Yang Zhang, 2020

The Contribution of the “School of New Marxist Economics” to China's Socialist Market
Economy
Author(s): Yang Zhang
Source: World Review of Political Economy , Spring 2020, Vol. 11, No. 1 (Spring 2020), pp.
4-27
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THE CONTRIBUTION OF THE “SCHOOL OF
NEW MARXIST ECONOMICS” TO CHINA’S
SOCIALIST MARKET ECONOMY
Yang Zhang
Yang Zhang is a post-doctoral researcher at the School of Marxism, Peking University, China. His
study mainly focuses on Marxist political economy. Email: [email protected]
Abstract: Since China’s reform and opening up four decades ago, the establishment
and healthy development of the socialist market economy has been closely
linked to the forward-looking theoretical analysis and policy suggestions given
by representatives from the School of New Marxist Economics. By comparative
analysis of a variety of cited literature, the author argues that the School of New
Marxist Economics scholars Guoguang Liu, Enfu Cheng, and Zuyao Yu, have made an
outstanding contribution not only to the construction of the socialist market economy
theory and socialist political economy with Chinese characteristics academically, but
also to the comprehensive deepening of reform and the strengthening of technology
power building in practice.
Key words: socialist market economy; “Chinese School” of socialist market economy;
School of New Marxist Economics in China
In 1979, China’s leader Deng Xiaoping said,
It is definitely incorrect to say that market economy only exists in capitalist society
or there is only capitalist market economy. Why can’t socialism adopt market
economy which should not be labeled capitalist . . . Market economy was in its
embryonic stage as early as in the feudal society. Socialism can also engage in
market economy. (Deng 1983, 236)
WRPE Produced and distributed by Pluto Journals www.plutojournals.com/wrpe/

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THE CONTRIBUTION OF THE “SCHOOL OF NEW MARXIST ECONOMICS” 5
In 1992, the 14th National Congress of the Communist Party of China (CPC)
officially proposed: “The socialist market economy system is established in order
that the market plays a basic role in the allocation of resources under the macro
regulation of the socialist country” (Central Literature Research Office of the CPC
1996, 19). In 2013, the Third Plenary Session of the 18th CPC Central Committee
proposed: “ensuring that the market plays a decisive role in the allocation of
resources and the government plays a better role” (Central Literature Research
Office of the CPC 2014, 513). This rewording reflects a development in theory.
The establishment and healthy development of the socialist market economy
theory since China’s reform and opening up four decades ago have been closely
linked to the forward-looking theoretical analysis and policy suggestions of rep-
resentatives from the School of New Marxist Economics at the Chinese Academy
of Social Sciences (hereafter referred to as the CASS), including Guoguang Liu,
Enfu Cheng, Zuyao Yu, and others (Cheng 2009).1 This paper, based on the lit-
erature and from the perspective of the history of economic thought, is limited
to elaborating the contribution and practical value of these three. It demonstrates
their taking the lead in advocating the establishment and healthy development of
the socialist market theory and thereby demonstrates the “Chinese School” of the
socialist market economy theory, namely, part of the innovative academic thought
of the School of New Marxist Economics.
1. Scientific Establishment of Socialist Market Economy Theory

by Chinese Scholars of “School of New Marxist Economics”
Three representatives of the “School of New Marxist Economics” at the CASS,

Guoguang Liu, Zuyao Yu, and Enfu Cheng, not only put forward and demon-
strated the socialist market economy theory earlier than neoliberal economists, but
also are unsurpassed in terms of the scientific nature, reasoning, consistency, and
applicability of their theory.2
1.1. Zuyao Yu’s Lead in Proposing the Category of “Socialist Market

Economy”
In 1979, Zuyao Yu at the CASS presented his paper “A Discussion on Socialist
Market Economy” at a grand seminar on the role of the law of value in Wuxi. It
was the first time a scholar put forward and demonstrated the category, necessity,
and realization of the path of “socialist market economy” in Chinese academia.
This pioneering work explored the theory of socialist market economy and had a
profound impact on the practice of economic construction over the next 40 years
World Review of Political Economy Vol. 11 No. 1 Spring 2020

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6 Yang Zhang
of reform and opening up in China. Yu stated, “as long as commodity system is

implemented in socialism, socialist economy is still a market economy in essence”
(Yu 2005a, 15). The paper took the implication of Lenin’s New Economic Policy
as an important reference for the implementation of the socialist market economy
system in China. He reckoned, “Lenin’s New Economic Policy is a paragon of
conduct in accordance with economic laws, regulating economy with economic
methods, and most of all utilizing the market economy” (16). In response to the
conservative views opposing the idea of “market economy” back then, Yu pro-
posed: “Market economy is not a scourge” (8) and the development of market
economy is not a threat, provided the dominant position of socialist public owner-
ship in important sectors is ensured, despite the coexistence of a variety of eco-
nomic components. In summary, “It is impossible to build a modern socialist
power by energetically developing socialist commodity economy without fully
utilizing the market economy and without following the requirement of the eco-
nomic laws to reform the economic administration system” (9). This paper was
awarded the first outstanding scientific research achievement of CASS.
Later, Yu wrote an article “On the Fundamental Role of the Market in
Optimizing Resource Allocation,” published in Qiushi in 1993. Here he made the
point that the inherent commodity nature of the socialist economy dictates that the
market plays an indispensable role in resource allocation, which cannot be per-
formed by any other regulatory mechanism (Yu 2005b). He followed this with
“China’s Market-Oriented Reform: A Hard Path after Ridding of Bewilderment”
in 1993. Here he stressed that “under no circumstance shall China’s economic
marketization engage in privatization or capitalization” (Yu 2005c, 57). In addi-
tion, he pointed out that socialist countries need to prepare to tackle a range of new
contradictions that can possibly arise while implementing the market economy.
These contradictions included the contradiction between the fundamental role
of the market mechanism and the strengthening of the economic function of the
state, the contradiction between the leading position of the socialist state-owned
economy together with the principal role of public ownership and their equal com-
petition with the diversified ownership coexisting long term, the contradiction
between the distribution system of the market mechanism and distribution accord-
ing to work for common prosperity, the contradiction between the reform of price
mechanisms and the current wage policy and consumption policy, the contradic-
tion between rural marketization and stabilizing the system of household contracts
and responsibility, the contradiction between China’s basic state policy of opening
up and power politics and hegemonism pursued by superpowers, the contradiction
between the economic marketization, the commercialization of interpersonal rela-
tionships, and the construction of socialist spiritual civilization, etc. In conclusion,
Yu remarked “[i]t is necessary for China to experience a hard journey which can

