China has released another major document regarding the establishment of a unified domestic market. Recently, the Central Committee of the Communist Party of China (CPC) and the State Council issued the Guidelines on Accelerating the Establishment of a Unified Domestic Market. The guidelines require accelerating the establishment of unified domestic market rules, breaking local protectionism and market segmentation, removing major impediments that restrain the economic cycle, promoting the smooth flow of a broader range of goods and resources and expediting the establishment of a unified domestic market that is highly efficient, rules-based, fair and open. The document reiterates the market-oriented reform policy, which will help clear up the surrounding uncertainties. The statement on removing major impediments is highly pertinent to the situation on the ground.
The establishment of a unified and open market is needed to reduce trading costs and improve economic efficiency. In the current context, building a unified domestic market will provide underlying support and intrinsic requirements for creating a new pattern of development, a prerequisite for achieving high-quality economic development. This goal is long-standing, which can be seen from two framework documents. In 1993, the Third Plenary Session of the 14th CPC Central Committee adopted the Resolution of the CPC Central Committee on Issues Concerning Building the Socialist Market Economy, which mentions the “establishment of a unified and open domestic market system.” In 2013, the Third Plenary Session of the 18th CPC Central Committee adopted the Decision on Major Issues Concerning Comprehensively Deepening Reforms, proposing that “an open and fair unified market system is the foundation for allowing the market to play a decisive role in resource allocation.” After much preparation, the guidelines were adopted at the 23rd meeting of the Central Committee for Deepening Overall Reform at the end of 2021, making evident that the establishment of a unified domestic market is a long-term arduous mission.
With the gradual establishment of a socialist market economy, China has made great progress in building a unified domestic market. However, greater challenges lie ahead as some major impediments are yet to be removed. So what are these major impediments? The head of the National Development and Reform Commission (NDRC) has listed several problems. For example, market segmentation and local protectionism are prominent, the resource factor market needs to be perfected, the quality system of the goods and service market is not complete, market regulation rules, standards and procedures are inconsistent and the super large market fails to give full play to the role of technological innovation and industrial upgrading.
These problems do indeed exist. Let me take local protectionism as an example. With the gradual formation of the domestic market network and continuous changes in the industrial structure, local protectionism has become more concealed and complicated. We have seen a shift of protection from goods to protecting factors and services and from protecting local enterprises to protecting the local market. Moreover, market access discrimination remains, rules and regulations are inconsistent and nontransparent and local governments often protect the interests of the local market and local enterprises through local preferential taxation, land and subsidy policies, as well as local regulations and standards. In the past, protecting the local market could be done, for example, by setting up checkpoints on highways to prevent nonlocal goods from entering the local market. However, more sophisticated measures are needed to solve new difficulties faced today.
Major impediments do not only exist in the aspects mentioned above but also deep within people’s understanding and opinions. Although the socialist market economy system has been the goal of the economic system reform for 30 years, quite a few officials, who appear to be in favor of market economy principles, are secretly against this development and still believe in giving administrative orders when things get critical. Among all the major impediments, the lack of trust in the market is the most threatening.
Together with other misconceptions, it has formed a strange unity of opposites that have become the resultant force preventing the construction of a unified domestic market. After being published, the guidelines immediately attracted close attention, but there are a few common misunderstandings. Some hold that the establishment of a unified domestic market should be a process of self-development rather than government intervention. From a long-term perspective, the market is indeed an embodiment of the automatic expanding order. However, for China, a great power undergoing the transformation from a planned economy to a market economy, governments at all levels play a dispensable role in the process of market cultivation. The government should first actively remove those impediments to the development of a market economy. Others express concerns about the enforcement effect of the unified market and some are even worried about a possible return of the planned economy. In fact, the great achievements of China’s reform and opening-up policy have rendered all backtracking thoughts and actions irrational. It is necessary to strengthen government supervision and regulation once the market economy has been recognized as a law-based economy system. Nevertheless, the aforementioned concerns should also be a reminder to the governments that the rule of law must be strictly followed.
Constructing a nationally unified market is not equivalent to secluding the country from the outside world. On the contrary, its characteristic of full openness means that the Chinese market is bound deeply integrate into the international market. To create a new development pattern with the domestic market as the mainstay and domestic and overseas markets reinforcing each other, we must give full play to the advantages of the two markets and their respective resources. Excluding ourselves from the international market would only turn the unified domestic market into a large “vassal economy.”
Building a unified domestic market is a long-term mission. Some have seen a link between the guidelines and the work of pandemic prevention and control. In fact, the guidelines are not specifically formulated for the pandemic, though pandemic prevention and control might be a tough test for the establishment of a unified domestic market. Over the past two years, there have been many excessive measures, such as one-size-fits-all lockdowns and extensive travel restrictions. Since mid-to-late March 2022, many places in China have implemented highway control and closure, which has significantly influenced the production and supply of goods and materials. In response to this, the General Office of the State Council recently issued a notice to relieve some of the obstacles to freight logistics. This shows that establishing a unified domestic market will be a severe challenge while fighting the pandemic.
For an emerging economy currently undergoing a major transformation, the key for China to facilitate the construction of a unified domestic market is, as pointed out in the guidelines, “establishing an effective market and a responsive government.” We need to handle the relationship between the government and the market, allowing the market to play a decisive role in resource allocation and give better play to the role of the government. An effective market and a responsive government are not two opposites on the different sides of a seesaw, but one organic whole, which requires both to comply with the nationally unified rules of the market system. To successfully remove major impediments, we must formulate sound rules and create a world- and future-oriented market system.
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