Author: Gao Fan is a distinguished researcher at the Shanghai Research Center for Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, Dean of the Institute of Marxism at Fudan University, and Professor at the School of Economics
The "Outline of the Fifteenth Five-Year Plan for National Economic and Social Development of the People's Republic of China" lists "adhering to the combination of effective markets and effective governments" as one of the major principles that must be firmly grasped for economic and social development during the "15th Five-Year Plan" period, and proposes "the formation of an economic order that is both 'flexible' and 'well managed'." Forming an economic order that is both "flexible" and "well managed" is a practical issue proposed by our party regarding the relationship between the government and the market. It is an important achievement in understanding the regularity of economic development and an important guarantee for continuing to write a new chapter of the two miracles on the new journey. It is of great significance to deeply explore its background, connotation, characteristics and implementation path.
Deepening understanding of the relationship between government and market and its internal logic
Properly handling the relationship between the government and the market is the core issue of economic system reform. Since the reform and opening up, especially since the new era, the party has led the people to continuously deepen their understanding of the relationship between the government and the market through practical exploration and promote a better combination of effective markets and promising governments. The Third Plenary Session of the 18th Central Committee of the Communist Party of China proposed to "make the market play a decisive role in resource allocation and better play the role of the government." The report of the 19th National Congress of the Communist Party of China emphasized "making the market play a decisive role in resource allocation and better play the role of the government." The report of the 20th National Congress of the Communist Party of China proposed to "give full play to the decisive role of the market in resource allocation and better play the role of the government.", 2024 The Central Economic Work Conference in 2016 proposed that "it is necessary to coordinate the relationship between the effective market and the effective government to form an economic order that is both 'flexible' and 'manageable'." The "Recommendations of the Central Committee of the Communist Party of China on Formulating the 15th Five-Year Plan for National Economic and Social Development" adopted by the Fourth Plenary Session of the 20th Central Committee of the Communist Party of China proposed "the formation of an economic order that is both 'flexible' and 'well managed'." The expansion of the role of the market and the government to the role of the market, the government and the economic order marks the deepening of my country's characterization of the relationship between the government and the market from focusing on the economic operating mechanism to covering the operating mechanism, process and results at the same time; from "making the market play a decisive role in resource allocation" to "giving full play to the decisive role of the market in resource allocation", which means The policy focus has shifted from the stage of building and improving the market system to the stage of fully releasing the inherent functions and effectiveness of the market system; from being both "flexible" and "managed" to both "flexibly liberalized" and "managed well", it reflects that the government's management of economic operations has expanded from a dimension focused on risk prevention and order stability to a coordinated dimension of overall development and security.
From a theoretical logic perspective, the relationship between government and market has always been a core topic in economics research. Western theory often oscillates between "state intervention" and "laissez-faire." For example, mercantilism emphasizes state intervention, Smith's "The Wealth of Nations" emphasizes liberalism, the German Historical School emphasizes state intervention, Marshall's "Principles of Economics" emphasizes liberalism, Keynes's "The General Theory of Employment, Interest and Money" emphasizes state regulation, and so on. This repeatedly swinging evolution process also shows that to understand the relationship between government and the market, we must go beyond the simple "dichotomy" framework and the "plate combination" paradigm, and focus on system integration and functional synergy.
From the perspective of historical logic, since the founding of New China, our country has created two miracles: rapid economic development and long-term social stability. The fundamental reason lies in adhering to the leadership of the party, giving full play to the advantages of the socialist system with Chinese characteristics, and continuously promoting the adjustment of the relationship between the government and the market. Especially after the reform and opening up, the relationship between the government and the market has undergone profound changes: the economic options of micro-subjects have continued to expand, the role of market mechanisms has become increasingly prominent, and the government's strategic planning, macro-control, and industrial policy capabilities have also continued to improve, forming a positive interaction between the government and the market that empowers each other, and constitutes an important institutional advantage for the continued advancement of Chinese-style modernization.
From a practical logic point of view, the "15th Five-Year Plan" period is a critical period for basically realizing socialist modernization and connecting the past and the future. It has achieved remarkable results in benchmarking high-quality development and significantly improved the level of scientific and technological self-reliance. There are still some aspects that need to be improved in the current economic system, such as strengthening the construction of a unified national market and giving full play to the potential of domestic demand. In the new era and new journey, only by further handling the relationship between the government and the market can we form an economic order that is more consistent with strategic deployment and key tasks.
The connotative characteristics of an economic order that is both “flexible” and “well managed”
Adhering to the combination of effective markets and promising governments is expressed from the perspective of concepts and methods; forming an economic order that is both "flexible" and "well managed" is expressed from the perspective of performance and results. The goal of combining an effective market and a promising government is to form an economic order that is both "flexible" and "well managed". The ultimate goal is to promote high-quality economic development and promote the economy to achieve effective qualitative improvement and reasonable quantitative growth. The connotation of forming an economic order that is both "flexible" and "well managed" can be understood from the following aspects:
"Let it go" emphasizes giving full play to the decisive role of the market in resource allocation. Its direction is to reduce the government's direct intervention in the market mechanism and strengthen the government's enabling role in market operation, thereby promoting a smoother flow of goods and factors, continuing to improve factor productivity and total factor productivity, stimulating the vitality of micro entities, and ultimately basing the underlying logic of economic growth on the continuous optimization of resource allocation efficiency. The development of my country's labor market provides a profound example of this. At this stage, my country's rural labor force mainly realizes large-scale non-agricultural transfer through migrant workers. This is essentially the market's response to the signal that "the labor productivity of the secondary and tertiary industries is significantly higher than that of the primary industry." However, there are still certain obstacles to the full flow of labor between urban and rural areas, regions, and industries, and the labor market has relatively obvious segmentation characteristics. In recent years, our country has continued to deepen reforms in related fields, eliminated institutional barriers to labor mobility, and empowered the market itself instead of directly allocating labor. This is the key practice of "liberalizing".