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be called the Long March of the new era in its transformation from an administra-
tive planned economy to a socialist market economy” (Yu 2005c, 54).
1.2. Guoguang Liu’s Pioneering Proposition of Market-Oriented Reform and

Active Advocacy of Reform of the Socialist Market Economy System
By summing up the experiences and lessons of economic construction after the
founding of new China, Guoguang Liu of the CASS proposed the inevitability of
the combination of planning and market for socialist economic construction, and
revealed the relation between planning and market in a socialist economy to be
neither mutually exclusive nor improvised but an intrinsic organic combination
determined by the nature of a socialist economy. In his article “On the Relationship
between Planning and Market in the Socialist Economy” in 1979, Liu innovatively
put forward the theory of “the organic combination of planning and market.” He
claimed that “it is actually unfavorable for the development of socialist planned
economy if we ignore the roles of commodity production, the law of value and
market mechanism” (Liu 2005a, 63). Specifically, exclusion of the market mecha-
nism in a socialist economy can tip the balance between production and demand,
resulting in a long-term deviation of the prices of all kinds of goods from the
requirements of the law of value and disjunction of material interests and business
performance, which will lead to high consumption, low quality, and low efficiency
of production. He indicated that two periods of rapid economic growth (the first
five-year plan and the three-year adjustment period) were in striking contrast to
two periods of major economic setbacks (the second five-year plan and the period
of the Cultural Revolution) during the first 30 years of socialism after the founding
of the new China. The former periods paid more attention to the use of the law of
value and the market, while the latter periods tended to deny commodity–currency
relations and market mechanisms in a socialist society. He argued that the socialist
economy is in “opposition only to the spontaneous market economy and the natu-
ral economy, but not to the market economy consciously controlled by the people”
(65). This actually illustrates the essential difference between the market economy
adopted by the socialist countries and that adopted by Western capitalist countries.
That is, the socialist market economy is the basic form of socialist economy con-
nected with advanced socialized mass production, combined with the national
plan and regulation, and this is fundamentally different from the capitalist market
economy based on private ownership. In addition, Liu also analysed from the per-
spectives of internal and external causes the theoretical problem of China’s one-
sided emphasis on planning, while ignoring the market for a long period of time
before its reform and opening-up period began. In terms of internal causes, he
suggested that interference from “two traditional ideas” resulted in “four replace-
ments.” The first traditional idea is to equate the market with the spontaneity of a

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8 Yang Zhang
capitalist market economy. “As long as one talks about utilizing the market, he is
labeled as implementing capitalism” (65). The second traditional idea is to equate
the planned economy with the natural economy, resulting in the practice of con-
ducting the socialist planned economy by means of natural economy. He further
emphasized that the practice of the natural economy was passed off as that of the
socialist planned economy owing to the constraints of productivity at that time.
Starting from the interaction of “two traditional ideas,” Liu presented “four
replacements:”
replacing administrative methods to manage the economy with economic

methods, replacing the will of the leaders with operation in accordance with
objective laws, replacing the governance on a patriarchal basis with the people
being the masters of the country, and replacing the management of the feudal
government type suitable for natural economy and so on with scientific
management suitable for socialized mass production. (Liu 2005a, 65)
In terms of external causes, he argued that the experiences of building socialism

from other socialist countries such as the Soviet Union were not in line with the
actual situation of all socialist nations.
Guoguang Liu paid attention to the reform of the economic system, and he was
also concerned with the transformation of the development model and growth
model, which he took as important to guide the strategic goal for reform and to test
the effectiveness of reform. In his articles “A Brief Discussion on the Transformation
of the Dual Models” (Liu 2006a) and “On the Transformation of Dual Models of
China’s Economy” (Liu 2006b), published in 1985, he raised the issue of the eco-
nomic system model and economic growth model, introducing his “dual models
transformation” theory. This “dual models transformation” was actually adopted
in the documents of the Fifth Plenary Session of the 14th Central Committee of the
CPC as the formulation and judgement of “Two Fundamental Transformations,”
the transformation of the economic system from traditional planned economy to
socialist market economy and the transformation of economic growth from exten-
sive mode to intensive mode. “Dual models transformation” was not only adopted
in the academic community, but also used directly in the practice of reform and
opening-up. In November 1987, invited by the preparatory group for the establish-
ment of Hainan Province, Liu formulated the economic development strategy for
the Hainan Special Economic Zone which was under way. A month later, he and
his research group submitted a report on this strategy, which suggested that Hainan
should implement the direct market economy under socialism. Liu pointed out that
“Based on the experiences drawn from the four special economic zones of

