Further reform will prompt measures to balance interests, release market potential

History and our experience over more than 30 years show that the key to achieving national rejuvenation, prosperity and the well-being of the people is to rely on reform and the continuous yield of reform dividends.

China's reform has entered the "deep water area" and it will be a profound, complicated and arduous process never before seen. Economic restructuring, social transformation and administrative transition are dependent on major breakthroughs in reforms, but these require making headway in adjusting major relationships.

The Third Plenary Session of the 18th Central Committee of the Communist Party of China has shown determination and courage to promote the necessary comprehensive reforms.

Giving priority to people's wellbeing and forming a reasonable structure of interests are priorities, but these will involve big chages in the way various interests relate to one another and a big breakthrough in income distribution.

To solve the problem of the imbalance of interests, we should increase the incomes of urban and rural residents, especially low-income groups. The report of the 18th CPC National Congress set the goal that by 2020, the country's GDP and per capita annual income of urban and rural residents should be double 2010 levels.

This goal can be achieved through substantive breakthroughs in income distribution reform. Judging from international experience, the expansion of the middle-income group depends on demographic urbanization. Urbanization will bring about rapid development of the service industry, resulting in quick expansion of the middle-income group. But this will require the integration of migrant workers into cities so that they become service consumers.

Another necessary reform is adjusting the relationship between the government and market to produce market vitality. Past experience shows that this relationship has a bearing on overall reform. If well handled, it will not only ensure healthy economic development, but also bring about social harmony and help eliminate corruption. Otherwise, a tense relationship will present many difficulties to economic restructuring, social transformation and the changing of government functions.

The main problem at present is the government's excessive administrative intervention in microeconomic activities. Therefore, a more rational relationship between the government and market is needed to allow the market to fulfill its basic role in allocating resources. A competitive market system offers the biggest reform dividends.

In this regard, we need to deepen price reform with the pricing of resources as the focus, promote financial reform with the marketization of interest rates and exchange rates as the focus, expand the space for social capital investment with promoting reform of monopoly industries as the focus, and adjust and optimize the allocation of state-owned capital with the focus on public welfare.

Whatever steps are taken to deepen economic, social, political, cultural and ecological reform, or to promote a new round of overall opening-up, there is an urgent need for legal and institutionalized guarantees and strengthening of the rule of law. Comprehensively deepening reform requires accelerating the construction of a law-based government and a fair and just society. Legislative guarantees for a modern market economy need to be established. A modern economy is a market economy based on the rule of law. A market economy lacking the rule of law is not only unfair, it is also unsustainable.

Adapting to the changing situation and regulating the reform process through legislation will not only effectively guarantee market equity, it will also effectively prevent distortions of reform. A fair legal environment is an important guarantee for social stability and healthy development. Reform of the judicial system should be sped to increase judicial transparency.

Meanwhile, the construction of a law-based government is a fundamental step toward good governance. The legislation concerning finance, taxation, government purchases and the allocation of public resources must be strengthened. Only with administration according to law will the government achieve the goal of building a law-based government by 2020.

Deepening comprehensive reform requires further opening-up. But prompting reforms with further opening-up will face more challenges. However, releasing the dividends of further reforms will benefit not only 1.3 billion Chinese people, but also regional economies that have close economic and trade ties with China. China's transformation and comprehensive opening-up will let the world share the "China dividend", especially regional economies.

The Chinese dream is the realization of common prosperity for the country's people. Market-oriented reform over the past 35 years has successfully made China rank among middle-income countries, and comprehensively deepening reform will enable the country to stride toward the rank of high-income countries.

The author is president of the China Institute for Reform and Development and the article is excerpts from a recent speech at the Eighth China-Singapore Forum. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 11/15/2013 page11)