"Good governance" emphasizes giving better play to the government's role. The government's role is not only to make up for market failures and stabilize economic growth and social order, but also to provide strategic guidance and collaborative tools for economic operations based on overall and long-term goals. "Good management" not only means that the government can warn, prevent and respond to factors that may cause economic fluctuations, that is, "manage" possible risks in economic operation, but also means that the government can fully empower growth and leading factors, that is, "deduct" new growth points in economic operation. At this stage, my country's cultivation and expansion of new productive forces is closely related to its scientific and technological innovation capabilities. Scientific and technological innovation is a systematic project, which depends on the investment mechanism in the field of basic research and the transformation mechanism from basic research to applied research. Basic research is crucial to the self-reliance and self-reliance of science and technology, but it often has the characteristics of long cycle, large investment, high risk, and strong externality. It is necessary to give full play to the role of the government's "visible hand" and rely on the new national system to promote the development of basic research in an in-depth direction. At the same time, it relies on industrial policy, financial policy, and the integrated development of education, science and technology talents to improve the efficiency of basic research transformation. This has important practical value for my country to promote the construction of an innovative power and high-quality development.
Both "liberal release" and "good management" emphasize the dialectical unity and organic synergy of the roles of the government and the market. "Let loose" and "manage well" condition and empower each other. Only by "liberalizing" can we "manage well". Only when the market role is fully exerted and micro-entities are dynamic, can the government have stronger fiscal mobilization capabilities and a higher level of public product provision. Only by "managing it well" can it be "unregulated". Only by strengthening the public service function of the government can all kinds of micro entities form stable expectations for economic activities and create sufficient incentives for investment, innovation and consumption. As a country that implements a socialist system, has a very large economic volume and regional development differences, my country needs to simultaneously stimulate vitality and maintain order to achieve high-quality development. "Freedom" emphasizes that on the premise of strengthening top-level design, we should fully stimulate the initiative of local and market entities and promote economic development in accordance with local conditions. Chinese-style modernization is a modernization that brings prosperity to all people. "Good management" requires the government to better play its role and promote the economy to achieve a good combination of development, sharing and sustainability. The leadership of the Communist Party of China provides the fundamental guarantee for coordinating the relationship between the government and the market. Therefore, it is both realistically necessary and institutionally feasible for our country to form an economic order that is both “flexible” and “well managed.”
Practical requirements for forming an economic order that is both “flexible” and “well managed”
At the micro level, efforts should be made to deepen the market-oriented reform of factors. Deepen the reform of the household registration system, promote the citizenization of agricultural migrant workers, continue to improve the level of rural social security, and promote the spontaneous flow of urban and rural labor mainly based on price signals such as wages; deepen the reform of the rural land system, safeguard the land contract rights, homestead use rights, and collective income distribution rights of farmers who settle in cities in accordance with the law, explore ways to establish voluntary paid exit, and build a unified urban and rural construction land city market, improve the efficiency of land factor allocation; deepen the reform of the financial system, enrich the supply of financial products, strengthen the support of capital factors for various market entities, and reduce corporate financing costs; improve the data basic system, improve digital rights confirmation, pricing, transactions, governance and other institutional mechanisms, strengthen the enabling role of digital technology in resource allocation, and give full play to the positive role of digital technology in information docking and market expansion.
At the meso level, efforts are made to promote industrial transformation and upgrading. In order to achieve our economic and social development goals on the new journey, our country must promote the deep integration of technological innovation and industrial innovation, maintain a reasonable proportion of manufacturing, and accelerate the construction of a modern industrial system with advanced manufacturing as the backbone. This not only requires governments at all levels to play a guarantee role in basic research investment and market order maintenance, but also requires various enterprises to carry out product innovation and technological innovation according to changes in market demand. In this process, the synergistic promotion effect of promising governments and effective markets must be maximized. Accelerate the improvement of government performance assessment and incentive mechanisms oriented towards high-quality development, place employment creation, innovation achievements, urban-rural integration, total factor productivity improvement and other factors in a more prominent position, and encourage local governments to not only focus on short-term growth, but also strive to cultivate regional long-term competitiveness and build a regional economic ecology that is both dynamic and well-regulated.
At the macro level, we should give full play to the advantages of the socialist system with Chinese characteristics and uphold and improve the basic socialist economic system. Chinese-style modernization is socialist modernization led by the Communist Party of China. Our country’s promotion of economic development is essentially to serve the all-round development of people and the common prosperity of all people. To form an economic order that is both "flexible" and "well managed", we must always adhere to the leadership of the Communist Party of China, adhere to the socialist system, and give full play to the advantages of the socialist system with Chinese characteristics. In terms of strategic guidance and regional coordination, we rely on the organic combination of different types of planning to ensure the continuity and systematicness of development paths, and transform the top-level design of coordinated regional development into development practice through mechanisms such as industrial collaboration and counterpart support. At the same time, we must adhere to and improve the basic economic system based on development goals and changes in the times. In terms of ownership, we adhere to and implement the "two unshakable principles" to promote the complementary advantages and common development of various ownership economies; in terms of distribution systems, we insist on distribution according to work as the main body and the coexistence of multiple distribution methods, and build a coordinated and supporting institutional system for primary distribution, redistribution, and third distribution, and promote the formation of an olive-shaped distribution pattern; in terms of economic operation systems, we adhere to the socialist market economic system, improve the macro-control tool system, enhance macro-policy synergy, improve macroeconomic governance efficiency, and promote finance to better serve the real economy.
"Guangming Daily" (page 11, March 17, 2026)