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Shenzhen, Zhuhai, Shantou and Xiamen, Hainan can implement the market econ-
omy oriented by the international market under the national macro-economic
guidance” (cited in Chen and Hu 1988, 20). The preparatory group for the estab-
lishment of Hainan Province accepted his proposal and put it into practice.
In 1990, Qiushi magazine held a seminar on “the combination of planned
economy and market regulation.” At the meeting, Liu once again expounded his
view on the relation between planning and market, stressing that “the government
should make more use of the market mechanism in economic regulation” (Liu
2005b, 130). He took Guangdong and other open coastal areas as examples to
demonstrate that “the more market-oriented areas are, the greater the achieve-
ments of reform” (130). However, he believed that socialist countries needed to
implement the market economy, which is “the market-oriented reform with
adherence to the dominant position of public ownership, planned guidance and
macro control” (130). On the issue of market-oriented reform, he put forward
“two assertions to adhere to” and “two mistakes to avoid” based on dialectical
materialism, namely, adherence to market economy and avoidance of blind faith
in market economy, adherence to planned economy and avoidance of blind faith in
planned economy. In his opinion, due to the limitations of information and inter-
ests, the practice of having blind faith in the plan system without considering the
law of value, demand and supply of the market, and the national conditions and
power leads to serious problems, whereas there are obvious defects of the market
in adjusting the industrial structure, realizing fair competition, promoting effi-
cient development, preventing monopolies, protecting the ecological environ-
ment, and so on. In short, Liu reckoned that “we must combine the plan and the
market, and one-sided emphasis on any one aspect is not appropriate” (133).
Later in 1992, Liu comprehensively summarized the whole process of the
development of the socialist market economy theory over a period of more than
ten years from the Third Plenary Session of the 11th Central Committee of the
CPC to Deng Xiaoping’s Southern Talks in “On Several Issues on the Theory of
Socialist Market Economy.” In this article, he scientifically expounded major the-
oretical issues involved in the case that the socialist commodity economy should
be changed to the socialist market economy. He argued the “commodity economy
is antithetical to the natural economy and product economy, which is concerned
with whether there is a commodity nature in the behavioral exchange in human
socio-economic activities.” “The market economy is antithetic to the planned
economy as a method for resource allocation.” “From a logical perspective, the
commodity economy is of a relatively abstract and essential content level, while
the market economy is of a concrete and specific form level” (Liu 2005c, 207,
208). He further pointed out:

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10 Yang Zhang
We now propose to use the concept of market economy to replace the concept of
planned commodity economy, in order to emphasize the need to further develop
the commodity economy, and on the issue of allocation of resources to replace
the methods of relying mainly on administrative plans with the market
mechanism. This is the essence of the current economic reform in China and it
cannot be fully covered and expressed by the concept of the “planned commodity
economy.” (Liu 2005c, 209)
Liu also made a scientific formulation on why the attributive “socialist” was added
before “market economy” and the characteristics that distinguished it from the
capitalist market economy. He pointed out,
With the leadership of the Communist Party of China, the public ownership as the
basis, and the goal of common prosperity, we are more likely to consciously
proceed from the combination of the overall social benefits and local interests in
the operation of the socialist market economy. Hence we can and will achieve a
better performance than the capitalist market economy in dealing with the
relation between planning and market, between flexibility in micro operation
and coordination in macro regulation, and between stimulating efficiency and
realizing social justice, etc. (Liu 2005c, 215–216)
1.3. Enfu Cheng’s Pioneering Proposition of the Socialist Market Economy

System and Establishment of the Theory of the Relation between Market
Regulation and State Regulation
Enfu Cheng at the CASS was not only one of the earliest proponents of the reform
of the socialist market economy system, but also a major contributor to the theory
of the healthy development of the relation between market regulation and state
regulation.
Early in his career Cheng proposed that “a new type of market economy system
under the regulation of planning” should be implemented at the primary stage of
socialism in China (Cheng 2010a, 181). In the mid-1980s, Cheng argued that the
economy at the primary stage of socialism should be a kind of developed com-
modity economy. In “Economic Characteristics and Reform at the Primary Stage
of Socialism” in 1987, he pointed out,
As the commodity economy of the primary stage, it is on the one hand essentially
a new type and the most advanced form of commodity economy relative to the
capitalist commodity economy from the perspective of the evolution history of
relations of production, but on the other hand it is also rather imperfect per se,
calling for the establishment of a suitable market system and a proper market

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mechanism as well as the continuous development of the relation of commodity

economy. (Cheng and Xu 1987, 27–28)
Later in “On the Basic Standards for Demarcating Socio-economic Formations

and Social Development Stage” published in the first issue of the Fudan Journal
(Social Science Edition) in 1989, Cheng claimed China’s economic system “is
essentially a new type of market economy system under the regulation of planning
as the market system and market mechanism are maturing and perfected” (Cheng
2010a, 181). In the second half of 1989, a new round of debate climaxed on the
relation between the plan and the market within all sectors of society. While the
new formulation of the central document then was “the establishment of the com-
modity economy system combining planned economy and market regulation,”
Cheng considered this formulation not accurate enough. In his opinion, although
the plan and the market can coexist, the whole economic system cannot be both a
planned economy and a commodity economy, as a result, he insisted on the word-
ing of “market economy” in 1990. In 1992, he responded to the views of some
scholars who deemed the market economy as contradictory to Marxist economics
in “Drawing on the Experience of the Western Countries and Establishing the
Market Economy System Dominated by Planning.” Cheng explicitly stated,
I have always believed that the viewpoints that deny that the sum of production,
distribution, exchange and consumption of commodities is equal to commodity
economy and deny that the socialized commodity economy is equivalent to
market economy are neither favorable to the scientific study of the economic
operation of contemporary capitalism and socialism, nor in accordance with the
whole analytical logic of Capital, a view grounded on the fact that Marx did not
use the categories of “commodity economy” and “market economy.” (Cheng
2010b, 643)
He further proposed,
We can in theory use the term “commodity economy” to express the meaning of
“market economy,” as well as critically adopt the term “market economy” once
stipulated by Western economics. However, considering the international
acceptability of the economic terms, we shall employ the concept of “market
economy” more often in the future. (Cheng 2010b, 643)
Second, Cheng led the way in his advocacy of the gradual establishment of a
new type of regulating mechanism with dual functions “based on market regula-
tion and dominated by state regulation” in the reform of the economic system.

