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Article

Accelerating the Construction of a Unified Domestic Market to Promote Sustainable Economic Development: Mechanisms, Challenges and Countermeasures—A Perspective Based on the General Law of the Market Economy and Chinese Reality

by
Jiaxian Shi
,
Changbin Qi
and
Xinxin Mu
*
School of Marxism, Liaoning University, Shenyang 110036, China
*
Author to whom correspondence should be addressed.
Sustainability 2023, 15(10), 8329; https://doi.org/10.3390/su15108329
Submission received: 20 March 2023 / Revised: 14 May 2023 / Accepted: 17 May 2023 / Published: 19 May 2023
(This article belongs to the Section Economic and Business Aspects of Sustainability)
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Abstract

:
Accelerating the development of a unified domestic market is essential for establishing a high-level socialist market economy, which will also serve as the foundation for promoting China’s sustainable economic development. Referencing the general law of the market economy, this study analyses the internal mechanisms for accelerating the formation of a unified domestic market to promote the sustainable development of China’s economy from four dimensions, including system guarantee, impetus condition, material basis and administrative guarantee. Furthermore, an empirical analysis is conducted to identify existing challenges in this regard using the data of China’s Marketisation Index Report by Province from 2016 to 2021, which include insufficient comprehension of the concept of a unified domestic market, institutional barriers, a low degree of opening up to the outside world and uneven infrastructure development. Corresponding policy suggestions include strengthening theoretical study, research and publicity; intensifying the unification of fundamental institutional systems and market rules; and accelerating high-level opening to the outside world and market facilities’ high-quality connectivity. This research provides a theoretical and policy reference for the sustainable development of China’s economy that is broadly applicable.

1. Introduction

The socialist market economy is defined as the market economy operating under the socialist system, which refers to an economy where resource allocation is based on the market, guided by the macro-control of socialist countries. [1] Adhering to the general principles of a market economy, the socialist market economy emphasises the decisive role of markets in resource allocation. The development of a unified domestic market is an essential requirement for China to build a high-level socialist market economy. Since the 14th National Congress of the Communist Party of China (CPC) proposed to ‘vigorously develop a unified national market and further exert the role of the market’, the formation of a unified domestic market has progressively become a focus and internal challenge of economic restructuring. Although the market economy has penetrated into every aspect of economic and social development after more than 30 years of development in China, many areas that require improvement remain, and the advantages of a super-scale market have not been effectively shared. Therefore, in 2022, as China began the new journey towards the second centenary goal of building a modern socialist country in all respects, the CPC Central Committee and the State Council issued the Opinions on Strengthening the Construction of a Unified Domestic Market (the Opinions), stating that accelerating the development of a unified domestic market referred to building ‘a unified national market with high efficiency, standards, fair competition and full openness’ to comprehensively promote ‘China’s market shifting from large to strong’ and to ‘provide strong support for the construction of a high-standard market system and a high-level socialist market economy’ [2]. Thus, a heightened urgency was projected for advancing the development of a unified domestic market in China.
In the international academic arena, the construction of a unified domestic market has consistently been a significant area of focus. Scholars from the United Kingdom and the United States, based on the context of human industrialisation, have explored the crucial role a nationwide unified market plays in attaining modernisation [3]. Hobsbawm points out that the United Kingdom (UK) formed a unified domestic market during the process of promoting modernisation [4]. Heilbroner and William argue that having a unified domestic market was a powerful driving factor for the UK to become the first European economic power [5]. One of the most influential policies that had a significant impact on France’s economic development was realising ‘the free movement of goods within the country and building a unified domestic market’ [6]. Allen notes that the United States, in order to promote economic development, eliminated internal tariffs and strengthened transportation infrastructure construction, thus establishing a unified national market [7]. David believes that a huge and constantly growing domestic market is sufficient to trigger and sustain the Industrial Revolution, while export trade cannot complete this mission [8]. American scholar Jeffrey affirms that having a vast domestic market demand was a prerequisite for the UK to achieve industrialisation, as their products needed a market [9]. Faulkner argues that between 1900 and 1930, the U.S. pursued an aggressive strategy of foreign expansion and investment, which continually supplemented the growing domestic market with foreign trade [10]. Romer points out that a unified domestic market has a profound impact on promoting the industrialisation of the United States [11].
The release of the Opinions triggered a research upsurge in Chinese academic circles. Scholars have conducted studies to define a unified domestic market and determine why and how to build a unified domestic market from different perspectives, disciplines and fields, and some valuable contributions have emerged. Firstly, the characteristics of a unified domestic market are essential to consider. Chen highlights that the primary features of such a market include the competitive nature of the “market,” the “large” scale and the “unified” institutional rules [12]. Secondly, constructing a unified domestic market holds great importance for China. Wei argues that a unified domestic market signifies a mature Chinese market economy and serves as an inevitable choice for promoting the country’s sustainable economic development [13]. Additionally, Yu and Ji assert that constructing a unified domestic market plays a crucial role in realising economies of scale, expanding openness to the outside world and promoting high-quality development of China’s economy [14]. In line with this, Liu proposes that accelerating the construction of a unified domestic market is not only the inevitable outcome of China’s socialist market economic system reform, but also a necessary requirement of the international economic situation and domestic development [15]. Thirdly, there are several issues faced in constructing a unified domestic market. Zhou and Li identify the main problems in building a unified domestic market in China, such as non-uniform institutional rules, severe regional market segmentation and local protectionism [16]. Expanding on this, Ou points out the pain points faced in building a unified domestic market across various areas, including basic institutions, economic policies, factor markets, circulation systems and market supervision [15]. Lastly, adopting effective strategies is crucial for constructing a unified domestic market. Lu and Li maintain that China needs to address the institutional and ideological barriers to the flow of goods and factors, and continuously promote and refine the construction of a unified domestic market [17]. Furthermore, Ding suggests that it is essential to properly manage the relationships among the market, government and enterprises during accelerating the construction of a unified domestic market [18]. In support of this, Ou proposes that enhancing the construction of a unified domestic market should involve strengthening the development of market infrastructure [15].
In summary, both domestic and international scholars have made considerable achievements in researching the construction of a unified domestic market, providing valuable insights and references for this study. However, the existing research mainly discusses the necessity of accelerating the construction of a unified domestic market in China and addresses the practical issues from the perspectives of institutions and economic policies. There is a lack of research on the impact of constructing a unified domestic market on sustainable economic development in China from the perspective of general market economy development. Therefore, the main contributions of this article are as follows: Firstly, by drawing on the experiences of developed countries in constructing a unified domestic market during the modernisation process and considering the historical experience of China’s vigorous development of a unified national market for socialist modernisation construction after the reform and opening up, this article uses economic theories to re-examine the issue of building a unified domestic market in China. Secondly, based on the general laws of market economy development, it systematically sorts out the role of accelerating the construction of a unified domestic market in promoting China’s sustainable economic development, thereby enriching and developing theories on sustainable economic development. Additionally, this article carries out a statistical analysis of the practical problems faced by China in accelerating the construction of a unified domestic market to promote sustainable economic development and puts forward corresponding policy suggestions. These insights aim to contribute to the acceleration of constructing a unified domestic market, promote sustainable economic development, advance the building of a powerful nation and provide some thoughts on the comprehensive advancement of Chinese-style modernisation and national rejuvenation.
The remainder of this paper is organised as follows. Section 2 analyses the influencing mechanisms of building a unified domestic market to promote sustainable economic development based on the general law of the market economy. Section 3 analyses the challenges that China confronts in accelerating the development of a unified domestic market by examining the reality of China’s current circumstances. Section 4 proposes countermeasures and suggestions based on the real problems facing China. Section 5 part summarises the theoretical and policy implications of this study.

