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Understanding Chinese-style modernization: A national wealth management perspective

YANG ZHIYONG | 2022-09-19 | Hits:
Chinese Social Sciences Today

Behind the modernization of China is the process of the national wealth management system, from the state’s overall control of social wealth to the rational use of social wealth. National wealth management offers a unique perspective on China’s modernization. Modernization needs financial support, especially in developing countries. Modernization without the support of wealth is not sustainable, and modernization without the support of sustainable financial resources won’t last. The centralization of national financial resources took the form of internal financing, which provided initial funds for the modernization of China, thus forming a centralized national wealth management pattern. 

The national wealth management pattern has evolved to meet the needs of modernization. The conditions that trigger the evolution of the model are the main challenges to the sustainability of social wealth creation. There is no one-size-fits-all model for national wealth management, but running water never goes stale. Wealth is accumulated in the flow. National prosperity is an important goal for modernization. The power of a country does not lie in the amount of wealth it directly controls, but in the amount of wealth it can mobilize and the extent to which wealth can be promoted to play a role in social development. From the perspective of the amount of directly controlled wealth, the proportion of wealth under state control in modernization becomes smaller in the early stage, and then is optimized according to actual needs. 

The complexity of social division of labor determines that extensive national wealth management cannot meet the needs of social development, so the national wealth management pattern turns into a more professional national wealth governance model with more participants, and realizes the modernization of governance in its evolution. Efficient management of wealth—directly controlled by the state—has been improved through evolution, which is highlighted by the improvement of budgetary capacity. Enhanced budgetary capacity involves not only budgetary system reform, but also budgetary technology innovation. Promotion of budgetary capacity is also an important part of national modernization. The enhanced budgetary capacity promotes efficient management of wealth directly controlled by the state, thus providing more adequate financial security for modernization. 

To meet the needs of modernization, national wealth management has changed from direct management to indirect management, from undertaking everything to providing financial support for national modernization, but the central goal of national prosperity has not changed. 

To adapt to the transformation of the national wealth management pattern, the enterprise accounting information management system has made corresponding reforms. From the specific industry accounting system to the accounting standard system, the information transmission channels and mechanisms of market entities have undergone fundamental changes, providing information support for the new national wealth management pattern. The increase of market transactions requires a corresponding reform of the System of National Accounts (SNA). The replacement of Material Product Balance System (MPS) by SNA is a fundamental change, and it also needs to be adjusted according to economic and social development. Development of the digital economy requires corresponding reform of accounting, and the SNA must adapt to industrial society to provide powerful decision-making information support for national wealth management. Chinese-style modernization is supported by a proper national wealth management pattern. Behind the evolution of the national wealth management pattern is a series of national wealth management stories based on a basic economic system with public ownership as the mainstay, forming a national wealth management system with distinctive Chinese characteristics, which has significant institutional advantages in pooling government financial resources and mobilizing social resources. 

The knowledge-supported transformation of China’s national wealth management pattern is an epitome of the Chinese path. Sorting out related cases can provide reference for comprehensively deepening reform and opening up. The change of fiscal relations between governments is a prominent case. This is not the application of a theoretical model, but the integration of Chinese wisdom on the basis of absorbing the common wealth of human civilization, to figure out the Chinese model and form a national wealth management pattern that meets the needs of China. 

Yang Zhiyong is deputy director and a research fellow at the National Academy of Economic Strategy under the Chinese Academy of Social Sciences.

Edited by YANG XUE