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12 Yang Zhang
In “Construction of a New Type of Regulation Mechanism ‘Based on Market

Regulation and Dominated by State Regulation’” in 1990, Cheng analysed the
functional advantages and disadvantages of market regulation and state regula-
tion respectively, and further proposed the combination and consistency of market
regulation and state regulation. Five of the major functional advantages “based
on market regulation” include “the short-term allocation function of the market
mechanism that directly regulates enterprises and individual workers, the micro-
equilibrium function, the signal transmission function, the technology innovation
function and the stimulation by interests function.” Its functional disadvantages
consist of the deviation from regulation target, the limit in the extent of regula-
tion, the low speed, and the high cost (Cheng 2010c, 611). Five of the major func-
tional advantages of economic activity “dominated by state regulation” include
“the macro balance function of the state mechanism in macroeconomic regula-
tion, the structural coordination function, the competition protection function,
the performance optimization function, and the income redistribution function”
(612). Its functional disadvantages consist of the subjective preference of state
regulation, the delay in transformation, the internal friction of policy, and the lack
of stimulation. While the respective functional advantages determine the basic
and leading roles played by market regulation and state regulation, the functional
disadvantages of each determine the need for their functional complementarity
and a kind of synergy. He believed that market regulation is a form of univer-
sal connection of the entirety of socio-economic activity. While state regulation
sets the goal orientation of the entire socio-economic activity; market regulation
works from the micro to the macro level, and state regulation works from the
macro to the micro level. The positive economic circulation system combining
the two can form an efficient and flexible regulatory mechanism. Based on this,
he advocated the establishment of a “three-dimensional integrated synthesis” of
market regulation and state regulation, consisting of the product dimension, the
property right dimension, and the regional dimension, and furthermore a spatio-
temporal articulation called the “four-dimensional spatial articulation” adding the
temporal dimension.
Third, Cheng proposed a pattern of building both a strong market and a strong
government. Cheng agrees with neither the “opposite relation theory” with its
view of the trade-off relationship between the market and the government, nor the
“two rounds of regulation theory” with its emphasis on a first round of market
regulation and a second round of government regulation. Cheng proposed a pat-
tern of building both a strong market and a strong government, based on the new
dual function regulation mechanism “based on market regulation and dominated
by state regulation” (Cheng 2010h, 73). In “Eight Dialectical Thoughts of Deng
Xiaoping’s Economic Theory” published in the first issue of Economic Perspectives

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in 1998, Cheng argued that the economic functions of China as a socialist country
reflected in respects of scientific management, efficient governance, people-
oriented service, and self-disciplined integrity would be shown to be superior to
the capitalist governments. Thus, the pattern of building both a strong market and
a strong government is not only conducive to giving full play to the efficient regu-
latory function of socialist countries, but also helpful in avoiding the trap of neo-
liberalism in the top-level design of economic policy.
2. The Contributions of Chinese Scholars of the “School of New

Marxist Economics” to the Healthy Development of the Socialist
Market Economy Theory
Since the start of the twenty-first century, Western forces have strengthened the
dissemination and permeation of neoliberalism in China. Representatives of
Western forces cooperated with domestic neoliberals to vigorously propagate the
neoliberal thoughts of relying only on privatization, marketization, and liberaliza-
tion and continually sought to occupy the ideological front of China’s economic
theory and policy. In order to prevent, resist, and eliminate the infiltration of neo-
liberal thought, and to defend the reform and opening up of the new era against the
interference of the trend of “capitalist marketization,” Chinese scholars of the
“School of New Marxist Economics” continuously put forward policy suggestions
to improve the socialist market economy system.
2.1. Zuyao Yu’s Focus on a Series of Issues in China’s Market Economy

Reform Process
Zuyao Yu paid attention to the problems and contradictions persisting and emerg-
ing in the process of China’s market economy reform. In his “China’s Economic
Concerns at Home” of 2002, Yu, starting from positive analysis, indicated ten
issues demanding solutions in China’s market economy reform. These included
extravagance, soaring unemployment, fiscal crisis, financial risk, polarization,
urban–rural dualism, an overdependence upon the export-oriented economic
structure, environmental pollution, social credit crisis, and cultural decadence (Yu
2002). The ten major issues he raised are still the focus of China’s market econ-
omy reform up to this day. Subsequently, Yu published “Solving the Conundrum:
Causes of China’s Economic Worries” in 2003, emphasizing that “We choose the
path of the reform of the socialist market economy without hesitation. However,
we must face these issues and analyse the reasons for these problems, and put
forward practical solutions” (Yu 2005d, 151). These two articles and his “China’s
Market-Oriented Reform: A Hard Path after Ridding of Bewilderment” in 1993
(Yu 2005c) together supported China’s market-oriented reform.

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14 Yang Zhang
2.2. Guoguang Liu’s Emphasis on the Adherence to the Orientation of the

Socialist Market Economy System Reform
Guoguang Liu stressed that an entirely pure market economy is not the aim for
China’s socialist reform. In a 2005 interview, “Rethinking the Reform Is Not
Equal to Anti-Reform,” Liu criticized the influence of neoliberal thinking. In the
article, he complained that neoliberalism had misled the direction of China’s eco-
nomic reform and development since the 1990s, especially since the new century,
and pointed out,
The theoretical premise and core theories of neoliberalism (such as the theory of
selfishness of human nature, the theory of eternality of private ownership, the
theory of omnipotence of free market, etc.) are not applicable to socialist China as
a whole, hence cannot become the mainstream of China’s economics and
dominate China’s economic development and reform. The guiding ideology for
China’s economics teaching and decision-making on economic issues in China
can only be Marxism which advances with the times. (Liu 2006c, 637)
Liu criticized some economists who advocated “marketization reform” and delib-
erately declined to use the word “socialist” and the precondition of market econ-
omy, who declined to mention public ownership as the main component of the
Chinese economy and its rejection of polarization. He emphasized that China’s
market economy is “socialist,” and a “precondition” for it is being “under the
state’s macro-control”; “a market economy that does not speak of socialism is a
crony market economy” (Liu and Zhang 2006, 42). In “Adhering to the Right Path
of the Reform” in 2006, he thoroughly analysed the means by which bourgeois
liberalism misled China’s reform and opening up, “Once bourgeois liberalism
emerged in China, its battle in the name of reform and opening up with Marxism
and the correct view of reform, namely, Deng Xiaoping’s view of reform, began”
(Liu 2006d, 644).
In 2008, Liu argued that, although great achievements had been made in eco-
nomic development in 30 years of reform and opening up in China, the eco-
nomic system had seen the rise of the dangerous tendency to blind faith in the
market, with the development of resource factors and financial markets lagging
behind, especially with the problem of over-marketization in the areas of educa-
tion, medical care, housing, and so on. These lead to the imbalance of the
national economy, the deterioration of resources and environment, and the wid-
ening of the distribution gap. He believed that “The solutions to the problems
incurred in the aspects of the comprehensive balance, environment and resource
protection, and fair social distribution are not in the market economy per se in

