The Relationship between the Non-public Economy and the Public Economy: Dominant Position of Public Ownership Economy and the Leading Role of the State-owned Capital Cannot Change
Prof. Zhang Zhikun is from School of Business Administration, Gongshang University, Zhejiang, July 2024
The Decision on Further Comprehensively Deepening Reform and Promoting China’s Modernization issued by the Third Plenary Session of the 20th CPC Central Committee (2023) once again clearly stated that “we must unswervingly consolidate and develop the public economy and unswervingly encourage, support and guide the development of the non-public economy”. The author noticed that the term “non-public economy” was used in the “Decision”, instead of the ambiguous term of “private economy”. Here I need to reiterate the explanation I made in the article “Characteristics of the Coexistence of Two Ownership Systems and Related Issues “: The so-called private economy in China is not completely equivalent to the private economy. In China, the so-called private economy is just a relative term proposed by some experts for unknown purposes to distinguish it from the state-owned economy mainly for better communication with the foreign western people.
In fact, it is to apply Western terms, regard the state-owned economy as the official economy, and regard the non-state-owned economy as the private economy. In this way, the private economy, individual economy and collective economy are confused, and all of them are labeled as “private”, while the state-owned economy that truly belongs to the whole people of Chinese citizens is pushed to the disadvantageous position of “non-private”.
From an political economic point of view, the term “private economy” is unscientific and non-standard, and it cannot be included in the national economic statistical classification. It is precisely because of the ambiguity of this term that in reality, the argument of “not competing with the people for profits” in China’s public opinion is rampant, and the reform policy also has many restrictions on the development of state-owned enterprises, while some people want to give the green light and support to the development of private enterprises.
In fact, the so-called support for private enterprises is mainly to support the development of private enterprises, and no one cares about supporting the development of collective enterprises. Therefore, the current proposal of “promoting the private economy to grow bigger, better and stronger” seems to mean “promoting the private economy to grow bigger, better and stronger in China”. What does this understanding mean?
It is bound to bring about questions about what “ism” contemporary China is pursuing and what “path” it is taking!
The author hopes that in the future at least the theoretical community will follow the standardized terminology of the Central Committee “Decision”, and no longer use the ambiguous concept of “private economy” in a general way.
The question of how the non-public economy will develop in China today is a political weathervane of great significance. The Third Plenary Session of the 18th CPC Central Committee in 2013 once again made it clear that it would “unwaveringly encourage, support and guide” the non-public economy, which means that the non-public economy will continue to rise in contemporary China. In view of this, people have reason to ask, to what extent should the non-public economy develop in China and what kind of shape should it take?
Regarding this issue, I believe that based on the spirit of the “Decision”, we can have the following understandings.
1. Functional positioning of the non-public economy in China is its Secondary and Supplemantary
The so-called functional positioning refers to the social functions that different economic elements of ownership objectively need to possess under different historical backgrounds and contemporary conditions.
The same is true for the non-public economy in contemporary China. As a private economy, under the overall institutional framework of Chinese socialism, whether it is a private enterprise or an individual business, its economic function is to build a high-level socialist market economic system and prosper and develop a Chinese market economy.
As the Central Committee “Decision” points out, “a high-level socialist market economic system is an important guarantee for China’s modernization. We must give better play to the role of the market mechanism, create a fairer and more dynamic market environment, optimize the efficiency of resource allocation and maximize benefits, and both “let it go” and “control it”, better maintain market order, make up for market failures, smooth the circulation of the national economy, and stimulate the endogenous motivation and innovation vitality of the whole society.”
People all admit that under the premise and under the condiition of “controlling it”, the development of the non-public economy at this stage can effectively “smooth the circulation of the national economy, stimulate the endogenous motivation and innovation vitality of the whole society”, so as to “better play the role of the market mechanism, create a fairer and more dynamic market environment, and optimize the efficiency of resource allocation and maximize benefits.”
The political function of the non-public economy
Based on the positive economic function of promoting high-quality economic development, the political function of the non-public economy has become clear and standardized. The development of the non-public economy in China is not to cultivate and support the expansion and strengthening of the “rich groups” in China, nor to create and achieve China’s new bourgeoisie, and then let them change the nature of the social, economic and political system.