2. Internal Mechanisms for Developing a Unified Domestic Market in China

Accelerating the development of a unified domestic market is an essential requirement for building a high-level socialist market economy, which will serve as the foundation for promoting the sustainable development of China’s economy. Based on the general law of the market economy, this study analyses the influence mechanisms of accelerating the development of a unified domestic market to promote China’s sustainable economic development from four dimensions, namely system guarantee, impetus condition, material basis and administrative guarantee (see Figure 1).

2.1. Effective Regulatory Institutional Systems and Rules

Establishing a unified domestic market and strengthening the unification of fundamental institutional systems and rules of the market is essential for developing a high-level socialist market economy, providing a systemic guarantee for sustainable economic development. A unified domestic market is the internal requirement of a market economy, which primarily relies on the adjustment of the market mechanism. The market is an institutional arrangement that combines products, services and resources [19]. From this perspective, the market is no longer simply a place for the exchange of goods; instead, it is a specific institutional arrangement composed of rules and practices that make the voluntary transfer of property rights possible [20]. The market is a sophisticated organisation that supports the mechanics of trade, which are extremely complicated and subject to endless changes [21], and a unified market presents an indispensable coordination mechanism of circumstances in which participants in the division of labour are economically separated [22].
The construction of a unified market aims to facilitate the market itself effectively operating [23] to improve the role of competition. Developing a market economy requires a system of ideas, mechanisms and values suitable to such development and a series of institutions designed by human beings to constrain and shape human interactions [24]. A variety of institutional guarantees are also necessary, such as a complete legal system, a modern circulation network covering logistics and business flow, and a seamless market information exchange channel. In addition, extensive trading habits should be established among the populace, and a customer service perspective should be cultivated.
A higher level of market economy requires more detailed rules. The market economy is a dynamic process of development, a coordination mechanism and also an attitude, belief and institution. Only when an effective system of market rules is established can a market operate in an orderly manner and fully leverage its potential, making simple transactions more efficient and complex transactions possible [21]. In addition, only with the establishment of a market rule system can a large enough market and purchasing power be created so as to support large-scale production and promote sustainable economic development.

