The Socialist Market Economy System

For 30 years after the founding of the New China in 1949, the Chinese government maintained a centrally planned economy. Under this system specific institutions, controlled by the state council, designed and made economic development plans. This system helped the Chinese economy develop steadily, according to specific targets, but also hampered the vitality and speed of economic growth.

At the end of the 1970s, China began to reform its planned economic system. In 1978, the Rural Household Contract Responsibility System (RHCRS), an important restructure that promoted agricultural production and rural development, was implemented.

Essentially, the RHCRS abolished the old "People's Commune System", giving farmers the right to make independent decisions on using a small piece of contracted land. In 1984, reform was carried out in cities and in 1992, China started to build a socialist market economy.

In October 2003, China set a number of goals to improve the socialist market economy. The main ideas behind the new trajectory were to unify rural, urban and regional development with economic and social development.

Opening-up the economy and fully exploiting the market's role in resource distribution was a major objective of the reforms, while competitiveness, national macro-economic controls and improving the government's social administration and public service functions were also considered an important task. In essence, the aims set in October 2003 were designed to provide a solid foundation for building a well-off society.

One of the many tasks of government today is to improve the foundations of the state-run economy, to allow it to accommodate private ownership.

This involves building a system that helps transform the dual economic structure in urban and rural areas; forms a mechanism that promotes harmonious regional economic development; builds a unified, open and orderly competitive modern market system; improves macro-economic policy, administrative management, economic and legal systems; completes an employment, income distribution and social guarantee system; and establishes a mechanism that promotes sustainable economic and social development.

According to the plan, by 2010, China will establish a relatively complete socialist market economy system and by 2020, a mature socialist market economy.