy, especially a state-owned economy, and, on top of this, the establishment of an independent and relatively complete industrial system and national economic system.

The dominant position of a public-owned economy is not only in accordance with our Constitution, but also a practical requirement for achieving sound and rapid economic development. Compared to developed countries, China has a larger population, scarce per capita resources, and overall low productivity. If we let the private sector dominate the economy, not only are we not able to concentrate our forces on accelerating development, but also, our country will gradually become polarized between the rich and the poor, and the entire society will lose cohesion and motivation for development. In November 2002, the Party’s 16th Conference stated that we “must unswervingly consolidate and develop the public-owned economy” and proposed a new round of reform goals, such as SOEs’ “mergers and acquisitions,” and “integration and expansion.” In October 2003, the “CCP Central Committee’s Decisions on Several Issues Regarding the Perfection of the Socialist Market Economic System” gave the direction “to further push forward investing more state-owned capital into important industries and key areas that are related to national security and the national economy.” The economy grew accordingly. From 2002 to 2009, excluding interest, the taxes paid by SOEs increased from 291.48 billion yuan (U.S. $44.2 billion) to 1.14748 trillion yuan (U.S. $173.8 billion), with an average annual growth rate of 21.80%. Those who promote the ideas that the “state-owned economy has nothing to do with people’s livelihood,” “the state-owned economy is outdated,” and “the public economy is a failure” cannot withstand the tests of history or reality.

2. Have a Deeper Understanding of the Dominant Position and Crucial Role of the Public Sector

There is no doubt that the private sector has played an important role in such areas as growing the economy, addressing employment, and “letting some people get rich first.” However, in order to fully achieve sound, rapid, and scientific economic growth; participate in high-end international competition; and promote the common prosperity, the public sector’s role is undisputable.

First, our public-owned economic system dominated by the state-owned economy is the main power driving our economic development. For over 60 years since the New China was founded, the average annual growth rate of our state-owned economic output has been more than 10%. The taxes and interest paid by SOEs has been more than those from other forms of ownership. For a long period in the reform, the taxes paid by SOEs accounted for more than 80% of our national revenues. Currently they still account for more than 50%. At present, SOEs provide 80% of our economy’s most important products and materials, key technologies, and important consumer goods, such as oil, electricity, steel, coal, and large-sized, specialty machinery. SOEs or companies controlled by SOEs are also the main providers of fertilizer, pesticides, and large-scale agricultural machinery.

Second, our public-owned economic system dominated by the state-owned economy allows the state to efficiently control the economy. It is hard for a capitalist society, which is based on private ownership, to achieve efficient state regulation and control of the economy. Take the well-developed U.S. as an example. Despite the fact that the government injected a large amount of bailout funds after the financial crisis, it still could not meet Wall Street’s lust for more money. A large number of poor people remain unemployed, the debt crisis and the large number of financial “toxic assets” cannot be eliminated, and consumption and investments have not improved. The fundamental issue is that the private-owned monopolies oppose and interfere with the government’s timely and effective control. In China, however, to overcome the negative impact of the Western financial and economic crisis, we quickly used the state-owned economic forces to actively carry out a national investment plan and efficiently produce a large quantity of public goods, thus ensuring the stability of both the micro and macro economies.

Third, our public-owned economic system dominated by the state-owned economy has been important in enabling our country to develop our economy as we see fit and to compete internationally. From 2005 to 2010 alone, the central SOEs’ total assets increased from 10.5 trillion yuan (U.S. $1.6 trillion) to 24.3 trillion yuan (U.S. $3.7 trillion), with an average annual increase of 18.2%. This greatly enhanced our overall economic strength. Thirty of our SOEs made the list of the top 500 companies in 2010, as ranked by the U.S. Fortune magazine. Unlike what some people have said–“The higher the proportion (of SOEs), the worse it is for economic transformation”–they actually became the Western companies’ fiercest competitors. The state-owned economy is also the major impetus for our country to carry out major research projects and build an innovative country.

Fourth, our public-owned economic system dominated by the state-owned economy is an important guarantee for scientific development. The public-owned economy not only focuses on economic efficiency, but also pays attention to social and ecological benefits, as well as the overall and long-term interests of the nation. In the areas of speeding up economic restructuring, safeguarding national economic security, strengthening military production, and other areas, the state-owned economy has strong systematic and technological advantages. It plays an indispensable leading role for the sound and rapid development of our economy.

Comrade Jiang Zemin pointed out that, without the public-owned economic system based on the state-owned economy, there would have been no socialist economic base, nor would there have been an economic base and powerful material support for the Communist regime and the socialist superstructure. Therefore, if the dominant position of the public-owned economy ever changes, the nature and role of the regime and the entire superstructure will all change with it.

1. Xinhua, “Precisely Understand the Basic Economic System of Socialism,” September 28, 2011