2.2. Fair Competition and Resource Allocation

A unified domestic market maintains fair competition and continuously improves the efficiency of resource allocation to drive sustainable economic development. The construction of a unified domestic market can promote fair competition, which is the fundamental principle of the market economy and the foundation of efficient market operation. It is also the most effective means to attract and secure various interests. The economic development gained through competition can benefit everyone, particularly consumers, resulting from the advantages that are not directly generated by increased productivity, achieve social progress and motivate overall production enthusiasm [25].
A unified domestic market can consolidate resources. The market mechanism promotes efficient resource use by directing resources to the production of the goods and services most needed by society [26]. The prerequisite of efficient market function is a safe, reliable, orderly and unified market, which guarantees the existence of large industries and the effective supply of social demands [27]. Furthermore, a well-functioning unified market leads to specialisation and trade gains, further refining resource use efficiency. Practices have demonstrated that market regulation is automatic, timely and sensitive; thus, it is a more effective means of economic regulation than planned economic regulation [28].
A unified domestic market can boost economic growth. The primary task of unifying systems and rules is to improve and consolidate the property rights protection system, which establishes the guarantee of efficiency. When the property rights of scarce resources are clearly defined, markets become efficient [29]. Secure property rights subsequently encourage increased investment, innovation and transactions, promoting economic growth [26]. The system makes economic transactions easier and has a substantial role in determining the cost of economic transactions [30].
A unified domestic market can help eliminate internal trade barriers [31]. Internal trade barriers mainly refer to an array of measures artificially imposed by local governments within a country to restrict the flow of goods and services. A unified domestic market demands a harmonised legal and regulatory framework, a fair competitive environment and the unhindered movement of various goods and production factors [2]. Constructing a unified domestic market requires the removal of internal trade barriers, the implementation of cohesive regulations and the creation of a seamless market that enables the free flow of goods and services within the country. This not only reduces transaction costs for businesses and encourages economies of scale, but also fosters efficient resource allocation nationwide, ultimately promoting economic growth and sustainable development [32].

2.3. Wealth Creation and Shared Prosperity

A unified domestic market can smooth the flow of production factors between urban and rural areas and create more wealth, establishing a material foundation for sustainable economic development. The market is an engine of wealth creation and has achieved considerable success in terms of wealth creation in the modern world [33]. As an enormously successful engine of technological innovation and wealth creation, the market economy has improved the quality of life for billions of people around the world [34] and will continue to be a source of growth and prosperity in the future. The market economy should continuously adjust to technological progress, change and novel perspectives; otherwise, risks of economic stagnation and falling standards of living could emerge [35].
A unified domestic market motivates people’s initiative, expanding the sources of wealth creation. Everyone participates in the market economy, and hard work and innovation are encouraged. The market system only thrives in circumstances where value is added throughout the market, and people are connected in a unique way [36]. Market regulation refers to decentralised decision-making, indicating that decisions are independently made by individuals and groups in the economy rather than by a central planning agency [37]. This approach can unleash the initiative and creativity of hundreds of millions of people, allowing the sources of wealth creation to be fully realised. The participation of hundreds of millions of people in China’s construction allowed China to build a pioneering socialist market economy with unique Chinese characteristics, making the nation strong and creating wealth [38]. Resulting from the tremendous vitality unleashed by China’s market-oriented reform, the nation has made remarkable progress over the past 40 years of economic reform, revealing the power of the market economy for generating shared prosperity and improved livelihoods.
A unified market is conducive to achieving common prosperity and maintaining social stability. A large unified market emphasises the scale of the market, unleashing scale and agglomeration effects. A large-scale unified market generally benefits the entire society [27], as the trickle-down effect of rapid economic growth will benefit most people [39]. Establishing a large unified market must integrate unified factor and resource markets and accelerate the development of a unified capital market, which will shorten the entrepreneurial process and accelerate contemporary wealth creation. Wealth creation is the intent of and foundation for achieving common prosperity. In addition, a unified market must adhere to the reform direction of a socialist market economy, which itself includes two dimensions; i.e., protecting market competition and maintaining social balance.

2.4. Governance–Market Balance

Building a unified domestic market must fully leverage the roles of the government and the market and clarify the role of the government in providing administrative guarantees for sustainable economic development. The relationship between the government and the market is a core component of the market economy system, and the development of a market economy is a continuous process of seeking a balance between the government and the market. The perspective asserting that markets are self-regulating is utterly utopian [40], as the market mechanism itself has external effects and lacks stability, far from solving the conflict between individual and social interests [41]. The Great Depression of the 1930s and the Keynesian Revolution have demonstrated that the market economy cannot be expected to maintain a self-regulated balance [42].
The relationship between the government and the market in the modern market economy is complementary, and the more influential the market is, the more necessary the regulatory role of the government is [23]. The practices of countries that have achieved modernisation demonstrate that rapid economic growth must be supported by powerful government regulatory oversight, which unifies the domestic market, as with the experiences of Germany, Italy, France, Japan, Russia and the United States in the 19th century [42]. In contrast, since the implementation of reform and opening up in China, the nation has created dual successes of rapid economic growth and long-term social stability because the Chinese government has had a limited and powerful role in ensuring market efficiency. The realisation of the trickle-down effect noted above relies on the ‘deliberate economic decisions’ of the government [43]. The experience of Romania has demonstrated that government hesitation and inefficiency do not advance the resolution of economic crises and sustainable economic development [44].

