In 1776, Scottish philosopher and economist Adam Smith published An Inquiry Into the Nature and Causes of the Wealth of Nations. In it, he put forward the idea that allowing individuals to pursue their own self-interest in commerce promoted economic prosperity.

In China, Smith is best known for his concept of the invisible hand, a metaphor for the unseen forces that deliver this prosperity. Since China decided to bid farewell to its planned economy in 1978, remarkable transformation has taken place. With the unleashing of market forces, China has turned itself into the world's second largest economy and brought more than 700 million people out of extreme poverty. In China's view, however, the market is only one side of the economic coin. The country also attaches importance to the "visible hand," or the role of the government in regulating economic activity.

A resolution adopted at the recently concluded Third Plenary Session of the 20th Communist Party of China Central Committee reaffirmed this approach. Focusing on the pivotal issue of balancing the relationship between the government and the market, the resolution makes arrangements for economic structural reform in the next five years.

"We will see that the market plays the decisive role in resource allocation and that the government better fulfills its role," the resolution reads. It calls for leveling the playing field to make economic operations more efficient. At the same time, it underlines the need to ensure effective regulation, maintain order in the marketplace and remedy market failures.

The resolution, adopted by senior Party officials at the session, codifies the governing party's vision for further deepening of reform. Drafted based on extensive research and consultation, it represents consensus across a wide spectrum of Chinese society. It will therefore be internalized in Chinese decision making at all levels.

Western countries have often championed free market capitalism as a hallmark of the freedoms that set them apart from other societies and forms of government. However, in recent decades, this economic system has struggled to deliver the same level of benefits as before. Instead, it has contributed to growing economic and societal challenges, exemplified by increasing inequality.

Market dysfunction has long prompted economists to explore a more nuanced approach, characterized by a combination of the visible and invisible hands. China's exploration of a socialist market economy gives these economists food for thought.