On the contrary, non-public economy is for consolidating and improving the socialist economic system. Under such institutional constraints, private capital cannot expand disorderly, cannot have political influence, and cannot form groups to make a show. As the “Decision” points out, “it will uphold and improve the basic socialist economic system, promote high-level scientific and technological self-reliance, promote high-level opening up, build a modern economic system, accelerate the construction of a new development pattern, and promote high-quality development.”
In this sense, the political positioning of China’s non-public economy is to give full play to the institutional and governance advantages of China’s socialism, and to consolidate and strengthen the socialist system with Chinese characteristics by supporting and guiding the healthy development of non-public enterprises. Any attempt to replace public enterprises with non-public enterprises, to let the non-public economy dominate the world, and to change the nature of the socialist economic system is all wishful thinking.
In other words, private enterprises and private capital as forms of private ownership must adapt to the framework of the basic socialist system and must follow China’s socialist path under the leadership of the Communist Party. It is not allowed to transplant, copy or establish a capitalist market system and institutional system outside of this.
II. How to Clarify the relationship between the non-public sector and the public sector
The relationship between the non-public economy and the public economy is very clear. That is the provision of the current socialist basic economic system in China: “with the public economy as the main pillar and multiple ownership economies developing together”. This actually implies two levels: one is that at the level of ownership structure and economic system, the public economy and the non-public economy are in a relation of “main pillar” and “supplementary (auxiliary)” main and auxiliary relationship, which is the fundamental attribute of the relationship between the public economy and the non-public economy under the socialist system.
The other meaning is that at the micro-level of enterprises, both public enterprises and non-public enterprises are legal entities in the market economy, and they are in a relationship of equal competition and common development, which is a general requirement for the operation of the market economy.
The relationship between these two levels should not be confused. In other words, just because any enterprise is an equally competing market subject, this cannot deny that the public economy has an unshakable dominant position in the ownership economic structure. The reason is very simple, because the fundamental nature of any society is determined by the nature of the dominant ownership economy. Theoretically we should always remember Marx’s method of “universal illumination”. In Marx’s A Contribution to the Critique of Political Economy, the scientific methodology of political economy is stated as follows: There is in every social formation a particular branch of production which determines the position and importance of all the others, and the relations obtaining in this determinant branch accordingly determine the relations of all other branches of production as well. It is a universal illumination within which all other colors are immersed and [which] modifies their specific features; or as if a special ether determined the specific gravity of everything found in it”
https://www. marxists. org/archive/marx/works/download/Marx_Contribution_to_the_Critique_of_Political_Economy; Method of Political Economy
The so-called saying that multiple forms of ownership are equal and without distinction between primary and secondary (supplemnatary) economies is a fantasy that completely ignores the historical facts and objective development laws of human society.
Under the principle of “two unshakable” principles, the Party “Decision” proposes “ensuring that all types of economic ownership can use production factors equally according to law, participate in market competition fairly, and receive equal legal protection, and promote the complementary advantages and common development of all types of economic ownership.”
Obviously, this refers to the equal competition relationship between the main behaviors of enterprises in the operation of the market economy, and it does not mean that in the ownership economic structure and economic system of the whole society, allowing the development of the private economy can negate or even replace the dominant position of the public economy. This “subject” (market behavior subject) and that “subject” (ownership structure subject) are not the same thing!
But some people just want to seize every opportunity to deliberately make a fuss about this issue. This is also the case after the release of the “Decision” of the Third Plenary Session of the 18th CPC Central Committee. Some people are overly nervous and excited, they publicly hype that the “Decision” does not contain the statement “public ownership as the main pillar”, saying that “the cancellation of this key statement is a historic change”, and they conclude that “in this “Decision”, the non-public economy and the public economy have achieved true equality, and there is no longer a distinction between who is the main pillar and who will play a leading role.”
Following this logic, it is necessary to cancel the main position of the public economy and raise the non-public economy to the main position, realize the replacement of the main and auxiliary positions of the public and private economies, and completely change the nature of China’s social economy. Frankly speaking, some people and the forces they represent have been working hard for this goal.