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China” (Liu 2008, 6). Therefore, “It is time to emphasize the guiding role of the
national plan in macro-control while continuing to adhere to market-oriented
reform” (Liu 2008, 7). In an interview on “The Directions, Goals and Core
Topics of China’s Economic System Reform” of 2018, Liu stressed that “failure
to adhere to the socialist direction of reform leads to a dead end” (Liu and Wang
2018). He also put forward suggestions on improving the socialist market econ-
omy system, such as strengthening and optimizing the state-owned and collec-
tive economy, strengthening the state’s macro-economic regulation and
regulation-oriented ability, and gradually solving the problem of wealth and
income polarization. Liu’s views have been highly valued and commented upon
by many leaders from the central government.
2.3. Enfu Cheng’s Proposition of the “Economic System Ensuring Four

Principal Positions” and Scientific Illustration of the “Theory of the Decisive
Role of the Market”
Enfu Cheng believes that the infiltration of neoliberalism into academic and
political circles of China should not be underestimated, and we should con-
stantly innovate in theory and practice and take a clear stand to criticize it. In
2007, he proposed that China should adhere to the “economic system ensuring
four principal positions,” that is, “multi-type property right system with the
public ownership taking the principal position, multi-factor distribution system
with labor taking the principal position, multi-structure market system with the
state taking the principal position, and multi-dimensional opening-up system
with self-reliance taking the principal position” (Cheng 2010d, 602). The four
aspects of the “economic system ensuring four principal positions” are comple-
mentary and inseparable, forming an organic unity embodying important fea-
tures of socialism with Chinese characteristics for a new era. Only if the
“economic system ensuring four principal positions” forms a synergy can the
joint trends of efficiency and fairness, prosperity of some people earlier than
others and common prosperity, national prosperity and people’s affluence,
emerge in China. The “multi-structure market system with the state taking the
principal position” embodies the dual functional regulation mechanism, with
the market allocating resources, and the state regulating the aspects of clean
governance, cost-effectiveness, democracy, and efficiency.
[S]cientific advocacy of “market-orientated reform” is different from arbitrary abuse

of “marketizing reforms.” The reform of the self-improvement of China’s socialism,
and the reform aiming at the establishment of the socialist market economy system,
is definitely not a simple “marketizing reform.” (Cheng 2010e, 142–143)

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16 Yang Zhang
In November 2013, President Xi Jinping discussed,
making the market play a decisive role in the allocation of resources and giving
better play to the role of the government. This is a major theoretical point put
forward by the decision of this plenary session. This is because the reform of the
economic system is still the focus of comprehensively deepening the reform, and
the core issue of the reform of the economic system is still to deal with the
relationship between the government and the market. (Central Literature
Research Office of the CPC 2014, 498)
There has been a debate in academic circles on “the decisive role of the market”
in the socialist market economy. Some scholars think that it leads to the road of
“market omnipotence” and capitalism. Enfu Cheng scientifically explained the
essential difference between the “theory of the decisive role of the market” of
socialism with Chinese characteristics and the “theory of market omnipotence” of
neoliberalism in 2014. “In China’s socialist market economy, although the condi-
tions for the market to play a role are different from those in a capitalist market
economy, the market similarly plays a decisive role in the allocation of resources
within a certain range” (Cheng and Gao 2014, 51). He pointed out that compared
with the neoliberal “theory of the decisive role of the market” which advocates
market fundamentalism, relying on marketization and minimization of govern-
ment functions, the “‘theory of the decisive role of the market’ of socialism with
Chinese characteristics should not only ensure the decisive role of the market in
the allocation of resources, but also emphasize national macro-control and micro-
regulation” (Cheng and Gao 2014, 56). He stressed that “‘the decisive role of
the market’ and the role of the government in planning and configuration are an
organic unity, in which both can achieve complementarity in function and synergy
in effect” (Cheng and Gao 2014, 56).
3. The Academic Value and Practical Significance of the

Contributions of the Chinese Scholars of the “School of New
Marxist Economics”
From these original contributions of the scholars of the “School of New Marxist
Economics” to the scientific establishment and healthy development of the social-
ist market economy theory, it can be seen that, since the reform and opening up,
scholars of the “School of New Marxist Economics” have carried forward the
theoretical quality of Marxist economics, keeping pace with the times, and have
summarized and refined new concepts and categories from abundant practical
experience in reform. They developed the socialist political economy with Chinese

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characteristics on the basis of scientifically sublating and surpassing the econom-

ics of the Soviet Union and the economics of the developed economies of the
West, and contributed Chinese wisdom to the exploration of a better social system
for humankind. In summary, there is a rich academic value and profound practical
significance in their great contributions.
3.1. Academic Value

3.1.1. Continuous Promotion of the Academic Innovation of Socialist Political
Economy with Chinese Characteristics
In “Reformulation of Chinese Economics: Beyond Marx and Western Economics”
in 2000, Enfu Cheng was first to propose the principles and ideas for reformulating
the paradigm of socialist political economy with Chinese characteristics in aca-
demia. To accomplish this, he had “to draw inspiration from the socialist eco-
nomic practice from both home and abroad, to take the main hypothesis in Marxist
economics as the basic point, and to absorb the proper elements of various eco-
nomic thoughts across time and space” (Cheng 2010f, 201). In 2009, Cheng clari-
fied scientifically, completely, and concretely the relation between the three
schools of thought of Marxism, Western economics, and Chinese studies and the
test of practice. He proposed six major academic principles for constructing mod-
ern Chinese economics, namely, “the adoption of Marxism as the base, Western
thoughts as the tool, national legacy as the root, world situation as the reference,
and national condition as the grounds, making comprehensive innovations”
(Cheng 2010g, 218). This paper has theoretical and guiding significance for the
system of modern economics with Chinese characteristics, and has become a para-
digm case of theoretical assessment of the relation between Marxism, Western
economics, and Chinese studies. Guoguang Liu is also in broad agreement with
the principles espoused by Cheng.3
In academia, the fact that Chinese scholars of the “School of New Marxist
Economics” took the lead in putting forward the theory of socialist market econ-
omy and its healthy development is seen as a successful case of combining aca-
demic innovation with demonstrated value and universal significance. It not
only highlights the main feature of scientifically, practically, and ideologically
adopting Marxism as the base, but also helps in avoiding the trap of “adopting
the Western economics as the guiding theory,” hence avoiding the disastrous
path of reform in the Soviet Union and the Eastern European socialist countries.
Neo-Keynesians such as Joseph Stiglitz reckoned the fundamental cause of the
failure of reform in the Soviet Union and the Eastern European countries was the
“misunderstanding of the basic concepts of the market economy” (Stiglitz 2007,
253), including blind faith in the Western myth of property right theory and

