Lesson 8: Economic System Reform

Household Contract Responsibility System

After the Third Plenary Session of the Eleventh Central Committee of the Communist Party of China, the Party and the government implemented the policy of reform and opening up. The reform started in rural areas to mobilize farmers' enthusiasm for production and promote rural economic development.

In 1978, peasants in Xiaogang Village, Fengyang, Anhui Province, implemented the system of contracting production to households and taking responsibility for their own profits and losses. In this way, farmers had the autonomy of production and their enthusiasm for production was greatly increased. In the autumn of the first year, agriculture achieved a bumper harvest, with production more than six times higher than the previous year. This practice of establishing a production responsibility system was recognized by the central government.

With the support and advocacy of the central government, the system of responsibility for joint family production was gradually spread throughout the country, and by 1983, it was basically implemented in rural areas nationwide. The implementation of the system of responsibility for joint family production stimulated the enthusiasm of peasants' labor and brought about a great liberation of rural productivity, and agricultural production and peasants' income were greatly improved. With the development of agricultural production towards specialization, commercialization and socialization, rural township enterprises also developed rapidly, opening up a new way for farmers to get rich and achieve modernization.

Reform of the urban economic system

In October 1984, the Third Plenary Session of the Twelfth Central Committee of the Communist Party of China (CPC) adopted the Decision of the CPC Central Committee on the Reform of the Economic System, which called for accelerating the pace of reform of the economic system with emphasis on cities.

Subsequently, urban reform was launched in full swing, mainly to develop the original single public ownership economy into a multi-ownership economy with public ownership as the mainstay; to separate the government and enterprises of state-owned enterprises, to gradually expand the autonomy of production and operation of enterprises, and to implement a system of management responsibility; to implement a system of distribution based on labor and the co-existence of multiple distribution methods.

The central aspect of urban economic system reform is to enhance the vitality of enterprises. Through the reform, enterprises have the autonomy to operate; the implementation of the responsibility system of business contracting, the economic interests of enterprises, employees' economic income and business results are linked to the enterprise, good business, employees' income will be more, to overcome the long-standing malady of eating "pot rice". This has greatly mobilized the enterprise, the enthusiasm of the workers, and enhanced the vitality of the enterprise. In 1987, China's gross industrial and agricultural product, gross national product, state revenue and the income of urban and rural residents all doubled compared to 1978.

Socialist Market Economy System

In 1992, the 14th National Congress of the Communist Party of China (CPC) explicitly proposed to establish a socialist market economy system, and in 1993, the 3rd Plenary Session of the 14th CPC Central Committee adopted the Decision of the CPC Central Committee on Several Issues Concerning the Establishment of a Socialist Market Economy System, pointing out that: the socialist market economy system is combined with the basic socialist system, and the establishment of a socialist market economy system is to make the market play a fundamental role in the allocation of resources under the macroeconomic control of the state. Under the macro-control of the state, the market plays a fundamental role in the allocation of resources.

Combining the basic socialist system with the market economy and establishing the socialist market economy system is conducive to achieving coordinated economic development and stable and rapid growth, which will give a great impetus to modernization and make China's economic strength significantly stronger.（634words）