Determined by the internationally accepted standard, currently China's market economy degree is about 69 percent

REPORTER: China had initially established a socialist market economic system at the end of 2000. Today, why is it necessary to reaffirm China's status as a market economic country?

LI XIAOXI: Since the 1990s, China has lost many lawsuits in its response to foreign anti-dumping cases against China because it is regarded as a "non-market economic country". This situation has not changed after China's accession to the WTO. Today, China is still regarded as a "non-market economic country" by some countries and, as a result, it is given unfair treatment in anti-dumping cases.

At present, China has become the most victimized country in the world anti-dumping cases. Among the 1979 anti-dumping cases found through global investigation conducted between 1995 and June 2002, China had 278 cases, accounting for 14 percent. Its overall average rate of winning the lawsuits in its response to the anti-dumping cases was only 35.5 percent, while its rate of losing the lawsuits was 64.5 percent.

Given this situation, the pressing matter at the moment is to make a determination of China's present economic system by the internationally recognized standard.

REPORTER: Then, is there a unified standard in the world for determining a market economy?

LI: A market economy, as a kind of economic system in human history, has its inherent set rule. Although there is not a unified standard in the world for determining the market economy, a market economic standard does exist relatively.

Making a summary of the market economy in accordance with the modern economic theory, in connection with the history and reality of the development of internal and external market economies and by the use of the legal stipulations on the market economic standard set by the United States, European Union and Canada for anti-dumping, we can come to five common standards for explaining what a market economy is.

Firstly, the standardization of government behavior. Are resources allocated by the government or by the market? Are the use and price of resources determined by the market or by the government? Does the government respect and protect the economic mainstay's sovereign right in regard to management, and does it give unfair treatment to enterprises? These problems, to put them in one word, are matters concerning the role of the government and the relationship between the government and the enterprise.

Secondly, the liberalization of the economic mainstay. This means that in the enterprise's production and marketing activities, is the behavior market-oriented or administration-related? The vital importance of this point lies in the right and behavior of the enterprise.

Thirdly, market-oriented production elements. Are the prices for enterprise's production elements, such as raw and semi-processed materials and labor wages determined by the market?

Fourthly, a fair trade environment. Is market trade activity free or repressed, are market infrastructure facilities and market legislation and judiciary sound? And

Fifthly, Rationalization of financial parameter. Are interest rate and exchange rate formed by the market? Does the enterprise enjoy the freedom of transferring profits or capital abroad? Does the enterprise have sovereign right to exchange or deposit foreign currencies?

REPORTER: Judged by these five standards, what's the degree of China's marketization?

LI: Judged from the role of the government, the functions of the Chinese government have turned from serving the planned economy to serving the market economy, the market has played a foundation role in the allocation of resources. The government no longer directly interferes in the concrete business activities of the enterprise, and has become a macro-manager.

Judged from the right and behavior of the enterprise, the pattern of the common development of economic sectors of all forms of ownership has been basically formed. The degree of market-oriented State-owned enterprises has been greatly enhanced; non-State economic sectors have become an important force propping up the national economy; the market-oriented reform has provided the numerous foreign-funded enterprises with a powerful institutional guarantee for them to diversify the Chinese market.

Viewed from the input of elements, in recent years, the capital goods market has been gradually set up, the labor market and real estate market have developed steadily, the technical market and information market have been formed step by step. The prices of commodities, production elements and services are mostly formed by the market.

Viewed from the trading environment, the legal system of the market economy has been basically set up, mechanisms under which free trade is carried out in accordance with these laws are taking shape. At the same time, the development of intermediate organizations has been noticeably speeded up, the management and supervision of the market are being constantly improved and strengthened.

Among these five standards, financial parameter is the relatively low one in terms of the marketization degree. Notwithstanding, China is pushing forward reform in this aspect, China's interest rate is market-oriented, a market-based, managed floating exchange rate system is playing an effective role. We have made a determination in accordance with these five standards, and have come to this conclusion: Currently, the degree of China's market economy stands at about 69 percent. We can say with confidence that at the moment China is already a developing market economic country.

(People's Daily April 15, 2003)