3. Realistic Challenges to China’s Construction of a Unified Domestic Market

Although establishing a unified domestic market is crucial for promoting sustainable economic development, its promotional effect has not been fully exerted in practice in China, as many constraints regarding aspects of market understanding, institutional mechanisms, market openness and market infrastructure construction remain.

3.1. Overall Public Comprehension of a Unified Domestic Market Is Insufficient

As proposed by the Party and the government in the Opinions, developing a unified domestic market has quickly become a popular social topic. Nevertheless, there are still different perspectives in society on the understanding of a unified market. First, the public misunderstands the construction of a unified domestic market. Intuitively, the public has a diversified comprehension of the meaning of a unified domestic market. Relevant studies show that more than 40% of the public has a prominently negative feeling towards developing a unified domestic market, and only about 30% has a prominently positive feeling [45]. As shown in Figure 2, 45.14% of the public expressed concern about accelerating the construction of a unified domestic market, 42.39% were confused and 22.47% were anxious. In contrast, those who expressed confidence, expectation and excitement about building a unified national market accounted for 37.63%, 37.29% and 33.27%, respectively. The public has a limited understanding of the concept and intent of a large unified market. According to the Opinions, unified refers to the unification of policies, rules and enforcement at the national level, and a unified market refers to an organic market system of interdependence, complementarity, openness and coordination formed in a more competitive, scientific and effective social division of labour and adhering to the principles of marketisation and a rule of law, which is effectively applied throughout the country, and continuously improving the uniformity of policies, the consistency of regulations and coordinated implementation. However, public understanding remains limited. Survey data showed (see Figure 3) that 54.26% of the public understood unified as the uniformity of basic laws and regulations, competition standards and regulatory requirements; 54.59% thought that unified meant the policy is non-closed, unified and fully open; 58.42% understood it as consistent rules, coordinated implementation and transparent and fair competition; and 48.63% understood it as high-standard market facilities and smooth logistics networks. In addition, some considered building a unified domestic market to mean a return to the planned economy, with the central government unifying the planning, allocation and management of various product elements in the market. In addition, some focused on the domestic aspect, thinking that the country is only prioritising the development of the unified domestic market and internal circulation, ignoring international integration.
Second, local government officials have a weak awareness of the precepts of a market economy, and there is also room for improvement in the work of government, as pointless formalities and bureaucracy remain acute issues. Cases of officials becoming detached from reality and acting against the public will are also frequent. Some local governments use one-size-fits-all or campaign-style approaches in policy implementation [46]. A small number of officials either shirk responsibilities, fail to do their jobs or behave in an irresponsible manner. By disregarding serious infringements on the rights and interests of the people, some officials have been derelict in their duties. Corruption remains a common problem in some sectors. For example, local businesses bribe government officials to secure exemptions or reduced fines during environmental inspections. Consequently, environmental issues remain unresolved, ultimately hindering sustainable economic development [47]. In particular, China’s assessment and incentive system for local government officials has long been geared towards boosting GDP growth [48]. For this reason, to pursue short-term local economic growth, many government officials tend to ignore the law of the market economy and excessively interfere in the market, such as formulating protective policies for local industries and excessive policy preferences [49]. This hinders the decisive role of the market in resource allocation and deviates from the requirement of limited government interference under a modern market economy system. Some government officials contend that the construction of a unified domestic market, which is a long-term task, will have a minor role in alleviating the current downward pressure on the economy, preferencing short-term stimulus policies. As a result, such officials have neglected reform and medium- and long-term governance in institutional construction, failed to balance the relationship between short-term policies and medium- and long-term reform and governance from the comprehensive governance perspective of general equilibrium and ignored the key role of the market-oriented reform of dividend growth.

