The Process and Logic of China’s Socialist Market Economy from Mechanism to System

ABSTRACT Since the founding of the People’s Republic of China, state leaders including Mao Zedong, Zhou Enlai, Deng Xiaoping and Xi Jinping have all made important statements on the fundamental economic system of socialism. Reviewing and analyzing the history of the formulations in important Chinese documents on the fundamental economic system, this paper highlights China’s exploration of theoretical innovation as promoted by innovation in practice. The paper contends that in dealing with the relationships between planning and market and between government and market, and while defending the fundamental role played by the market in resource allocation, we should consistently stress the superiority of socialism and point to the active roles of the party and government, while emphasizing the attribute of “socialist.” In discussing how to combine the socialist economic system with the market economy, the paper stresses the superiority of socialism as a fundamental system, and contends that public ownership must be retained as the mainstay of the economy, so that the general character of the market economy can be transformed and endowed with a socialist character. The paper also discusses how the market economy should be combined with the fundamental economic system of socialism from the perspective of political economy.