Economic System Reform

The Chinese Communist Party adopted the "Decision on Some Issues Concerning the Establishment of a Socialist Market Economic System" at the Third Plenary Session of the Central Committee of the Fourteenth Party Congress, convened in Beijing on November 11-14, 1993. The "Fifty Articles" encapsulated China&s;s approach to attaining a market economy. To slightly overgeneralize, there were five main elements: conversion of state-owned enterprises into stock companies; reform of the financial system; reform of the investment system; problems with fiscal reform; and reform of the trade system. Policy with respect to the investment system is specified in article 20 of the "Fifty Articles." The principle is that the entity undertaking investment should be a "legal person" that will assume the risk and rewards. With respect to fiscal and tax reform, there are three major issues: dual tax system, introduction of the Value-Added Tax, and establishment of a dual budgetary system.