3.2. Institutional Barriers, Market Segmentation and Unfair Competition

Institutional barriers lead to market segmentation, forming internal trade barriers that hamper the free flow of goods and factors. The construction of a unified domestic market is the key to the smooth circulation of commodities and factors [50]. Circulation is the bridge connecting production and consumption, the guiding force determining the efficiency and benefits of economic operation and a reflection of the maturity of the market economy. Embodied in the flow of production factors, a market economy can improve the allocation efficiency of spatial resources when the institutional framework allows the smooth flow of labour, capital and land resources between urban and rural areas and regions. However, China’s commodity and factor markets remain segmented, and local protection policies are a significant cause of market segmentation. In consideration of local economic development and profit and tax contributions, local governments tend to offer more explicit or implicit support to local businesses, artificially restricting the free flow of goods between regions. For instance, local governments adopt price leverage to set discriminatory charges for non-local goods to weaken the competitiveness of non-local products in the local market. Some may adopt ultra-economic means by implementing different technical requirements and inspection standards on similar commodities to control the flow of non-local goods into the local market [51]. Chen found that cross-provincial trade in China involves approvals and permits from multiple local governments, leading to a cumbersome and time-consuming approval process that hinders the smooth progress of trade [52]. Ding et al. found that in order to protect local enterprises and local economic interests, Chinese local governments sometimes adopt tax policies, trade barriers and licensing systems to restrict the entry of enterprises from other regions [53]. At present, different regions of China still implement local protectionist policies; thus, commodity prices are not completely determined by the market. The “China Marketisation Index by Province Report (2021)” calculates the degree of marketisation for different regions of China based on various indicators, such as market resource allocation, the degree of market competition and the market environment, each with specific weights assigned. A higher score indicates a greater degree of marketisation. The scores for different regions in China are shown in Table 1. It shows that from 2016 to 2019, the scores on reducing local government’s protection of commodity markets show a downward trend on a national scale, indicating that the circumstances of local government intervention in commodity markets have not improved. Meanwhile, the degree of government intervention in the commodity market among the eastern, central, western and north-eastern regions of China significantly varies [54], constraining the cross-regional flow of commodities. Furthermore, institutional barriers prevent the free flow of production factors. Support for a system for the distribution of production factors such as knowledge and technology based on contributions is inadequate, impeding the free flow of technical factors. The institutional barriers formed by variations in household registration, industry, region and ownership nature also impede the free flow of labour. For example, Li et al. found that factors such as local government protection of local financial markets and risk preferences of local financial institutions in China hinder the free flow of capital across regions [55]. Chen et al. found that due to weak intellectual property protection, regional differences in legal systems and administrative barriers, the flow of technological factors between regions in China is limited [56]. Au et al. showed that China’s household registration system (Hukou) classifies the population into rural and urban residents, making it difficult for rural residents to find work, rent housing, receive education and access healthcare when moving to cities, thus limiting the flow of labour between urban and rural areas [57]. As shown in Table 1, from 2016 to 2019, various factor markets in different regions of China unevenly developed, indicating a certain level of segmentation in the capital, labour and technology markets, disrupting the free flow of production factors. Although China is devoted to promote the free flow of goods, capital and labour services through establishing the unified market at present, there is a significant gap between China’s development and that of the European Union. The goal of a unified European market is to eliminate a broad spectrum of non-tariff barriers, including tangible restrictions such as customs checkpoints, transit procedures and quarantine standards, technical constraints such as regulations and technical standards as well as fiscal barriers such as differences in types of tax and tax rates. To facilitate the free movement of goods, individuals, capital and services, the European Union Commission issues 282 directives, and 264 of these directives have been approved by the Council. Furthermore, the regulations issued by the European Union are almost incorporated into domestic legislation of the 12 member states. Therefore, the unified market has been established in the European Union and has been officially in operation since 1 January, 1993.
What is more, institutional barriers lead to unfair competition. Market competition, particularly fair competition, is the soul of the market economy. The opposite of fair competition is monopolies and unfair competition. At present, China has not formed a fair, competitive environment in the market. As previously noted, various local preferential policies and subsidies lead to unfair competition. Some governments offer preferential policies and subsidies on finance, taxation and land for specific enterprises and investors, and these non-market economic factors intensify the unfair competition among localities, interfering with and distorting enterprises’ market-related decision-making [58]. For instance, some cities provide high subsidies for China–Europe freight trains and air freight, and implement exclusionary requirements for the use of local access, ports and other facilities, not only reducing efficiency but also constraining regional coordinated development [59]. Furthermore, local governments monopolise the market by means of administrative power, including regional blockades, local protectionism, the establishment of administrative monopoly companies and government-only trading [60]. These circumstances discourage new businesses from entering the market, impede the growth of existing businesses and limit consumer choice, distorting the effective adjustment of market prices. Table 2 shows that, with the exception of eastern and north-eastern regions where government intervention in enterprises decreased, the circumstances in other regions did not improve from 2016 to 2019. In addition, the fair competition environment in the Chinese market requires improvement.

