Guide and Regulate the Capital Market

Guide and Regulate the Capital Market*

April 29, 2022

Capital is a key factor of production in the socialist market economy, and we should regulate and guide the use of capital within this context. This is an economic as well as a political issue of both practical and theoretical significance. It concerns the basic socialist economic system, the fundamental state policy of reform and opening up, high-quality development, common prosperity, national security, and social stability. Therefore, we must have a deeper understanding of all types of capital and their functions, ensure their healthy growth through regulation and guidance, and promote their constructive role as a key factor of production.

Throughout our Party’s 100-year history, we have upheld the basic tenets of Marxism, increased our understanding of how capital functions, and explored guidelines and policies for regulating and guiding healthy capital growth in light of the actual conditions of our country and major tasks in different stages of development.

After the launch of reform and opening up at the Third Plenary Session of the 11th CPC Central Committee in 1978, we broke free from a restrictive mindset on ownership and came to realize that capital, as a major factor of production, can serve as a tool for the market to allocate resources and an effective means to grow the economy. We realized that a socialist country can use all types of capital to promote economic and social development. Step by step we established the basic socialist economic system and introduced the socialist market economy in which various forms of ownership develop together with public ownership playing the dominant role and multiple forms of distribution coexist, observing “to each according to their work” as the principal form. We remained committed to consolidating and developing the public sector, and at the same time to encouraging, supporting and guiding development of the non-public sector.

Since the 18th CPC National Congress in 2012, we have improved the basic socialist economic system, and established the two abovementioned commitments as a fundamental strategy for upholding and developing socialism with Chinese characteristics in the new era, and as a major guideline for the Party and the country. We have launched comprehensive reform, highlighting the decisive role of the market in the allocation of resources and an effective role of the government in creating a more enabling market and legal environment for all types of capital to grow. We have redoubled our effort to control monopolies in order to prevent disorderly expansion of capital, forestall potential risks, and protect fair competition in the market. We have guarded against and defused financial risks, and checked the tendency of moving from real economy to virtual economy, with a focus on mitigating the risks of non-performing assets and asset bubbles. We have opened wider to the outside world, and are working to create a double development dynamic with the domestic economy as the mainstay and the domestic economy and international engagement providing mutual reinforcement, so as to build an open economy of higher standards. We have learned more about the nature and role of capital and the law of capital circulation, and developed a greater capacity to govern the operation of capital.

Over more than 40 years of reform and opening up, capital and other factors of production such as land, labor, technology and data have jointly contributed to the prosperity of the socialist market economy. We must recognize the positive role of all types of capital. At present, there are various forms of capital in our country, including state-owned capital, collective capital, private capital, foreign capital, and mixed capital. Capital is expanding in size and operating at a faster speed. Market players are diversifying and international capital is pouring into Chinese market.

We must uphold Party leadership and the socialist system, and keep to the correct political direction. We must take a problem-oriented approach, develop systems thinking, and take account of current realities to plan for the future. We must prevent unchecked growth of capital while encouraging investment, and adopt differentiated policy measures as appropriate. We must strike a balance between development and security, between efficiency and fairness, between vitality and order, and between domestic and international markets. We must boost the vigor of all types of capital, including non-public capital, and maximize the role of capital in promoting scientific and technological progress, growing the market economy, adding convenience to daily life, and increasing our participation in international competition. We must ensure that capital always serves the interests of the people and the country, and contributes to comprehensive socialist modernization and national rejuvenation.

We should strengthen theoretical research on capital in the new era. How to ensure its healthy growth through regulation and guidance has become a key topic of theoretical and practical importance in Marxist political economics. We should review both our successes and failures in handling capital since the founding of the PRC in 1949, and particularly since the launch of reform and opening up. We should probe deeper into theories on capital in the context of the socialist market economy, and guide practice with sound theories. In this way, we can facilitate an orderly growth of all types of capital, and leverage their role in boosting productive forces, creating wealth, and improving people’s wellbeing.

