In December 1978, China initiated reforms to transition from a planned economy to a market economy, continuously advancing market-oriented reforms since then, with the role of market mechanisms in resource allocation steadily strengthening. With the deepening of the reform and opening-up, China's economy has grown exponentially, with market entities such as domestic enterprises, individual businesses and foreign-invested institutions emerging rapidly.

In particular, the private economy, humble at its beginning, has demonstrated significant contributions, accounting for over 50 percent of the country's tax revenue, more than 60 percent of its GDP, over 70 percent of technological innovations, more than 80 percent of urban employment and over 90 percent of all businesses. These achievements underscore the significant outcomes of China's market economy development. The key to these achievements is China's persistent efforts in improving the business environment.

Wenzhou city in China's Zhejiang Province is a case in point. Located in the south of the province, Wenzhou used to be poverty-stricken due to its landlocked location and limited arable land per capita (approximately 353.34 square meters only). After 1978, Wenzhou took the lead in exploring a market economy. On December 11, 1980, the Wenzhou Municipal Administration for Industry and Commerce issued a business license to Zhang Huamei, an individual, for the first time in China since 1978, marking the beginning of Wenzhou's market economy.

Subsequently, Wenzhou also pioneered the establishment of the first specialized market, the first "peasant city" (the city of Longgang, built by peasants who were permitted to move into the town to establish rural enterprises), and other market-oriented reforms. Wenzhou succeeded in developing non-agricultural industries through household industries and specialized markets, creating the well-known Wenzhou Model in the early stages of China's marketization.

Thousands of individual household businesses overcame Wenzhou's disadvantages in geographical location and resource scarcity, leading to rapid economic development, a thriving commodity economy and significant improvements in people's living standards. Wenzhou's GDP skyrocketed from 1.32 billion yuan ($182 million) in 1978 to 82.8 billion yuan ($11.4 billion) in 2000, with an average annual growth rate of 15.6 percent.

The Wenzhou Model also became a vivid portrayal of China's early exploration of market-oriented reforms. Upon entering the 21st century, Wenzhou accelerated market-oriented reforms, pioneering the first joint-stock cooperative enterprise, implementing floating interest rate reforms, and particularly since 2012, promoting the "Number One Reform Project" to improve the business environment, yielding significant results.

Driven by these reform initiatives, Wenzhou's business environment continues to improve, ranking second among China's top 10 cities with the best business environment for two consecutive years, effectively unleashing the vitality of market entities. By the end of 2023, Wenzhou had 1.41 million businesses, which means one out of every seven Wenzhou residents is a business owner on average. From issuing China's first individual business license to now having over 1.4 million businesses, it shows how much Wenzhou has achieved in developing its market economy and the vigor of China's market economy.

Wenzhou is the epitome of China's deepening reform and opening-up, the continuous improvement of the socialist market economic system and the steady improvement of the business environment.

Particularly since 2012, China has comprehensively deepened reforms, attached great importance to the optimization of the business environment, advanced reforms to delegate power, streamlined administration and optimized government services, continuously relaxed market access, and enacted the Civil Code of the People's Republic of China, the Regulations on Optimizing the Business Environment, and the Foreign Investment Law. It has continuously reduced the number of items on the negative list for foreign investment access, expanded the foreign investment industry catalog, committing itself to creating a market-oriented, rule-of-law, and internationalized business environment.

In October 2019, the World Bank released its report Doing Business 2020, evaluating the business environment of nations and regions around the world. Of all 190 countries and regions evaluated, China ranked 31st in 2020, rising from 91st in 2012. This remarkable improvement positioned China as one of the top global performers in enhancing the business climate, with various types of enterprises such as state-owned, private and foreign-funded ones thriving with boosted vigor.

As of the end of September 2023, the number of registered business entities nationwide reached 181 million, an increase of over 100 million from the 55 million recorded at the end of 2012, underscoring an upward trend of common prosperity of all types of enterprises.

In recent years, the world has been living through accelerating changes unseen in a century, with the rise of anti-globalization sentiments, as well as frequent regional conflicts and unrest. Amidst the volatile geopolitical landscape, China has persisted in deepening its reform and opening-up, continuously innovating in key areas, and has taken more profound and extensive measures with greater intensity to promote high-level opening-up in all respects, creating a safe and stable environment for businesses and contributing to the world's economic stability.

The choice of foreign investment is a strong testament to China's sustained improvement of its business environment. Schott AG, a German specialty glass manufacturer, has been in the Chinese market for over 20 years, continually expanding its investments in China. Albert Chen, managing director of Schott China, stated, "Over the past five years, the Chinese market has consistently been the fastest-growing market for Schott globally." He added that China's continuous relaxation of foreign investment access, delegation of the power to approve, streamlining of administration and reduction of the corporate tax burden have provided a highly efficient, fair, easy, and free market environment for foreign companies.

According to the Global Investment Trends Monitor by the United Nations Conference on Trade and Development (UNCTAD), global foreign direct investment flows in 2023 were 18 percent lower, excluding some conduits. However, against such a backdrop, China's actual use of foreign investment in 2023 remained at a historical high. In the first quarter of 2024, the number of newly established foreign-funded enterprises in China reached 12,000, a year-on-year increase of 20.7 percent; actual use of foreign investment in China's manufacturing industry reached 81.06 billion yuan ($11.15 billion).

Reform and opening-up in China are always ongoing and can never be completed. The business environment can always be improved, but never perfected. China's journey from a planned economy to a market economy through market-oriented reforms has been of immense significance not only for China itself but also offers valuable lessons for other countries.

First, China's reform practice has proven that market mechanisms are an efficient tool for resource allocation. The establishment of market mechanisms is gradual, rather than changing overnight. Market-oriented reform, as a fundamental institutional change, faces various challenges brought by conflicts of interest and differences in regional history, cultural traditions and mindsets.

Second, there is no unified model for a market economy. Transitioning countries must gradually integrate market mechanisms with their own country's unique conditions to establish an effective market economy.

Finally, in implementing market-oriented reforms, China has always conducted pilot reforms in selected regions before generalizing them nationwide. This approach controls risks, avoids big fluctuations in the overall economy, and rapidly popularizes good practices through effective mechanisms.

The author Ouyang Yaofu is an associate research fellow with the Institute of Economics, Chinese Academy of Social Sciences.