Q: Recently, some countries have accepted China's market economy status. But why haven't many other countries accepted this status? What is the basis of China's proposal to become a market economy country?
A: China used to practice a planned economy. However, after more than 20 years of reform and opening-up, especially after entering the World Trade Organization (WTO), China has gradually built up a market economy with Chinese characteristics and become a developing market economy country. The following five aspects are the main bases:
Firstly, Though State-owned enterprises still hold the dominating position in the national economy, the non-State sector, which has experienced unprecedented development, now claims one third of the overall GDP. The non-State sector has become an important pillar of the national economy.
Secondly, a comprehensive commodity market system has been basically established. At present, the market allocates more than 95 percent of commodity resources. All mandatory plans for agricultural production have been cancelled and mandatory plans for industrial production have been limited within the five trades of timber, gold, cigarettes, salt and natural gas.
Thirdly, the macro management of the national economy has transformed from depending on administrative means to the use of economic and market means, such as taxes, interest rates, and price and investment policies. The focus of government management has been shifted from interfering in the production of individual enterprises to adjusting aggregate social supply and demand.
Fourthly, a new distribution system based on a combination of production factors such as capital and technique input, management and labor is coming into being. Incomes from various sources have been accepted by the society and put under the production of law.
Fifthly, a comprehensive social security system has been established which covers retirement, unemployment, medical insurance and minimum living guarantee for the urban population. The system plays an important role in shaping a market-oriented employment system, deepening enterprise reform and maintaining social stabilization.
According to international criteria, if 60 percent of a nation's economy is market-oriented, it should be considered a market economy. China's market-oriented level reached 69 percent in 2001, no lower than that of many other market economy countries. Of course, the 69 percent also indicates that China is still a primary market economy. The remaining 31 percent is the part that China needs to further reform.
