Liu He in November: "Macroeconomic stability is a rare resource"

"Two unwaverings"; "sufficiently trust, rely on and respect entrepreneurs"; etc.

Your Pekingnologist has been sitting on this unfinished translation for four months because he first couldn’t finish it in time and then as time goes by it appeared less relevant.

But since the special meeting [Pekingnology] of the Financial Stability and Development Committee of the State Council chaired by Politburo member and Vice Premier Liu He last week restored [Financial Times] some badly-needed confidence, it may be high time to re-read his writing immediately after the Sixth Plenary Session of the 19th Central Committee of the Communist Party of China [Communique].

Before diving into the piece, here are some basic ABCs that are probably not sufficiently known to some China watchers, which might have led to confusion.

In most cases, immediately after a Plenary Session of a Central Committee, certain books including one bearing the name of 辅导读本 Tutorial Readings will be published to, as it is usually put, to help people learn and implement the spirit of that Plenary Session.

For example, the Sixth Plenary Session of the 19th Central Committee produced the 中共中央关于党的百年奋斗重大成就和历史经验的决议 [Chinese] Resolution of the CPC Central Committee on the Major Achievements and Historical Experience of the Party over the Past Century [English] in November 2021.

Then books including one entitled 《〈中共中央关于党的百年奋斗重大成就和历史经验的决议〉辅导读本》Tutoring Readings on the Resolution of the CPC Central Committee on the Major Achievements and Historical Experience of the Party over the Past Century are published, as publicly announced by Xinhua [Chinese] on November 16. The Xinhua announcement is also reprinted [Chinese] in the People’s Daily and carried by the prime-time news show 新闻联播 on CCTV [Chinese].

In addition to the Communique, the Resolution, and General Secretary Xi Jinping’s explanation [Chinese] on the Resolution, the articles in the book are written by current senior officials, including the one highlighted in the 目录 Table of Contents above - 《必须实现高质量发展》We Must Realize High-Quality Development by 刘鹤 Liu He.

Other articles include, for example, 改革开放是党的一次伟大觉醒 Reform and Opening-up is a Great Wake-up Call of the Party by 曲青山 Qu Qingshan, President of the Institute of Party History and Literature, on Page 237.

Then, these articles appeared on the pages of the People’s Daily one by one under the column of 学习贯彻党的十九届六中全会精神 Learn and Implement the Spirit of the Sixth Plenary Session of the 19th Central Committee of the CPC. For example, Liu’s article appeared [Chinese] on the People’s Daily on Nov. 24, a full week after the publication of the book has been announced. A slightly abridged version [Chinese] of Qu Qingshan’s article appeared on the People’s Daily on December 9.

This chronological order means the articles’ appearance on the People’s Daily is technically not their first publication. (This is all public information so next time buy the book instead of waiting for the People’s Daily!)

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Now we’re back to the article 《必须实现高质量发展》We Must Realize High-Quality Development itself. Here is an abridged translation:

Today, the principal contradiction facing Chinese society is that between unbalanced and inadequate development and the people’s ever-growing needs for a better life. Imbalances and inadequacies are essentially low-quality development. In the economic system, some areas have been close to modernization, some are partially modern, and some are inefficient and outdated.

At this stage, China’s production function is changing. We see changes in the factors of production, way of combination, and the efficiency of allocation in economic development. The hard constraints we face have increased markedly. The constraints imposed by resources and the environment are approaching the upper limit. Peaking carbon emissions and realizing carbon neutrality has become an important framework for China’s medium and long-term development. High-quality development and scientific and technological innovation become the optimal solution to multiple constraints.

In the stage of building a moderately prosperous society in all respects, we have mainly pursued the "quantity" [of the economy]. In the next stage of building a modern socialist country in all respects, we must solve the question of "quality" and achieve a significant improvement of quality amid the sustained growth in quantity.

Economic growth often experiences cyclical fluctuations, but wild fluctuations will damage factors of production and wealth of the nation. The history of economic growth of various countries shows that some fast-growing economies would plunge after an economic boom, and often never recover the boom again. Given the worldwide changes unseen in a century and the global economy fraught with uncertainties, macroeconomic stability has become a rare resource. High-quality development necessitates more attention paid to the supply-side efforts, and economic stability can be ensured by optimizing the economic structure. The macroeconomy is a continuous process that must not be disrupted.

Competitive enterprises are the micro-level foundation of high-quality development. To achieve high-quality development, we must take the cultivation of outstanding enterprises with core competitiveness as an important starting point for economic policies, thus laying solid micro-level foundations for a high-standard market system.

China has this problem where big enterprises are not strong. China has ranked first in the world in terms of the number of Fortune Global 500 companies in the past two years, but that is mainly due to the large size of the companies, and they still lag world-class enterprises in terms of innovation leadership and international competitiveness.

Small enterprises are dynamic in nature and large in number, but they suffer from weak market competitiveness and insufficient capabilities in upgrading. State-owned enterprises (SOEs) must consistently deepen reforms and participate in market competition in an efficient and fair manner. Private enterprises should work to produce innovative, distinctive, specialized, and sophisticated products, and combine risk-taking entrepreneurship with good corporate governance. Foreign-invested enterprises are essential to high-quality development, and we should encourage the introduction of more competitive products, technologies, and services so that they can create value in higher-level competition, and achieve mutual benefits and win-win outcomes.

Entrepreneurs are integrators of factors of production, explorers of markets, and promoters of innovation. Entrepreneurs are like fish, attracted by appropriate water quality and temperature. Therefore, it is necessary to create a favorable market environment for entrepreneurs to enable them to play their roles.