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18 Yang Zhang
overdependence on Western economics textbooks based on US and neoclassical

models. He argued that “textbook economics are proper for education, but not
for providing policy suggestions to governments on reform implementation and
market economy system reconstruction” (253).
3.1.2. Full Display of the Chinese Wisdom of Contemporary Marxist Political

Economy
China’s socialist market economy theory is an economic theory with Chinese char-
acteristics which is based on Marxist political economy. It cannot be equated with
the general principles of market economy, let alone the theory of capitalist market
economy. It can be concluded from the above research that the socialist market
economy theory is the core theory of socialist political economy with Chinese char-
acteristics, which is guided by Marxist political economy, using the rational compo-
nents of modern Western economics as a tool and always tested against the reality of
socialist practice. This kind of scientific understanding can break the two main erro-
neous views that have been popular since the beginning of reform and opening up:
(1) that Marxist political economy can only be a planned economy theory based on
public ownership; (2) that China’s economic system reform is carried out based
on the market economy theory of Western economics. Xinhua Jian objectively
pointed out that “the theory of market economy is not the patent of Western econom-
ics. Marx long ago put forward the general principles of scientific market economy
and the theory of capitalist market economy of Marxist political economy” (Jian
2018, 15). On this basis, we can eliminate the dogmatic view that socialist public
ownership cannot be effectively combined with market economy, and should con-
stantly innovate and improve the theory of socialist market economy.
The scholars of the “School of New Marxist Economics” in China will continue
to be flag bearers in developing and innovating the theory of socialist market econ-
omy. They are working to establish the Chinese School of this theory in global
academia, “to fully display the ‘Chinese wisdom’ of contemporary Marxist politi-
cal economy” (Gu 2018, 13). Through this they are assisting the realization of the
project Xi Jinping outlined in the report of the 19th National Congress of the CPC,
of “making efforts to build an economic system with an efficient market mecha-
nism, dynamic micro agents and appropriate macro-control, and continuously
enhancing China’s economic innovation and competitiveness” (Xi 2017, 32).
3.1.3. Contributions to the Enrichment of International Socialist Market

Economy Models and the Respective Schools of Thought
The problem of the socialist market economy has long been the focus of many
scholars in the world. The research and discussion on the socialist economic model
have challenged those who oppose completely the plan and the market, socialism

181.229.205.87 on Tue, 13 Apr 2021 13:32:17 UTC
and the market. Traditional socialist theory that regards the national plan as the
only operating mechanism of the socialist economy has been changed, and a vari-
ety of models have been explored that combine the plan and the market, centrali-
zation and decentralization, efficiency and fairness. The study of socialist economy
model by scholars in the world can be divided into six categories, with a total of
17 models. The first category is the decentralized socialist economic model, spe-
cifically including Virlyn W. Bruse’s “planned economy model with market
mechanism,” Ota Sik’s “planned market economic model,” Janos Kornai’s “model
of introducing market mechanism into planned economy,” Alec Nove’s “feasible
socialist economic model.” The second is the autonomous socialist economic
model, including Edvard Kardelj’s “autonomous socialist economic model,”
Edward van Nike’s “workers’ autonomous economic model,” and Tony Andreani’s
“enterprise autonomous socialist model.” The third is the socialist economic
model which emphasizes efficiency and maximization of benefits, including John
E. Roemer’s “bank-centered socialist model” and James Juncker’s “practical mar-
ket socialist model.” The fourth is a socialist economic model which emphasizes
equality, including David Miller’s “model of cooperative market socialism” and
Dean Elson’s “socialist model of market socialization.” The fifth is the new model
of socialist economy which advocates democracy, including Thomas Weisskopf’s
“democratic market socialist model based on enterprise,” David Schweickart’s
“socialist model of economic democracy,” and Robin Archer’s “socialist eco-
nomic model based on economic democracy.” The sixth is the socialist economic
model against the market, specifically including Maurice Herbert Dobb’s “planned
economic model with the central authority providing centralized solutions,” Ernest
Mandel’s “no price economic model,” and Bertell Ollman’s “democratic planned
socialist economic model.”
In China, the theory of the socialist market economy constructed by the schol-
ars of the “School of New Marxist Economics” not only advocates that China at
the primary stage of socialism needs to use the market mechanism to develop
productive forces, but also emphasizes the need to regulate the entire socio-
economic operation through state adjustment to further regulate the market.
Scholars of the “School of New Marxist Economics” believe that after socialism
with Chinese characteristics enters the new era, we should be more vigilant about
the phenomenon of neoliberal economics insidiously masquerading as the theory
of the socialist market economy and causing serious damage to the cause of social-
ist modernization. On the whole, China’s socialist market economy is fundamen-
tally different from full marketization reform under the guidance of neoliberal
economics. The key is to give full play to the benign and efficient regulatory func-
tions of socialist countries. In short, the theory of the socialist market economy
constructed by scholars of the “School of New Marxist Economics” who can

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20 Yang Zhang
represent the “Chinese School” can be summarized as “the market socialist econ-
omy model with the principal position of public ownership and the dominant role
of the state,” This is an important theoretical achievement of developing Marxism
and building socialism in the twenty-first century, which is conducive to enriching
the model of socialist market economy worldwide and its school of thought.
3.2. Practical Significance

