Traditional factors can unlock new potential

Editor's note: Promoting market-based allocation of production factors is key to building a unified national market and establishing a high-standard socialist market economy. Qiushi Journal spoke to Xu Shanchang, director of China Society of Macroeconomics, Fan Xin, vice-dean of Renmin University of China's School of Economics, and Liu Peilin, chief researcher at the Academic Center for Chinese Economic Practice and Thinking of Tsinghua University, on the impact of market-based allocation of production factors. Below are excerpts from the interviews. The views don't necessarily represent those of China Daily.

China's factor markets remain constrained in some places by administrative boundaries and local interests. They impose their own restrictions on land, labor, technology and other factors. These problems limit optimum resource allocation and weaken economic returns in these places.

Advancing the reform of market-based allocation of production factors hinges on coordination between an efficient market and a well-functioning government. The market should decide the resource allocation, and the government should stimulate the vitality of all factors and ensure their smooth flow.

Production factors are not static. As the economy develops, new factors such as technology and data are becoming increasingly important alongside traditional factors of land, labor and capital. China's development experience shows that traditional and new factors are not mutually exclusive but complementary. The new factors will not necessarily replace traditional ones but enhance the existing ones. Developing new quality productive forces requires both traditional inputs and the increasing contribution of emerging factors. Empowered by digital and intelligent technologies, traditional factors can unlock new potential and shift from low-efficiency utilization to high-value transformation and provide support for the application of new technologies.

China has unveiled comprehensive pilot reform plans to advance market-based allocation of production factors across 10 key regions. Deepening reform of market-based allocation of production factors will strengthen factor synergies and create new opportunities for economic and social development. Such reform can advance the development of new quality productive forces by exploring institutional innovation in technology, computing power and talent and accelerating the transformation of scientific breakthroughs from laboratory results into industrial application.

The reform will also promote innovation and industrial upgrading by activating land resources, capital and labor and guiding them toward high-end manufacturing and green, low-carbon industries. Meanwhile, fostering the market-based flow of data, carbon emissions rights and ecological products will give rise to new business models and industry formats. By unifying rules, strengthening protection of property rights and improving trading platforms, these pilots can enhance economic expectations and bolster confidence among market players, thereby attracting more private capital into innovation and entrepreneurship.

The simple accumulation of production factors can no longer sustain high-quality economic and social development. It is essential to promote a system-wide integration, improve coordination and enhance the overall efficiency of market-based factor allocation. This requires more effective coordination among factors by enhancing the integration of new and traditional factors and removing bottlenecks in the links of science and technology with industry and finance.

All this calls for improving factor pricing and compensation mechanisms by allowing prices to be determined primarily by market supply and demand and preventing improper administrative intervention. Compensation should reflect market-based assessments of factor contributions to fully unlock their vitality. Additionally, China should build a unified, well-regulated and secure factor market by strengthening trading platforms and regulatory frameworks, advancing modern governance of factor markets, and enhancing risk prevention to ensure security and control in key domains.