The Central Committee of the Communist Party of China gives unprecedented prominence to the importance of innovation. We must be keenly aware that due to the profound changes in China and beyond, scientific and technological innovation concerns not only development but also survival. The key to avoiding falling into the “middle-income trap” lies in whether we can transform from being driven by the input of factors of production to being driven by technological innovation.

Since the end of World War II, many countries have embarked on industrialization and even crossed the threshold of middle and high-income for a short time, but only a few countries such as the Republic of Korea, Singapore, and Israel have become developed countries without falling into the middle-income trap. These countries occupy important positions in global innovation and the division of labor in the industrial chain, without exception. Innovation is directly related to raising total-factor productivity, labor productivity, technological contribution, accumulation of human capital, and other factors.

It is necessary to optimize the structure of science and technology, truly establish an innovation system with enterprises as the mainstay, capitalize on the leading and supporting role of large enterprises, support small and medium-sized enterprises (SMEs) in becoming important sources of innovation, and strengthen international cooperation in innovation.

High-quality development should be market-oriented, rule-of-law-based, and internationalized. To achieve high-quality development, it is necessary to strengthen the market mechanism, foster healthy competition, cut institutional transaction costs, and establish a unified, open, and high-standard market system with orderly competition.

The socialist market economy is essentially an economy based on the rule of law. Therefore, it must be guided by principles of protecting property rights, honoring contracts, unifying the market, and ensuring equal exchange, fair competition, and effective supervision. We should also improve the legal system of the socialist market economy and provide a fair, stable, predictable, and law-based environment for market entities.

We should make dynamic improvements to high-quality development in high-level international competition, promote the institutional opening-up in terms of rules, regulations, and standards, and make the Chinese market more attractive and the Chinese enterprises more globally competitive. The orientation towards marketization, rule of law, and internationalization complement each other as the fundamental institutional requirements for cultivating and attracting world-class factors and high-quality entities [enterprises, farmers, and residents]. We must make efforts across the board to build a more mature and shaped system of the socialist market economy.

Under the framework of carbon emissions peaking and carbon neutrality, we must make the comprehensive transition towards a green and low-carbon way of production and lifestyle in a gradual and orderly manner. This is an extensive, profound, and systemic transformation of the economy and society. We will improve policies and the market system for green and low-carbon development, and give full play to the role of market mechanism for offering incentives and imposing constraints. We will study how to achieve green and low-carbon development under China’s current coal-based energy mix. We will address ecological and environmental issues in promoting green and low-carbon development, achieve major breakthroughs in green and low-carbon technologies, and accelerate the formation of spatial configurations, industrial structures, production modes, and ways of work and life that help to conserve resources and protect the environment. We will be fully involved in the global environment and climate governance, and guide international cooperation to address climate change.

We must always stick to reform and opening up. Ahead of us are more complicated and arduous reform tasks. We must liberate our minds and adopt a pioneering spirit and a professional attitude to make breakthroughs in key areas and key links of reform and opening up. We will work to promote that the price of land, finance, science and technology, data, and other factors is determined by the market, overhaul pricing mechanisms for coal, electricity, and other energy sources, and encourage the development of green energy. We should promote broader and deeper reform by improving the efficiency of resource allocation, ensuring unimpeded economic circulation, and increasing effective incentives.

China’s policy of opening to the outside world will not change - it will not change today, and it will not change in the future. We will promote a shift in China’s opening-up from the flow of commodities and factors of production to institutional opening-up in terms of rules and others. We will move faster to establish an institution of rules and a regulatory model aligned with internationally common rules. An important way to promote opening up is to participate in market competition in developed economies and to introduce high-tech and high-quality direct investment from developed economies.

We will promote the high-quality development of the Belt and Road Initiative, and achieve high-level “bringing in” and “going global” strategies.

We will improve the perfection of the global economic governance system, hold high the banner of economic globalization, negotiate and sign high-level free trade agreements, promote the formation of a closer and more stable global economic system, and achieve a positive feedback effect with domestic high-quality development.

Always stick to the “two unwaverings”. By summing up the experience in socialist construction, the Party has established the basic socialist economic system: public ownership is the mainstay and diverse forms of ownership develop together; an income distribution system under which distribution according to one’s work is the mainstay while multiple forms of distribution exist alongside it; and the socialist market economy system. This is a great creation of the Communist Party of China and the Chinese people, so it must be upheld, consolidated, improved, and developed.

The basic economic system and the stability of big national policies is an absolute need for entities [enterprises, farmers, and residents]. To achieve high-quality development, we must comply with the Resolution and unwaveringly consolidate and develop the public sector, and unwaveringly encourage, support, and guide the non-public sector.

We will prompt state capital and state-owned enterprises to grow stronger, better, and bigger. We will also work to make the public sector more capable of competition, innovation, control, influence, and resilience. We will promote the healthy development of the non-public sector and the healthy growth of people in that sector.

We should deeply understand the psychological characteristics of the society, and the needs and concerns of the market. Based on that, we should strengthen the guidance of expectation, enhance the capability to formulate policies, do a good job in policy evaluation and communication with the market, adopt a problem-oriented approach, and introduce more high-quality policies that serve entities [enterprises, farmers, and residents].

We will strengthen market supervision and anti-monopoly regulation to guard against the disorderly expansion of capital, maintain market order, and guide the orderly and healthy development of the factor of capital.

To adapt to the new economic development trend, we should both tighten the supervision and encourage innovation of the platform economy, and nurture platform enterprises with world-class competitiveness.

We should promote entrepreneurship, sufficiently trust, rely on and respect entrepreneurs, and enable them to play their important role in fostering innovation and raising competitiveness.