We will say that this is complete nonsense and it is not the case at all.
The Decision of the Third Plenary Session of the 18th CPC Central Committee reiterated the “two unshakable” principles in the second major issue, “building a high-level socialist market economic system”. Although the Decision did not directly reiterate the phrase “upholding the dominant position of public ownership”, this does not constitute any “historic change” at all.
Because in the first major issue of the “general theory” nature, “the great significance and overall requirements of further deepening reform in an all-round way and promoting Chinese-style modernization”, “Decision” stipulates that “the overall goal of further deepening reform in an all-round way” is first of all “focusing on building a high-level socialist market economic system, giving full play to the decisive role of the market in resource allocation, better playing the role of the government, adhering to and improving the socialist basic economic system, promoting high-level scientific and technological self-reliance, promoting high-level opening up to the outside world, building a modern economic system, accelerating the construction of a new development pattern, and promoting high-quality development.”
What is the “socialist basic economic system”?
The new party program/constitution adopted at the 20th National Congress (2022) has clearly stipulated: “We must uphold and improve the basic economic system including public ownership as the main pillar, promote the common development of multiple ownership economies, distribution according to work as the main pillar, promote the coexistence of multiple distribution methods, and the socialist market economic system.”
Let me ask, if the “public ownership as the main pillar” is removed from the “socialist basic economic system”, can it still be called the “socialist basic economic system”? Of course no!
From the perspective of ideology and theory, “upholding the dominant position of public ownership” is already included in the logic of “consolidating and improving the basic socialist economic system”.
The “Decision” emphasizes the “basic socialist economic system” as a major premise in the “General Introduction”, which naturally includes the connotation of consolidating and improving the dominant position of public ownership, so there is no need to repeat this in the “Sub-Discussion” section later, which is a foregone conclusion. This means that the non-public economy can never take over the main position and replace the public economy as the core and main pillarof China’s economic system.
From the perspective of practical path, “three concentrations” are new requirements for the dominant position of public ownership.
The “Decision” requires that state-owned enterprises should strengthen their core functions, enhance their core competitiveness, concentrate on important industries and key areas related to national security and the lifeline of the national economy, concentrate on public services, emergency response capabilities, public welfare areas related to the national economy and people’s livelihood, and concentrate on forward-looking strategic emerging industries (referred to as “three concentrations”).
This shows that in the future, state-owned enterprises must not only become stronger, better and bigger, but also further strengthen their leading and controlling capabilities in key areas and key industries. This is of course the latest requirement to strengthen the dominant position of the public economy.
It can be seen that although the “Decision” did not elaborate on the dominant position of public ownership and the leading role of the state-owned economy in the “Sub-discussion” section, it not only did not deny the “dominant position of public ownership”, but also put forward higher-level tasks and requirements on how to consolidate and develop the dominant position of public ownership and give play to the leading role of the state-owned economy in the new era andas the new background.
As a combination of multiple ownership elements, the socialist economic structure and economic system must have main and auxiliary parts. This is not a distinction between high and low in market competition, but each different part has its own function. Just like the human body, the main part is of course the heart, brain and main organs of the human body.
Other organs and muscles and skin are of course also important, but they must be supported by the heart and controlled by the brain. Public ownership is equivalent to the heart, brain and main organs of the human body, among which the heart and brain are the state-owned economy. Therefore, the dominant position of public ownership and the leading role of the state-owned economy cannot be shaken and cannot be shaken. Supporting and encouraging the development of non-public ownership economy must not change the dominant position of public ownership and the leading role of the state-owned capital economy.
III. Clarifying the development direction and future of the non-public economy
First, the non-public economy must become an organic part of China’s socialist modernization.
The purpose of implementing this policy has been highly condensed in the “overall requirements” of the general part of the “Decision” and the “construction of a high-level socialist market economic system” in the sub-part, that is, to make the development of China’s non-public economy a part of “promoting the modernization of our national governance system and governance capabilities”, an organic part of “comprehensively deepening reform”, and an effective means of promoting China’s socialist modernization.
Looking to the future, China’s non-public enterprises must integrate into China’s socialist modernization, which is the only correct direction for their development.