3.2.1. Enhancement of Self-Confidence in International Economic Competition
In November 2013, Xi Jinping pointed out,
What China implements is a socialist market economy system. We still need to

persist in giving play to the superiority of China’s socialist system and the active
role of the party and the government. The market plays a decisive role in the
allocation of resources, but not in all areas. . . . Emphasizing the government’s
responsibilities and roles is mainly to maintain macroeconomic stability,
strengthen and optimize public services, ensure fair competition, strengthen
market supervision, maintain market order, promote sustainable development,
promote common prosperity, and make up for market failure. (Central Literature
Research Office of the CPC 2014, 500)
The reform of the economic system advocated by scholars of the “School of

New Marxist Economics” is guided by Marxist economics. It has always stood
on the side of the masses, is not one-sided, is not biased, and has always adhered
to the dialectical unity of market regulation and state regulation and emphasized
that the combination of their organic functions is an inherent requirement of the
reform of the socialist market economy system. In contrast, Chinese neoliberal
economists often oppose the country’s active science and technology policies
and industrial policies. For example, in the face of the US technology policies
against China’s ZTE Corporation and Huawei, as well as the accusations of Made
in China 2025, Jinglian Wu from the Development Research Center of the State
Council of China said at an academic conference hosted by CIDEG of Tsinghua
University in 2018 that
there seems to be a danger judged by the responses of the internet. This danger is
that this debate has made this nationalism gain more advantages, that is, to
support China’s related industries with greater administrative power. For example,
there is a slogan of “developing the chip industry at all costs.” (Wu 2018, 60)
Wu’s fear is obviously contrary to the position of the Chinese government, indus-
tries, academics, and citizens. In July 2018, Xi Jinping stressed,

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We must give full play to the unique role of the socialist market economy, give full
play to the advantages of China’s socialist system, and give full play to the role of
scientists and entrepreneurs in innovation to form a system to solve the key and
core technological problems. (Xi 2018a)
Jinglian Wu opposed Chinese cadres and the masses when they demanded the
strengthening of the centralized and unified leadership of scientific and tech-
nological work, and work to form a strong synergy and system to surmount
key technological difficulties. Wu’s extremist misinterpretation of his oppo-
nents as representing the “danger” of “nationalism” in order to make his own
market fundamentalism appear more moderate reflects his adherence to the
laissez-faire ideology of developing a market economy and of reliance on core
technology from the West. In addition, Weiying Zhang of Peking University
has always opposed the national industrial and technological policies. As he
himself emphasized, “I advocate the abolition of any form of industrial policy”
(Zhang 2016, 13).
In response to such views, Enfu Cheng wrote an article in 2018 which, starting
from the theory of socialist market economy combining market regulation and
national control, emphasized that intellectual property advantage brought by inde-
pendent innovation should be highlighted in the new era.
Under the circumstances that key and core technologies are blocked by the
developed countries, only by means of education reform and cultivation and
introduction of the talents, breaking the commanding height occupied by developed
countries by accelerating the independent research and development and
dominating step by step the international industry chain, changing China’s passive
position to an active one, can we fundamentally promote the transformation of
China from a large economy to a strong economy and realize the high-quality
development of the national economy. (Cheng 2018a, 2)
And Zuyao Yu also has stressed that “If we reject entirely the function of the
state in the allocation of resources, and depend purely on the market, the process
for realizing the economic take-off will be slow and the cost will be huge” (Yu
2005c, 50).
In conclusion, as China handles the “economic and trade war,” “technology
war,” and “financial war” waged by the United States, the socialist market econ-
omy theory constructed by the scholars of the “School of New Marxist Economics”
helps to give full play to the positive role of the state, the unique function of the
socialist market economy, and the institutional advantages of China’s socialism,
forming a system to solve core technological problems.

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22 Yang Zhang
3.2.2. Ensuring the Orientation of Reform of the Socialist Market Economy

In May 2018, Xi Jinping declared at a conference commemorating the 200th anni-
versary of Marx’s birth:
We should have the courage to deepen the reform in an all-round way, consciously
stimulate the vitality of the development of social productive forces through
adjusting relations of production, and consciously adapt to the requirements
of economic base development by improving the superstructure, and make
socialism with Chinese characteristics move forward in accordance with regular
rules. (Xi 2018b)
However,
the great social transformation in contemporary China is not to simply

continue the model of China’s history and culture, not to simply use the ideas
of classical Marxist writers indiscriminately, not to reproduce the practice of
other socialist countries, and not to replicate the modernization development
abroad. (Xi 2018b)
Scholars of the “School of New Marxist Economics” in China agree with the cen-
tral government’s decision to deepen reform in an all-round way, actively offer
plans and policies, promote the continuous improvement of the socialist market
economy system with Chinese characteristics in the deepening of reform in an all-
round way, and facilitate the self-improvement and development of the socialist
system (He 2018).
However, in the process of comprehensively deepening reform in China, some
academic views catered to the market logic of Western neoliberalism, separating
the relation between “state and market” from that between “government and mar-
ket.” In essence, these views preach taking the “Western model” as a prototype for
the reform of the market economy system and following the development path of
relying on Western capitalism. They advocate the reform plan of unrestrained pri-
vatization, relying purely on marketization and liberalization, emphasizing one-
sidedly the important role of private ownership economy and marketization
reform, and further rejecting the model of the economic system with domiant pub-
lic ownership, denying the institutional advantages of socialist countries in gather-
ing resources for grand undertakings, and negating the path of socialism with
Chinese characteristics via self-dependence and opening-up. Jinglian Wu made
this case in his book 50 Chinese Economists on China’s Economy in the Past 30
Years: Review and Analysis published in 2008. He argued that

