Dividends from reform

The "equality debt" produced by its stalled efforts to deepen reforms, and which has long accumulated in its economic and social development, has also become a heavy burden on China's sustainable development. For example, the reform of State-owned enterprises has failed to be advanced and the private sector has encountered bigger obstacles than in the past in certain areas. While attaching excessive importance to the pursuit of efficiency, the country has not paid parallel attention to the pursuit of fairness, which has caused inequality and injustice to spread from economic to political, social and other fields.

Due to the absence of a scientific and equitable decision-making and correction mechanism, the country has failed to strike a balance among different interests in the process of reforms and this has caused some monopolistic and interest groups to take shape. Now reforms in the economic field alone cannot resolve a wide range of deep-rooted contradictions and problems. For example, China's efforts to transform its economic development model call for the reform of its current management system that has handcuffed its economic development and improvements in other administrative management institutions. To further boost its productivity and improve its production relations, China should take bolder steps to push forward institutional reforms.

To this end, China should try to better deal with the relations between the government and the market in a bid to strike an interest balance among various groups. The government's excessive power and its excessive administrative interventions into the market will easily produce rent seeking. To avoid this, a scientific and fair decision-making and correction mechanism should be established, beginning with an open and transparent information disclosure mechanism. Past experiences indicate that market dysfunction, to a large extent, stems from information asymmetry among players. Open, transparent and independent information disclosure will help lower the country's transaction costs and improve its market efficiency. A democratic opinion environment and effective monitoring will serve as an important misconduct correction mechanism in China's bid to push forward the market economy and reforms.

China should also promote governance in accordance with the Constitution and other laws and restrict the excessive use of administrative power. Based on this, institutional reforms should be steadily advanced to ensure the enforcement of reforms in other areas. Institutional reforms will not only facilitate China's bid to push for democratization and rule of law but also serve as the only path for the country to advance toward Constitutional civilization and build a society ruled by law.

Zhao Xiao is a professor with the School of Economics and Management, Beijing University of Science and Technology, and Shi Guicun is a member of the university's Research Section of China's Economy.

(China Daily 01/21/2013 page8)