3.3. Inadequate Market Openness and Global Factor Allocation Capacity

According to the new international economics, opening up to the outside world can generate economies of scale, promote the formation of capital and improve resource allocation efficiency, thus boosting economic growth [61,62]. In view of this, China’s efforts to build a unified domestic market must also accelerate and expand its opening up. A higher degree of market openness allows China to effectively utilize global factors and market resources, better connecting the domestic market with the international market, ultimately leading to improved economic performance. In addition, opening also allows China to take full advantage of global innovative factors such as technologies and talents to increase its influence in the global industrial chain and international supply chains and its voice in multilateral economic governance. However, at the current stage, the degree of openness of China’s market is still insufficient. The market rule of law environment varies across regions, and the level of support for foreign-invested companies in laws and regulations needs to be improved. The development of capital markets varies in different regions, with only regions with more advanced financial markets attracting more foreign investment [63]. As shown in Table 3, there are regional differences in the market rule of law environment in China. The eastern region has a relatively better environment, while the western and north-eastern regions lag behind. There are also differences in the development of capital markets between regions, with the eastern coastal regions having a more developed capital market, providing better support for foreign-invested enterprises in financing and investment, while other regions are relatively underdeveloped. This suggests that, in constructing a unified national market, China needs to further strengthen the development of the market rule of law environment, promote the integration and growth of capital markets and thereby enhance the openness of the market to the outside world and promote sustainable economic development.
However, China is still not economically open enough to the outside world, and legal and regulatory support for foreign-funded companies must be improved. According to International Institute of Management Development (IMD) 2019 statistics [64], China lags behind developed countries and regions in terms of openness and support for foreign-funded companies (see Table 3), indicating a long and arduous task for China to build a unified domestic market and a contemporary high-level open economic system.

3.4. Weaknesses in Market Infrastructure Constrain the Release of Market Potential

Infrastructure has a vital and obvious role in economic development [65,66,67], and many scholars view infrastructure construction as an important influencing factor driving economic growth and regional and national development [68,69,70]. A unified domestic market necessitates the infrastructural connectivity of different regions and effective connections between different modes of transportation to efficiently facilitate the circulation and efficient allocation of goods and factors throughout the country. The infrastructure development in various regions of China is uneven. For some underdeveloped areas, due to low return on investment, lack of attraction and limited financing channels, infrastructure remains weak. Using expressways as an example (Figure 4), in 2021, there was a large gap between developed and underdeveloped areas in terms of expressway length and density, with Guangdong Province, which ranked first, having an expressway density of 6.18 kilometres per 100 square kilometres, whereas the Tibet Autonomous Region, which ranked last, had a density of 0.08 km/ 100 square kilometres, 77.25 times less than Guangdong. Simultaneously, the per capita expressway mileage in each province remains at a relatively low level. In addition, for some inland areas, particularly third-, fourth- and fifth-tier cities, business logistics, cold chain storage, settlement and payment facilities in the urban periphery and towns are outdated; trading platforms are scattered, disorderly and underserved; the last mile problem in consumption remains prominent; and services such as the after-sales maintenance of durable goods, trade-in and recycling are far behind those of developed regions [71]. This severely restricts the cultivation and release of the market potential in small towns and rural areas.
The coverage rate of infrastructure (i.e., new information networks) is relatively low, the investment gap remains large and a large gap is evident compared with developed countries and regions. Taking internet speed as an example, as shown in Figure 5, of the 63 countries and territories counted by IMD in 2019, China ranked 61st, even lower than India and Brazil. Slow broadband speed has become a common concern of the government, enterprises and netizens. These realistic problems have seriously hindered the capabilities to construct a unified domestic market in China.

