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Relevant Observations on "Top-Level Design"

Dec 25,2012

By Xia Bin, Research Institute of Finance of DRC

Research Report No 21, 2012

The coming five to ten years are critical both for China's economic development and for the governing of the Communist Party of China, given the inadequate reforming efforts and consequently the increasingly complex and sharp conflicts of interest that have deeply influenced the society. The economic growth will slow down in the coming few years, and it is held that China will face more thorny issues if those problems remain unsolved. Once again, China is at a critical moment, just like three decades ago when reform was urgently required. There is no way out but reform. And it is particularly important to propose a "top-level" design at a time when the Twelfth Five-Year Plan has just been implemented and the Party and government leaders are to be re-elected. It shows that we remain sober-minded and are clearly aware of possible crisis in social and economic development.

I. Principles for Top-Level Design

First, goal of the top-level design. About 32 years ago when we just started to discuss reform, we had to make clear what its goal, direction and principles were. An answer has long been provided to all these questions, i.e. we should develop market economy and law-based economic operations. Despite challenges, confusions and doubts, we have maintained the direction of the reform. The economic miracle made in the past three decades has also proved that the tendency of reform cannot be changed by a small number of people and the masses do not agree to change either. When China has become the second largest economy of the world, we are facing some new issues including many acute contradictions which impede sustainable economic development, social stability and undermine the foundation of the Party's ruling, Therefore, the top-level design we talk about today is not mere about theoretical discussions or academic ideas or concepts proposed by theorists. Rather, it is problem-oriented, more specifically, it is developed to solve institutional problems underlying the unsustainable development of China's economy, eliminate risks for China's economy when the global demands weaken after the crisis of the United States and the slow down of China's economic growth, and resolve social instability caused by severe income distribution inequality as China has become a world economic power. The top-level design should propose more specific questions based the aforementioned problems and formulate measures, policies and detailed and feasible solutions.

Second, the top-level design should grasp and highlight major problems. In today's social and economic fields, including science, education and health, there are many contradictions and problems which cause complaints or even indignation. The top-level design should neither pursue a reform planning as all-around as the one for the Twelfth Five-Year Plan period, nor one like the Report on the Work of the Government which covers all fields of the society and economy. Now whenever we talk about how to deepen the reform, we would like to touch every sector and every aspect; however, some of such questions are routine work of the reform and should have been solved long before. We should always work hard and do what we get to do to solve problems such as financing difficulties for small and medium-sized enterprises and usurious loans. However, the top-level design deals with key problems which may affect the whole situation, aims to solve core issues and contradictions which have existed for long, and tries to solve major problems which may impede the stable growth of China's economy and can be solved only by cross-sector consultation and coordination. Only by so doing can we identify and address the critical and overall problems before we proceed to solve a series of other problems. To put it simply, the top-level design doesn't have to be all-inclusive, trying to deal with all economic and social problems. An important principle is that it should start from addressing problems which are generally the toughest issues and have aroused most discontent and impeded or will impede the social stability and stable economic growth, and it should effectively address institutional contradictions underlying such problems. And we should directly face the tough challenges and try to make breakthroughs. That's the real meaning of the top-level design.

Third, ideological straitjacket needs to be removed, and economic issues shall not be discussed merely in the economic context. Many problems have been fully detected after 32 years of reform in China, and some still remain unsolved. An important reason is the fear of some people for touching on the political reform and ideological problems. Today as the top-level design is proposed, it should start from the supreme interest of the country's stability, aim at social stability and sustainable economic development and directly face whatever problems we meet in a practical and realistic way, rather than dodge those in the political fields. Otherwise, we are to blame for leaving so many economic problems unsolved and allowing them to do harm to the country and the Party as well. Take the establishment of scientific decision-making mechanism as example. Although it is not an economic problem, the past decade has proved that as China has become the second largest economy in the world in the process of globalization, massive and knowledge-intensive international issues have been of central significance. What are scientific decisions for the top decision-makers? How to make such decisions? It is held that mistakes would be made if we fail to properly answer this question.

Fourth, a global vision is necessary for the top-level design. Recently, there are opinions overseas that China's economy will collapse in 2013 and its banking system will be falling down in 2016. There are also predictions that China's GDP will surpass that of the United States in 2016 in terms of purchasing power parity and in 2018 in terms of market rate. Anyway, China has become the focus of the world. Therefore, the top-level design shall not simply regard the pessimistic ideas about China as "conspiracies", but regard them as warnings, find out possibility of systematic risks after China's economic growth slows down and work out solutions; on the other hand, we should not blindly believe those optimistic ideas, but should remember all possibilities may become true. The most important is whether we ourselves can properly rectify and adjust systems and policies. As China is one of the major economies in the world, its problems influence the whole globe. The top-level design can make sense only when it deals with problems influencing the world's investment, consumption and export. Likewise, solutions and policies for these problems cannot be worked out by divorcing from reality or by putting aside other countries' concerns, interests and possible countermeasures following the rise of China and the possible changes in the world environment.  

II. Main Contents of Top-level Design

Based on the aforementioned analysis, it is held that the top-level design must solve eight problems.

1. Reform of land system

In fact, no clear solutions have been worked out in a long period of time for the use of agricultural land for non-agricultural purposes and the residential land problem, but local governments are active in making pilot practice. Due to ambiguity in the policies, many contradictions have become more complex. Such problems not only impede the protection of farmers' rights and interest, but also influence the unified land planning in the construction of thousands of towns in China, the supply of construction land and the land finance. Furthermore, from the perspective of economic development, increasing farmers' income by transfer of land-use rights is important for developing the consumer market of hundreds of millions of Chinese farmers. Politically, solving problems like forced dismantling and people's appealing to higher authorities for help, rich-poor gap between rural and urban areas and corruption can directly influence the stability of the government's rule. The land requisition in rural areas caused many mass incidents and the largest number of people appealing to higher authorities for help in recent years. It's time for the central government to make up its mind to solve this problem, as it has become the major economic and social contradiction in urban and rural areas. And it is a problem that the top-level design must not avoid.   …

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