After over 30 years of high-speed economic growth, a new phase has dawned. Everybody is anticipating a medium to high-speed economic growth rate that constitutes a “New Normal”. However, multiple economic indicators and direct observation of the market last year have shown that people are to be disappointed. The biggest problem now is many enterprises are making a loss or going bankrupt, decrease of tax revenue, gloomy prospects for enterprises, major fluctuation in the stock market, and the depreciation of Chinese Yuan, just a string of bad news. It is very likely that China’s economy may well deteriorate in the coming year 2016. Just as estimated by many economists.

Such bleak situation has occurred before. It first took place in 1978, after the reform and opening-up. Due to the disastrous Cultural Revolution, everything was in chaos while the economy was about to collapse. The second time was between 1990-1991, as a consequence of the events in 1989, the economy was in deep recession. The market was empty, there were no guests at hotels, seats were vacant on airplanes, and there were few cars in Chang’an Street, a main boulevard that goes through Beijing. These two precedents were way worse than now. However, China not only stepped out of the gloom, but also achieved mind-blowing economic development. What is the lesson there? I think it all boils down to “emancipation of the thoughts.”

The first time of thoughts emancipation was the Third Plenary Session of the 11th CPC Central Committee that broke with the constraints of the “two must.” It ushered in the collapse of the People’s Communes and initiated the household contract institution. These measures solved the problem of feeding the people, which had not been solved for 27 years after 1949. Chinese people have never been in famine ever since. How to feed over a billion people may be a huge conundrum, but it can be easily solved with an emancipated mind. Then what constraints were lifted? It was the false belief of broad-scoped and public ownership of agriculture.

The second time for thoughts emancipation was after 1989 when China was under international pressure and the leftist thoughts were domestically pandemic. That was when any idea concerning making money was deemed capitalism and there was a fever over a socialist society based on public ownership. The subsequent two years witnessed the market depression and economic stagnation, which wiped out all the flourishing energy brought about by the Third Plenary Session. DENG Xiaoping, the designer of the reform and opening-up, felt concerned about the situation that fell short of his expectations. He then started a series of “southern trip speeches.” The two essential statements were “don’t ask whether it is capitalist or socialist, whichever fits works; whether a cat is black or white makes no difference. As long as it catches mice, it is a good cat.” Such statements, in fact, broke the false belief in socialist public ownership. What followed was development by leaps and bounds, which constitutes the foundation of the high-speed development for the next 20 years.

Although the difficulties faced by China now are not as severe as before, the causes remain the same. That is the false belief in public ownership. It first and ultimately shows in the low efficiency of the state-owned enterprises (SOE). These SOEs possess a huge amount of resources, such as capital, land, mines, or various quotas, but offer low productivity. As there is unfair resource usage and distortion of the fair opportunity for other economic sectors to gain resources, these SOEs drag down the resource efficiency of the whole society, which impedes the development of the economy. Abundant studies have proved this. Another issue with SOEs is the rampant corruption within them, which is less likely in private enterprises.

The problems of the SOEs have been around for years. The mixed ownership that was proposed lately indicates the recognition of the relation between ownership and the operation efficiency. However, it still follows the false line of logic as the proposal holds that the public-owned assets play a major role in the operation of enterprises. We also need to note that SOEs have a role in China’s economy, especially in the construction of infrastructures, since SOEs are better at lowering the transaction cost and speeding up the construction than private enterprises. Therefore, it does not fit China’s situation to fully privatise. However, it is also not fair to exaggerate the importance of SOEs and uphold a false belief in public ownership. We should fully recognise that what’s supposed to be publicly owned should be so, and what’s supposed to be privately owned should be so. To call a spade a spade and to practice pragmatism is the right path.

Over 3 centuries ago, British philosopher John Locke said that property was not to be publicly owned, and power was not to be privately held. We should see that those who are in favour of public ownership might not surrender their possessions to the public. On the contrary, they are most likely to have other people surrender their property so that they could grasp some. In this sense, the superficial fairness of public ownership is a form of deceit and grasp of property. In order not to let this scenario take place, property rights must be protected. There originates the saying that “the protection of private property is the moral god” On the other hand, public ownership leads to man fighting and stealing, which is a full deterioration of morality. Such scenarios occurred in China and the world before.

John Locke’s statement is a theoretical judgement, while China’s practical experience proves it right. Unfortunately, the Chinese people have not fully recognised the limits of public ownership. Many still believe it is an advanced arrangement, instead of giving it a critical assessment. If there is no emancipation of thoughts and no break with the false belief in public ownership, an innovative solution to the current economic downfall is hardly to be obtained.