We should understand all types of capital in our country and their role from a historical, developmental and dialectical perspective. In the socialist market economy, capital is an important means of gathering and allocating factors of production and boosting productive forces. Therefore, we must allow capital to play an active role in this regard. Yet we must be aware that capital is profit-driven in nature, and, if unregulated and unconstrained, will cause immeasurable damage to the economy and society. In this new development stage, we should practice the new development philosophy, foster a new development dynamic, and propel high-quality development. To this end, we must properly handle the relationships between various forms of capital, clearly define their respective nature and role, and ensure their healthy growth through regulation and guidance.

We should properly manage the operation of capital and distribution of gains. The socialist nature of our country determines that we must adopt multiple forms of distribution with “to each according to their work” as the principal form, and implement the principle of putting people first in social distribution. We should make economic development benefit more people and ensure fairness in primary distribution. While supporting capital growth and value addition in the process of social distribution, we should, more importantly, respect the underlying principle of “to each according to their work”. Development is for the people and by the people, and its benefits should be shared by the people. In this way, we will remain committed to the path towards common prosperity.

We should continue to reform the capital market. We should further improve the fundamental institutions of domestic capital market, and better leverage its role to create greater space for the growth of all types of capital. We should improve the system of property rights protection, fully implement relevant policies and policy reviews to ensure fair competition, and remove market barriers, providing all types of capital with equal access to orderly competition and fair opportunities to participate. We should improve the institutions of the open economy, pursue high-standard opening up, and facilitate investment. With an enabling market environment, we will be able to attract more international capital to our country for investment and business growth. We should support and encourage domestic capital and enterprises to go global.

We should regulate and guide the growth of capital. We should set up “traffic lights” for capital flows by improving relevant laws, and developing a complete and cohesive framework of well-conceived rules and systems. To protect property rights, respect contracts, unify the market, and ensure equal exchange, fair competition and effective regulation, we should enact, amend, repeal or interpret relevant laws and regulations to address prominent problems. We should maintain strict controls on capital market access, improve relevant institutions, and make the negative list for market access more precise and appropriate. We should improve the rules for capital operations. We must strengthen regulation and law enforcement against monopolies and unfair competition, and punish abuses of a dominant market position and other illegal activities in accordance with the law. We should advocate a healthy culture of credibility and integrity, and encourage players in the capital market to practice the core socialist values, uphold business ethics, and fulfill their social responsibilities.

We should promote comprehensive and effective governance of capital operations. We should document successful experiences, identify market trends, and enable innovation. We should make our governance more targeted, rational and effective. We should devise a whole-process capital governance system that ensures ex ante guidance, in-process safeguards, and ex-post regulation. We should further institutional reforms, and exercise accurate and sound regulation in accordance with the law, in a fair manner, and at the source. We should fully enforce accountability, adopt new approaches and overcome weaknesses, and modernize our capital regulation capacity and system. Regarding the regulatory responsibilities that are not explicitly stipulated in laws, we should remain faithful to the principle that whoever exercises the power of approval or the administrative authority performs capital regulation. We should strengthen capital regulation by local governments, and ensure that their responsibilities are fulfilled to the letter. We should improve the collaboration mechanisms for industry governance and for comprehensive governance, and reinforce coordinated multi-agency regulation in the areas of industries, finance, foreign investment, competition and security. We should accurately identify the key areas and targets that may cause systemic risks, exercise capital governance with more foresight and agility, and identify and resolve risks as early as possible.

We should combat capital-related corruption. We must maintain a tough stance against corruption, strike hard at profit-driven abuses of power, and punish corruption behind disorderly expansion of capital and platform monopolies.

One of the Party’s main economic tasks is to ensure the healthy growth of capital through regulation and guidance. Party committees and Party leadership groups at all levels must think and act in accordance with the decisions and plans of the Central Committee, perform their responsibilities, and improve their capabilities in capital governance. They must promote policies more widely, properly guide market expectations, and preempt systemic risk by all means.

* Main points of the speech at the 38th group study session of the Political Bureau of the 19th CPC Central Committee.

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