On April 10, 2022, the Opinions of the Central Committee of the Communist Party of China and the State Council on Accelerating the Construction of a National Unified Market (hereinafter referred to as the “Opinions”) was issued, which specifically called for speeding up the establishment of a national unified market system and rules, breaking local protectionism and market segmentation, removing key blocking points restricting economic circulation, and accelerating the construction of an efficient, standardized, and fully open national unified market characterized by fair competition.Why calling for "accelerating the construction of a national unified market" at this time? China is now in a critical stage of building a new development landscape, which requires efforts to further improve productivity, stimulate market vitality, promote the transformation and upgrading of industrial and supply chains, widen opening-up, smooth out domestic circulation, and promote the formation of a “dual circulation” development pattern. This in turn requires sufficient institutional support for the domestic market, an efficient market connectivity mechanism, as well as the full leveraging of the value of resource factors.A call has already been made in China’s 14th-Five-Year Plan to "accelerate the construction of a national unified market". China has made remarkable progress in improving basic regulations, building a factor market and perfecting market regulatory rules. However, various problems such as regional barriers, inconsistent standards and insufficient innovation still exist.The release of the Opinions marks a further refinement of the call for the construction of a national unified market in the 14th-Five-Year Plan. At the macro and strategic levels, the latest policy document also provides an action program for the construction of a national unified market in the future. Its main objectives are to create a more market-oriented, law-based and internationalized business environment give full play to the roles of an effective market and an industrious government to stimulate market vitality promote technological innovation and industrial transformation and upgrading, and enhance the international competitiveness of industries and raise the level of consumption and investment, smooth out the domestic cycle, and boost the development based on “dual circulation”.

What is a "national unified market"?The national unified market means the unification of basic market regulations, high standards for market infrastructure, mechanisms for smoothing out the flows of factor resources, marketization levels of goods and services, regulatory rules and norms, and the order of fair competition. It requires efforts to strengthen the mechanism of coordination between various departments, improve the institutional framework and reduce government intervention break regional barriers and improve the smooth flow of resource factors in all links enhance supervision, fight against practices of unfair competition, and build a fair and orderly market environment.

Can the "national unified market" effectively boost the economy against mounting downward economic pressure?Affected by the COVID-19 pandemic and the Russia-Ukraine conflict, China now faces growing downward economic pressure. In particular, the continuous impact of unstable factors on economic recovery will bring structural pressure on the Chinese economy.From the perspective of macro control, China will keep the main tone of its pro-growth policy unchanged. At the same time, it needs to step up structural regulation at the supply and demand ends. The construction of a national unified market will form close synergy with the macro control policy framework, which will lead to a re-focusing of industrial policies. By promoting institutional reform and policy guidance, China will remove the main obstacles that inhibit domestic demand, promote the coordinated development of import and export trade, and promote the establishment of a mechanism that can balance domestic and foreign demand. At the same time, there is also a need to enhance the factor flow mechanism, reinforce the driving role of investment, stimulate market vitality, and press ahead with industrial transformation and upgrading.In the short term, however, China will continue to take cross-cyclical monetary and fiscal policies as the main means to boost the economy. The construction of a national unified market will provide an efficient and direct path for policy transmission. In the medium and long term, the national unified market will become a strong booster for China to enter the stage of high-quality development and form a new pattern of “dual circulation” development.

What is the impact of the ";national unified market"?The Opinions conveys to the market China’s determination to deepen reform. Facing a critical period of economic transformation, China has continued to deepen reform at different levels, including basic regulations, market environment improvement, technological innovation and regulatory mechanism building. It has also formulated specific action guidelines for key sectors and key links, which are intended to clarify the division of work between and action paths for various departments, market entities, regulatory authorities and other participants. All the efforts serve the purpose of comprehensively promoting the transformation of the Chinese market from a big to a competitive one.The introduction of the Opinions showcases China’s commitment to deepening reform and opening up, giving full play to its institutional and mechanism advantages and comprehensively enhancing the strength of market resources. As for macro control, China will take the stance of blazing new trails to further improve its basic regulations, standards system, regulatory mechanisms and market order. On this basis, it will take domestic demand as the starting point to emphatically deal with those key links that restrict the smooth flow of factors and the role of the market, straighten out blocking points, improve total factor productivity and establish smooth domestic circulation. Benchmarking against the international market standards, China will also widen opening-up, boost the cross-border flow of factors, and enhance the effect of linkage between domestic and international markets, thus promoting the formation of a “dual circulation” development pattern.The market will usher in a period of rapid change. In the past, regional protectionism, poor logistics flow and excessive administrative intervention have restricted the better leveraging of the advantages of full market competition. In the future, the basic regulations and market structure will undergo thorough transformation under the nationally unified standards, local administrative intervention will be weakened, institutional obstacles will be further removed, and the market order will become fairer and more transparent. All these will lead to greater innovation vitality. Of course, changes can go in various directions. In a market environment where competition pressure constantly grows, those entities that run against market rules and hinder industrial progress will face the fate of faster elimination, while entities that are conducive to market innovation and support national strategic objectives will grow stronger and more competitive. Those small and medium-sized enterprises with certain innovation and growth potential but weak competitiveness for the time being will get more support and incentives for survival and development.



Author: Tian Xuan, Associate Dean of Tsinghua University PBC School of Finance