ABSTRACT

China must accomplish the following two historical tasks at the same time before it can achieve the long sought after goal of modernizing its society and lifting its huge population to the high income rank. First, China has to transform itself from a central planning economy into a market-oriented economy; second, China has to transform itself from a developing economy into a developed economy (Naughton 2006). These two tasks are closely intertwined and interdependent. The success of one depends on the success of the other. In other words, if China fails to nurture a real market mechanism to allocate all the resources efficiently, there is no way that China can transform itself into a developed economy; however, unless China can demolish thoroughly the remnants of its central planning system, there is no way a real and fully fledged market system can emerge and develop to “play a decisive role in resource allocation”, as is called for by the “Decision” 1 adopted at the Third Plenum of the 18th Congress of the Chinese Communist Party held in 2013.