China to Ratify Basis for Market Reforms

China will soon revise its constitution to provide a firmer legal basis for market-oriented economic reforms, official media announced Monday.

The revisions aim to fully legitimize the growth of private enterprise, to further undercut most forms of rigid central planning and to reinforce the autonomy of factory managers within the state-owned sector.

The constitutional amendments were approved by the Communist Party’s Central Committee, then submitted to the Standing Committee of the National People’s Congress, the official New China News Agency reported.

The Standing Committee will place them on the agenda for the annual session of the full National People’s Congress, which opens March 15, the news agency said.

Because the Communist Party has absolute control of the Congress, there is virtually no doubt that the amendments will be approved, although there could be slight changes in wording.

The amendments, according to the official news agency, will eliminate a part of the existing constitution, adopted in 1982, that declares, “The state practices economic planning on the basis of socialist public ownership.” This will be replaced by a reference to China practicing a “socialist market economy,” the news agency reported.

Another revision will replace a reference to the “state economy” with the term “state-owned economy.”

This seemingly small change is meant to support a trend by which the state retains ultimate ownership of various enterprises but gives them full autonomy. This concept of having large numbers of government-owned enterprises compete against one another and private companies in a free-market environment is central to the idea of a “socialist market economy.”

These changes are important because they come against a background of decades during which most Chinese industry was essentially an administrative arm of the state. Government bureaucrats issued orders about how much to produce, where to sell it and how much to sell it for. Government also dictated wages and required factories to provide a wide range of social services that usually included housing.

This often is still the case, but the trend is toward relieving factories of their social welfare function.

The amendments are aimed in part at providing a stronger framework of law within which enterprises may function, thereby freeing them from many of the administrative orders they have previously been required to obey, the official news agency said.