An Economic Information Daily report last week pointed out some areas of concern in the transition from a controlled economy to a market-oriented one, and made some suggestions on how to remedy them.

The newspaper suggested that government should put fairness and system improvement first and avoid too much market-orientation and shifting of responsibilities toward grassroots government.

It identified three problematic trends:

--The monopolizing of public goods by government officials results in their unfair supply. For example, a local cultural and educational bureau in Dongguang County, Hebei Province said in June that the county's best primary school would only be accessible to children of local government clerks, and those born to other families were excluded.

--Provision of public goods is overly market-based. Health and education should be provided by government, but now this is often done by others. Since the 1980s, medicare reform, with little fiscal support, has tended to be too market-oriented. In cities, state-owned enterprises (SOEs) cannot shoulder employees' basic medical expenses and some firms evade basic medicare for their staff. To make up for insufficient government funding, hospitals have raised charges and actually make profits, but many people cannot afford medical bills.

--The responsibility of providing public goods has been transferred to grassroots government. Higher learning has been given too much attention while compulsory education is ignored. County or township governments, which often run into fiscal difficulties, have to finance compulsory education and public health, a burden that ends up being borne by farmers. After the rural tax reform of 1999, compulsory education has become increasingly difficult to maintain.

To address these problems, the report made the following three suggestions:

--Social fairness. Much social conflict arises to defend social fairness, said Chen Ganquan of the Anhui Government Development and Research Center. He said government needs to provide public goods to both urban and rural areas and to all social classes in a fair and balanced way and take the collective will of the public into consideration.

--Transformation of government functions. Experts say government should transform its function from regulating and controlling the economy to providing public goods and services to offset failures of the marketplace. They suggest setting up a liability system in the supply of public goods, holding officials to account regarding compulsory education, access to medical treatment, etc.

--Policy construction. This should take citizens' rights as its basis. For a long time, agriculture has supported the development of industrialization, but as development progresses, China now has a dual economic structure in the cities and countryside. Previous policies can only widen the gap between them, so dual public goods supply mechanisms should be created and a new public resource allocation mechanism developed.

(China.org.cn by Tang Fuchun, Yuan Fang August 1, 2005)