Second, the relationship between the non-public economy and the public economy is not a zero-sum relationship at this stage (primary stage of socialism), but a complementary relationship.
Although it is a primary-supplementary relationship in terms of ownership structure, it is an equal competition relationship at the enterprise level. As stated in the “Decision”, “it is necessary to ensure that all types of ownership economies use production factors equally in accordance with the law, participate in market competition fairly, and receive equal legal protection, and promote the complementary advantages and common development of various types of ownership economies.” Because of this, it is necessary to “adhere to the policy of creating a good environment and providing more opportunities for the development of the non-public economy.”
Third, while “encouraging” and “supporting”, we must strengthen the socialist “guidance” of the non-public economy.
The “Decision” once again emphasizes “unwaveringly encouraging, supporting and guiding the development of the non-public economy”. To carry out “guidance”, it is necessary to carry out necessary “standardization”, “correction” and “selection”, to do what is right and not to do what is wrong, and to impose certain restrictions, so that the development of the non-public economy can keep pace with the rhythm of China’s economic development and keep pace with the development of the public economy. In this regard, it can also be understood that non-public enterprises must do a good job of “following up”.
In other words, it is not a question of “who advances and who retreats between public and private enterprises”, but that non-public enterprises must “follow up” and avoid negative aspects and strengthen positive aspects under the strong and effective guidance of the public economy to achieve their own development and progress.
As in the past, every time an important political event occurs, it always greatly activates and arouses the appetite of some political speculators. They observe the wind direction, speculate on the trend, and wait for an opportunity to conduct political hype and manipulate, trying to influence and control the trend of public opinion.
As soon as the “Decision” of the Third Plenary Session of the 18th CPC Central Committee appeared, some people were eager to create topics and write articles, hoping to bring out the political rhythm they need, snatch the right to interpret and explain the “Decision”, and painstakingly create a public opinion atmosphere that meets their expectations, instilling in the people the illusion that reform and opening up is a turn to the “right”, and creating a preconceived prejudice that China has to integrate into the Western capitalist system.
But the actual situation is not like this. The author believes that the Third Plenary Session of the 20th Central Committee and the “Decision” made by it are completely in line with the correct line established by the Party Central Committee with Comrade Xi Jinping as the core since the 18th National Congress.
What should be changed will be changed resolutely, what should not be changed will never be changed, and what was wrong in the past will be resolutely corrected. This is a more distinct strategic confidence and the continued advancement of the path of socialism with Chinese characteristics in the new era. Some people want to create the so-called “cancellation of this key statement is a historic change” in the spirit of the Central Committee to spy on the political direction and influence political changes, which is a completely futile trick.
The future of China’s non-public economy
As for the future of China’s non-public economy, based on the careful understanding of the “Decision” of the Third Plenary Session of the 20th CPC Central Committee and the spirit of previous relevant documents, we believe that in the process of encouraging, supporting and guiding the development of the non-public economy, we must continue to improve and develop the socialist system with Chinese characteristics, strengthen this system rather than destroy or weaken it.
As the “Decision” points out, “to win the strategic initiative in the accelerated evolution of the century-old changes” and “to provide strong impetus and institutional guarantees for China’s modernization”, its goals are highly consistent with the goals of comprehensively deepening reform, that is, “to continue to improve and develop the socialist system with Chinese characteristics”, and to “build a solid fundamental system, improve basic systems, and innovate important systems”.
Therefore, it is entirely possible to publicly declare that the future of China’s non-public economy is by no means capitalism, but socialism, and it serves the great rejuvenation of the Chinese nation.
Of course, just as everything has a complex development process, in socialist China, encouraging, supporting and guiding the development of the non-public economy is also a difficult and exploratory undertaking.
In the process of its historical development, it is bound to have many complex movements of advance, retreat, detour and compromise, and even often present a situation of taking two steps forward and one step back.
As described by the classic writers, the road ahead cannot be as straight and flat as the sidewalk along the Neva River. But no matter how complex and arduous it is, the mission and responsibility of the non-public economy under the socialist system with Chinese characteristics is fixed and unchanged, that is, it must serve China’s socialist modernization, serve common prosperity, and serve China’s great socialist cause! Otherwise, there is no future.