4. Countermeasures and Suggestions

In the face of the existing challenges to building a unified domestic market to promote the sustainable development of China’s economy, the methods proposed include strengthening theoretical study, research and publicity; intensifying the unification of the fundamental institutional systems and rules of the market; accelerating high-level economic opening to the outside world; and expediting the high-standard connectivity of market facilities.
First, deepen broad public understanding of the importance and urgency of building a unified domestic market. Efforts should be initiated to strengthen theoretical study, research and publicity to enrich the understanding of the unified domestic market. The concept of a unified domestic market was not proposed without grounds, but evolved with history and strong policy continuity as well as the understanding and exploration of this trajectory as a continuous process of development and deepening. Accelerating the construction of a unified domestic market is essential for China to build a high-level socialist market economy and is urgently needed to promote the sustainable development of China’s economy. First, government officials must improve their capabilities to navigate the market economy, strengthen their comprehension of the objective law of the market economy and follow proven economic and legal approaches. In particular, the government should not arbitrarily alter economic processes at will, but establish various decision-making approaches that conform to objective laws. In addition, domestic scholars should strengthen theoretical research and publicity, clarify the scientific connotation of building a unified domestic market, address all kinds of misunderstandings and extensively reference the experience of developed countries in building unified markets to provide evidence-based suggestions for accelerating the establishment of a unified domestic market.
Second, intensify the unification of fundamental institutional systems and rules of the market to promote the flow of resources and fair competition. The market system is an essential component and the effective operational basis of the socialist market economy. Constructing a unified domestic market entails liberating the “invisible hand” of the market and effectively utilizing the “visible hand” of the government. Policy-making should take into account the elimination of internal trade barriers when formulating various legal documents. It is crucial to strengthen the mechanism of intergovernmental coordination and cooperation, break geographical and administrative boundary constraints and promote intra-regional, inter-regional and inter-metropolitan integration. For example, China should learn from the European Union’s “New Approach Directives” policy in the construction of market integration, which simplifies the transaction process of transnational products and services through unified technical standards and certification systems [72]. This will accelerate the market-oriented construction of a unified national market and eliminate all obstacles to the free flow of goods, services, capital and labour within China, forming a unified domestic market. Furthermore, to foster an effective market, efforts should be made to reshape the relationship between the government and the market, reduce governing interventions, relax government regulation and streamline outdated laws to fully release the decisive role of the market and provide a sufficient institutional basis for efficient resource allocation. Fully implementing a democratic political system offers citizens a better rule of law environment, enhances policy stability and transparency and is more conducive to sustainable economic development [73]. Therefore, the government must enhance market supervision legislative work, refine market supervision procedures, strengthen the construction of standardized and normative market supervision, disclose supervision standards and rules according to the law and increase the stability and predictability of market supervision systems and policies. In addition, policymakers must appropriately transition the relationship between the government and enterprises, intensify the unification of fundamental institutional systems and rules of the market, continue to improve and unify systems for property rights protection, market access and fair competition, exercise regulatory authority according to law and boost confidence in the private sector to establish an enabling environment for innovation. Governments should ensure that no market entities have undue competitive advantages because of specific ties to the government and that legal rules are equally applied to maintain a level playing field and provide an institutional basis for innovation-driven transformation.
Third, accelerate high-level opening up and promote the positive interplay between domestic and international circulation. A high-level unified domestic market system should be open and aligned with contemporary international market standards. To connect domestic and international markets, China should open to the outside world more actively, more vigorously and at a higher level, align to the international regional or multilateral systems of standard market rules, promote institutional opening up, improve the alignment of rules and standards for foreign trade in services and technology, promote the liberalisation and facilitation of trade and investment, strengthen the initiative in the global allocation of high-quality factor resources (i.e., human resources, capital and industry) and fully benefit from the advantages of a super-large market to achieve mutual benefit and win-win results. China should also further relax internal restrictions to tap into internal potential, promote unimpeded flows in the economy in the process of accelerating the building of a unified domestic market, reduce institutional transaction costs and strengthen internal momentum and motivation for development. Only by connecting and integrating with the global market can the unified domestic market truly bring China’s super-scale advantage into full play. In the interplay between domestic and international circulation, new advantages in participation, opening up, cooperation and competition will emerge, and opening up will be continuously deepened.
Fourth, speed up the high-standard connectivity of market facilities to provide basic support for the smooth flow and efficient allocation of commodity factor resources. To address the problems of poor infrastructure connectivity, the unreached last mile of various modes of transport, the urgent need for upgrading modern market facilities and the lack of integration of various trading platforms, vigorous efforts should be made to promote the development of a modern infrastructure system to serve the unified market, accelerate the construction of a modern distribution network, develop multimodal transport and expand the coverage of public resources trading platforms to all types of public resources suitable for market-based allocation. These approaches are conducive to removing impediments to domestic circulation, reducing social logistics and market transaction costs and improving the efficiency of market operation and resource allocation. Priority should also be given to coordinating the construction of information networks, promoting the development of information industries (i.e., communications, internet and e-commerce platforms) and exploring ways to establish an interconnected and efficient market infrastructure management system.

5. Conclusions

The promotion of Chinese-type modernisation must adhere to the reform direction of the socialist market economy. The construction of a unified domestic market will provide strong support for building a high-level socialist market economy and the essential direction for China’s sustainable economic development. As the foundational support and internal requirement for building a new development pattern, accelerating the construction of a unified domestic market will establish an appropriate relationship between the domestic market and international markets, attract global resource factors with domestic circulation and enhance the market synergies. The core of a unified market is to properly contextualise the roles of both the government and the market, realise the organic combination of an efficient market and an effective government and make the socialist market economy more mature and complete to establish an economic system that aligns with the general trend of human history. In summary, the construction of a unified domestic market can help promote China’s sustainable economic development and establish a comprehensive modern socialist country, contributing to the modernisation of the world and the sustainable development of humankind.
This paper explores the role of accelerating the construction of a unified domestic market in promoting sustainable development in China, analyses the existing issues and accordingly offers policy recommendations based on the general principles of a market economy. The mechanism through which the construction of a unified domestic market contributes to “innovative, coordinated, green, open and shared” development requires further study. The 20th National Congress of the Communist Party of China has made the construction of a unified domestic market an important strategic deployment for building a modern socialist country. In the process of the modernisation of human society, every country’s march towards modernisation is inseparable from the utilisation of a unified domestic market. In future research, the authors will focus on the relationship between a unified domestic market and a country’s path to modernisation, as well as how China can achieve national modernisation through the construction of a unified domestic market, starting from the realisation of modernisation in human society.

