CROSS-CUTTING DISTORTIONS

of China’s market

Reagrading the EUROPEAN COMMISSION STAFF WORKING DOCUMENT ON SIGNIFICANT DISTORTIONS IN THE ECONOMY OF THE PEOPLE’S REPUBLIC OF CHINA FOR THE PURPOSES OF TRADE DEFENCE

CONSTITUTION OF THE PEOPLE’S REPUBLIC OF CHINA

Four constitutions have been enacted since the People’s Republic of China was founded, each reflecting the changing political objectives of the CCP.3 The current Constitution4 was promulgated in 1982, and has since then been amended on a number of occasions. The concept of ‘socialist market economy’ was first introduced in the 1993 revision. The following provisions in the current version of the Constitution are the most relevant in providing the basis for the socialist market economy:
Preamble, seventh paragraph:
China will be in the primary stage of socialism for a long time to come. The basic task of the nation is to concentrate its effort on socialist modernization along the road of Chinese-style socialism. Under the leadership of the CCP and the guidance of Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory and the important thought of Three Represents, the Chinese people of all nationalities will continue to adhere to the people’s democratic dictatorship and the socialist road, persevere in reform and opening to the outside world, steadily improve socialist institutions, develop the socialist market economy […] to turn China into a socialist country that is prosperous, powerful, democratic and culturally advanced.
The preamble sets out key political principles and outlines two key elements in relation to the economy:
 It establishes that China will be in the primary stage of socialism for a long time to come.
 It reaffirms the CCP’s leading role with regard to China’s overall development, as well as for the development of the socialist market economy (for a more detailed analysis of the CCP’s role, see Chapter 3).
The importance of establishing that China is in the primary stage of socialism and will remain so for a long time to come becomes apparent when reading the seventh paragraph of the preamble together with the second paragraph of Article 6:
Article 6
The basis of the socialist economic system of the People’s Republic of China is socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people. […]
In the primary stage of socialism, the State upholds the basic economic system in which the public ownership is dominant and diverse forms of ownership develop side by side and keeps to the distribution system in which distribution according to work is dominant and diverse modes of distribution coexist.
Article 6 confirms that ‘socialist public ownership’ remains the basis of China’s socialist economic system. Furthermore, it affirms that the State is to uphold the basic economic system in which ‘public ownership is dominant and diverse forms of ownership develop side by side’ for as long as China remains in the primary stage of socialism.
The revision of Article 15 of the Constitution introduced in 1993 is particularly telling. Currently, this provision reads as follows:
Article 15
The State practises socialist market economy.
The State strengthens economic legislation, improves macro-regulation and control.
The State prohibits in accordance with law any organization or individual from disturbing the socio-economic order.
Prior to that change, the first sentence (‘The State practises socialist market economy’) read: ‘The state practices planned economy on the basis of socialist public ownership’. In other words, the State acknowledged that China’s economy would no longer be fully planned.
Articles 7 and 11 of the Constitution elaborate further the concept of a socialist market economy.
Article 7
The State-owned economy, namely, the socialist economy under ownership by the whole people, is the leading force in the national economy. The State ensures the consolidation and growth of the State-owned economy.
Article 11
The non-public sectors of the economy such as the individual and private sectors of the economy, operating within the limits prescribed by law, constitute an important component of the socialist market economy.
The State protects the lawful rights and interests of the non-public sectors of the economy such as the individual and private sectors of the economy. The State encourages, supports and guides the development of the non-public sectors of the economy and, in accordance with law, exercises supervision and control over the non-public sectors of the economy.
Article 7 reaffirms the State-owned economy as the leading force in China’s economy (see Chapter 5.1). However, recognition of the role of the non-public sectors of the economy was first introduced in the 1999 constitutional revision, through the amendment of Article 11. Article 11 – which was then further amended in 2004 – recognises the importance of the non-public sectors of the economy, and declares that the State shall protect the lawful rights and interests of the non-public sectors of the economy, as well as encourage and support them.
Nevertheless, there are no courts which are capable of taking action to secure constitutionally guaranteed rights.5 Furthermore, the Constitution assigns to the State an interventionist role that goes beyond protecting the rights and interests of the non-public sectors, in that the State shall ‘encourage, support and guide’ (emphasis added) their development. Thus, the legal value of such rights is limited.
In short, the Constitution makes it clear that China practices a socialist market economy, that the State-owned economy is the leading force of the economy, and that when it comes to the private economy, the State does not limit itself to encouraging and supporting it, but also guides it. The Chinese State makes use of a variety of different instruments – both incentivising and restricting – to guide the economy. These topics will be further developed in subsequent chapters.

3 Heilmann, S., Rudolf, M. (2017). The constitution of the party-state, in Heilmann, S. (Ed.) (2017). China’s Political System. Lanham, Maryland: Rowman & Littlefield, p. 57.
4Constitution of the People’s Republic of China (full text after amendment on March 14, 2004). http://www.npc.gov.cn/englishnpc/Constitution/node_2825.htm (accessed 5 May 2017).

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