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economists tend to take the government as the provider of public goods instead
of a market player supplying goods and services and they believe that too much
government intervention hinders market operation and leads to corruption.
Therefore, they are more inclined to prefer the Western type of market economy,
namely, the liberalized market economy system. With more and more scholars
mastering modern economics, the influence of this kind of thinking is on the rise.
(Wu et al. 2008, 10–11)
The idea of “market economy” in Weiying Zhang’s 2012 book The Logic of the
Market echoes Jinglian Wu’s views. Zhang deemed himself one of the representa-
tives of Property-Right Economics and argued that
the market economy could not be built on the basis of state ownership, and only
the market economy based on private property system can operate efficiently!
Therefore, for the successful establishment of the market economy system,
economic privatization is unavoidable. (Zhang 2012, 52)
Evidently, the “market economy model” advocated by Wu and Zhang is the “liber-
alized market economy model” based on neoliberal theories, namely, the “Western
model.” The comprehensive deepening of the “market-oriented” reform they
referred to is in fact the path of Western “liberalized market economy,” even if
disasters such as financial crises, fiscal crises, economic recessions, and polariza-
tion result, it means a “true success” of the reform.
Guoguang Liu distinguished between the two views on reform:
Is it sticking to the reform direction of self-improvement of socialism initiated by

Deng Xiaoping, or shifting China to the direction of capitalism under the guise of
supporting reform and opening up? Is it adhering to the socialist basic economic
system, that is, with public ownership taking the dominant position and various
forms of ownership developing together, or adopting the privatization of the
capitalism? Is it sticking to the target of building the socialist market economy, or
taking the target of building the capitalist market economy or the so-called
marketization reform? (Liu 2006e, 647)
Enfu Cheng also stressed,
There are significant differences between neoliberal capitalism and socialism with
Chinese characteristics in respects of economic systems, economic theories and
policy ideas. . . . Major failures have occurred in neoliberal economies and social

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24 Yang Zhang
democratic economies against the criteria of improving the overall strength of the
country and the wellbeing of the people in accordance with the essential
requirement of the people, which makes the socialist market economy with Chinese
characteristics as a new mode of economic civilization of mankind more outstanding
in comparison. Marxism, Leninism and the sinicized political economy theories and
policy suggestions have effectively promoted the improvement of the overall
strength of China and the wellbeing of the people in accordance with the people-
centered principle and the community of human interests. (Cheng 2018b, 58)
In conclusion, by comparative analysis of a variety of cited literature, the author

argues that scholars of the “School of New Marxist Economics” have made more
outstanding contributions both to the construction of socialist market economy
theory at the academic level, and to the comprehensive deepening of reform and
the strengthened technology power building in practice, than the neoliberal econo-
mists in China. This recognition is of great significance for correcting misconcep-
tions at home and abroad, for accurately describing the development history of
China’s economic theory over the past 40 years of reform and opening up and the
direction of future reform and opening up, and for promoting the mutually benefi-
cial interaction between China’s economy and the world economy.
Acknowledgements
This article is translated from Chinese by Dr. Xiaoran Gong at the Shanghai University of International
Business and Economics.
Notes
1. See Cheng (2009). He introduced eight important theoretical innovations of modern Marxist
economists, of which this paper only expounds specifically on the significant contributions of
Guoguang Liu, Zuyao Yu, and Enfu Cheng to the socialist market economy theory due to the length
and demonstration perspective of this paper.
2. Jinglian Wu, a neoliberal economist from the Development Research Center of the State Council,
still criticized “the transition from planned economy to market economy” in 1983 (Zhou and Wu
1983, 48). He stated that
the implication of comprehensive market regulation is practically to give up planned economy. To

carry out the operation principle of this mode is to make the various basic proportional relations of
the national economy to form spontaneously under the control of the market power, hence the
drawbacks of capitalism will inevitably occur. Therefore, this mode is not worthy of consideration.
(Wu and Zhou 1983, 52)
However, after learning about the central government’s intention to adopt the wording of “socialist
market economy,” Wu shifted to suggest in an article published in 1992 to “establish the wording of

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‘socialist market economy’” (Wu 1992, 3). Shortly afterwards, he no longer insisted on the socialist
market economy with public ownership taking the dominant position, but stated that “the fundamental
characteristics of socialism are social justice plus market economy, rather than other thoughts” (Wu
1997). Later on, he preferred the wording of “good market economy” and “bad market economy.”
3. Guoguang Liu made the following comment on the book titled Study on Enfu Cheng’s Academic
Thoughts (Economic Science Press 2015, 1):
As one of the major academics of the school of innovative Marxism, there is a great deal of
academic and practical significance in the ideological principles of “the adoption of world situation
as the reference, national condition as the grounds, Marxism as the base, Western thoughts as the
tool, national legacy as the root, making comprehensive innovations” that Professor Enfu Cheng
proposed.
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The Contribution of the “School of New Marxist Economics” to China's Socialist Market

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In 1979, China’s leader Deng Xiaoping said,

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1. Scientific Establishment of Socialist Market Economy Theory

Three representatives of the “School of New Marxist Economics” at the CASS,

1.1. Zuyao Yu’s Lead in Proposing the Category of “Socialist Market

World Review of Political Economy Vol. 11 No. 1 Spring 2020

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of reform and opening up in China. Yu stated, “as long as commodity system is

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1.2. Guoguang Liu’s Pioneering Proposition of Market-Oriented Reform and

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replacing administrative methods to manage the economy with economic

In terms of external causes, he argued that the experiences of building socialism

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World Review of Political Economy Vol. 11 No. 1 Spring 2020

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1.3. Enfu Cheng’s Pioneering Proposition of the Socialist Market Economy

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mechanism as well as the continuous development of the relation of commodity

Later in “On the Basic Standards for Demarcating Socio-economic Formations

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In “Construction of a New Type of Regulation Mechanism ‘Based on Market

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2. The Contributions of Chinese Scholars of the “School of New

2.1. Zuyao Yu’s Focus on a Series of Issues in China’s Market Economy

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2.2. Guoguang Liu’s Emphasis on the Adherence to the Orientation of the

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2.3. Enfu Cheng’s Proposition of the “Economic System Ensuring Four

[S]cientific advocacy of “market-orientated reform” is different from arbitrary abuse

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In November 2013, President Xi Jinping discussed,

3. The Academic Value and Practical Significance of the

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characteristics on the basis of scientifically sublating and surpassing the econom-

3.1. Academic Value

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overdependence on Western economics textbooks based on US and neoclassical

3.1.2. Full Display of the Chinese Wisdom of Contemporary Marxist Political

3.1.3. Contributions to the Enrichment of International Socialist Market

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World Review of Political Economy Vol. 11 No. 1 Spring 2020

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