By Jiwei Lou, World Bank
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Additional resources for Macroeconomic reform in China: laying the foundation for a socialist market economy
We believed macroeconomic reform was inevitable and could not be carried out piecemeal in some regions and sectors; rather, it would have to involve the national economy, and reforms in any one sector would have to be integrated with others. Thus, SRC's Department of Macroeconomic Regulation Studies (DMRS), cooperating with other government departments, began work on a new design for the macroeconomy. From mid-1992 onward, drafts were made for an integrated proposal of pricing, taxation, fiscal and financial reforms, and the plan was thoroughly discussed in SRC.
The general principle is that central and local governments should not interfere with enterprise management. Instead, they should be concerned with ensuring social stability and order, as well as a unified national market. They should also be constructing transregional national infrastructure, and adjusting major economic (regional and industrial) structures. For their part, local governments would be responsible for local social and economic issues, including construction of infrastructure, environmental protection, education and medical care, income distribution and social security policy, development of commerce and other tertiary industries, and improving the investment climate.
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