II. Adhering to and Improving the Basic Economic System

The basic economic system with public ownership playing a dominant role and different economic sectors developing side by side is an important pillar of the socialist system with Chinese characteristics and is the foundation of the socialist market economy. Both the public and non-public sectors are key components of the socialist market economy, and are important bases for the economic and social development of China. We must unswervingly consolidate and develop the public economy, persist in the dominant position of public ownership, give full play to the leading role of the state-owned sector, and continuously increase its vitality, controlling force and influence. We must unwaveringly encourage, support and guide the development of the non-public sector, and stimulate its dynamism and creativity.

5. Improving the property rights protection system. Property rights are the core of ownership. We need to improve the modern property rights system with clear ownership, clear-cut rights and obligations, strict protection and smooth flow. The property rights of the public sector are inviolable, as are those of the non-public sector.

The state protects the property rights and legitimate interests of all economic sectors, ensures that they have equal access to the factors of production according to the law, participate in market competition on an open, fair and just footing, and are accorded with equal protection and oversight according to the law.

6. Vigorously developing a mixed economy. A mixed economy with cross holding by and mutual fusion between state-owned capital, collective capital and non-public capital is an important way to materialize the basic economic system of China. It is conducive to improving the amplification function of state-owned capital, ensuring the appreciation of its value and raising its competitiveness, and it is conducive to enabling capital with all kinds of ownership to draw on one another's strong points to offset weaknesses, stimulate one another and develop together. We will allow more state-owned enterprises (SOEs) and enterprises of other types of ownership to develop into mixed enterprises. We will allow non-state-owned capital to hold shares in projects invested by state-owned capital. We will allow mixed enterprises to implement employee stock ownership plans (ESOP) to form communities of capital owners and laborers.

We will improve the state-owned assets management system, strengthen state-owned assets oversight with capital management at the core, reform the authorized operation mechanism for state-owned capital, establish a number of state-owned capital operating companies, support qualified SOEs to reorganize themselves into state-owned capital investment companies. State-owned capital investment operations must serve the strategic goals of the state, invest more in key industries and areas that are vital to national security and are the lifeblood of the economy, focusing on offering public services, developing important and forward-looking strategic industries, protecting the ecological environment, supporting scientific and technological progress, and guaranteeing national security.

We will transfer part of the state-owned capital to social security funds. We will improve the budgeting system for the operation of state-owned capital, and increase the proportion of state-owned capital gains that are turned over to the public finance to 30 percent by 2020, to be used to ensure and improve the people's livelihood.

7. Promoting a modern corporate system for SOEs. Owned by the whole people, SOEs are an important force for advancing national modernization and protecting the common interests of the people. Although SOEs generally have assimilated themselves into the market economy, they must adapt to new trends of marketization and internationalization, and further deepen their reform by aiming the focus at regular decision making over operation, maintaining and appreciating the value of state assets, participation in competition on an equal footing, raising production efficiency, strengthening enterprise vitality, and bearing due social obligations.

We will accurately define the functions of different SOEs. We will ensure state-owned capital increases its input into public-welfare enterprises and make greater contributions in the provision of public services. In natural monopoly industries in which state-owned capital continues to be the control shareholder, we will carry out reform focusing on separation of government administration from enterprise management, separation of government administration from state assets management, franchise operation, and government oversight, separate networks from operations and decontrol competitive businesses based on the characteristics of different industries, and make public resource allocation more market-oriented. We will continue to break up all forms of administrative monopoly.

We will improve the corporate governance structure with coordinated operations and effective checks and balances. We will establish a system of professional managers, and give better play to the role of entrepreneurs. We will deepen reform of systems concerning the promotion and demotion of management personnel, hiring and firing of employees, and salary increase and decrease. We will establish a long-term incentive and restraint mechanism, and strengthen investigations into the accountability of SOE operations and investment. We will explore ways to publicize important information, including SOE financial budgets.

SOEs should appropriately increase the proportion of market-oriented recruitment, and rationally determine and strictly regulate the salary standards, position benefits, position-related expenses and business spending of SOE management personnel.

8. Supporting the healthy development of the non-public sector. The non-public sector plays an important role in sustaining growth, stimulating innovation, increasing employment, increasing tax revenues and so on. We will persist in equality of rights, opportunities and rules, abolish all forms of irrational regulations for the non-public economy, remove all hidden barriers, and adopt specific measures for non-public enterprises to enter franchising fields.

We will encourage non-public enterprises to participate in SOE reform, foster mixed enterprises with non-public capital as the controlling shareholder, and encourage qualified private enterprises to establish the modern corporate system.