Author Contributions

Conceptualization, X.M. and J.S.; methodology, X.M. and J.S.; software, X.M.; validation, X.M. and J.S.; formal analysis, C.Q. and X.M.; investigation, X.M.; resources, X.M. and J.S.; data curation, X.M.; writing—original draft preparation, X.M.; writing—review and editing, X.M. and J.S.; supervision, X.M.; funding acquisition, X.M. All authors have read and agreed to the published version of the manuscript.

Funding

This study is supported by the National Social Science Foundation of China (Grant No. 20CSH034).

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

Not applicable.

Conflicts of Interest

The authors declare no conflict of interest.

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Figure 1. Mechanisms of a unified domestic market for sustainable economic development.
Figure 1. Mechanisms of a unified domestic market for sustainable economic development.
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Figure 2. Public perceptions towards building a unified domestic market.
Figure 2. Public perceptions towards building a unified domestic market.
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Figure 3. Public understanding of the meaning of a unified domestic market.
Figure 3. Public understanding of the meaning of a unified domestic market.
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Figure 4. Expressway length per capita and density in provinces and regions of China at the end of 2021. Source: National Bureau of Statistics (2021).
Figure 4. Expressway length per capita and density in provinces and regions of China at the end of 2021. Source: National Bureau of Statistics (2021).
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Figure 5. Comparison of regional internet speeds in 2018. Source: IMD, World Competitiveness Yearbook (2019).
Figure 5. Comparison of regional internet speeds in 2018. Source: IMD, World Competitiveness Yearbook (2019).
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Table
Table 1. Development degree of commodity and factor markets by region in China from 2016 to 2019.
Table 1. Development degree of commodity and factor markets by region in China from 2016 to 2019.
Development Degree of Commodity Market
RegionDecrease in Regional Protection of the Commodity MarketDegree of Commodity Prices Determined by the Market
20162019Data in 2019 Compared to 201620162019Data in 2019 Compared to 2016
Nationwide092.864.237.295.60−1.69
East742.60−4.147.927.27−0.65
Middle8.005.21−2.808.156.69−1.46
West6.881.92−4.966.204.06−2.14
Northwest7.252.79−4.467.783.97−3.81
Development Degree of Factor Markets Development Degree of Factor Markets
RegionMarketisation of the Financial IndustryConditions of Human Resources SupplyMarketisation of Science and Technology Results
20162019Data in 2019 Compared to 201620162019Data in 2019 Compared to 201620162019Data in 2019 Compared to 2016
Nationwide5.336.250.923.324.331.010.911.330.42
East7.027.690.674.805.460.661.592.240.65
Middle5.336.401.072.684.101.420.530.790.26
West4.005.071.072.373.561.190.610.750.14
Northeast4.995.890.903.504.110.600.661.741.07
Source: China’s Marketisation Index Report by Province (2021).
Table
Table 2. Circumstances of fair competition in the Chinese market from 2016 to 2019.
Table 2. Circumstances of fair competition in the Chinese market from 2016 to 2019.
Decreased Government Intervention in EnterprisesConditions for Fair Market Competition
20162019Data in 2019 Compared to 20162019
Nationwide4.644.41−0.234.00
East6.596.660.075.63
Middle4.153.88−0.273.82
West3.723.06−0.662.87
Northeast2.793.390.603.45
Source: China’s Marketisation Index Report by Province (2021).
Table
Table 3. Regional market rule of law environment and development degree of capital market.
Table 3. Regional market rule of law environment and development degree of capital market.
Market Rule of Law EnvironmentDevelopment Degree of Capital
Market
20162019Data in 2019 Compared to 201620162019Data in 2019 Compared to 2016
Nationwide4.888.753.873.984.516.27
East6.459.953.506.336.808.19
Middle4.668.633.974.464.986.85
West3.677.954.282.022.614.65
Northeast4.918.143.233.013.575.19
Source: China’s Marketisation Index Report by Province (2021).
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Shi, J.; Qi, C.; Mu, X. Accelerating the Construction of a Unified Domestic Market to Promote Sustainable Economic Development: Mechanisms, Challenges and Countermeasures—A Perspective Based on the General Law of the Market Economy and Chinese Reality. Sustainability 2023, 15, 8329. https://doi.org/10.3390/su15108329

AMA Style

Shi J, Qi C, Mu X. Accelerating the Construction of a Unified Domestic Market to Promote Sustainable Economic Development: Mechanisms, Challenges and Countermeasures—A Perspective Based on the General Law of the Market Economy and Chinese Reality. Sustainability. 2023; 15(10):8329. https://doi.org/10.3390/su15108329

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Shi, Jiaxian, Changbin Qi, and Xinxin Mu. 2023. "Accelerating the Construction of a Unified Domestic Market to Promote Sustainable Economic Development: Mechanisms, Challenges and Countermeasures—A Perspective Based on the General Law of the Market Economy and Chinese Reality" Sustainability 15, no. 10: 8329. https://doi.org/10.3390/su15108329

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