China's Central Economic Work Conference, held in Beijing on Dec 10 and 11, put reform at the center of its agenda. The message was clear: to sustain momentum and vitality in high-quality development, institutional bottlenecks must be removed and reform must move forward in a determined and coordinated manner.

Since the 18th National Congress of the Communist Party of China in 2012, Xi Jinping, general secretary of the CPC Central Committee, has repeatedly emphasized the need to balance the "invisible hand" of the market with the "visible hand" of government, creating a governance system in which an efficient market and a well-functioning government reinforce each other. The fourth plenary session of the 20th Central Committee of the CPC in 2025 further elevated this principle, offering a road map for modernizing economic governance.

Modern governance is not about expanding scale, but about improving efficiency and unleashing innovation. It requires moving from factor-driven growth to innovation-driven growth, and from passive adjustment to proactive institutional design. Reform must therefore provide the core momentum. The following measures can help in this direction.

First of all, reform must orient governance toward high-quality development. This is the central task of modernizing economic governance. Reform should target deep-seated constraints — insufficient innovation capacity, regional disparities and rising ecological pressures. This means establishing evaluation systems based on quality and efficiency rather than sheer output, which will nudge firms to compete on innovation and sustainability. It also requires stronger policy coordination, aligning industrial, technological, environmental and market reforms so that institutional dividends can translate into long-term momentum.

The market-government relationship should also be balanced to build a more coordinated governance system. Getting the relationship right is the "master key" to stronger governance. China must accelerate legislation for building a unified national market, strengthen fair competition rules and eliminate local protectionism, regional barriers and discriminatory entry requirements. Removing these obstacles will improve market circulation, unlock the potential of China's enormous domestic market and help curb wasteful, low-efficiency forms of competition.

At the same time, regulatory methods should evolve. The country needs an integrated approach that combines law-based regulation, credit-based oversight and digital tools. Strengthening competition policy and cracking down on administrative monopolies will ensure that firms compete through innovation rather than unfair advantages.

What's more, market-based allocation of key production factors should be raised in the overall resource efficiency. The smooth flow of production factors — technology, data, capital, land, and labor — directly affects economic vitality. Reform should improve the mechanisms for market-based allocation, expand pilot programs and create more flexible channels for factor mobility.

Technology transfer platforms need better integration and incentives for turning research into commercial products should be strengthened. Clearer rules for data ownership, trading, and security are essential for unleashing the real value of data as a production factor. Barriers to cross-regional movements of labor and capital must be removed, enabling resources to follow viable projects and strategic planning. Continued reform of small and medium-sized financial institutions and deeper capital-market reforms will help match capital with innovation.

Corporate governance to energize market players and unleash micro-level dynamism is also a key point. Market entities are the foundation of high-quality development. Reform of State-owned enterprises should be advanced with a sharp focus on modern corporate governance with Chinese characteristics as its core. State-owned enterprises should concentrate on their main responsibilities, build strategic capabilities and improve oversight.

For the private sector, improving the business environment is key. Hidden barriers must be dismantled, payment arrears cleared and private firms encouraged to participate in major national research and industrial projects. Stronger legal protection for property rights and fair competition will help unleash private-sector dynamism and foster complementary growth between public and private enterprises. Platform companies should be guided toward shared development with partners and workers.

Fiscal governance is equally important in providing a more solid and sustainable foundation for national development. Fiscal reform is fundamental to national governance. China must better align financial resources with governmental responsibilities, improve transparency and reinforce local fiscal capacity.

This includes clearer division of central and local spending responsibilities, reforming the tax system, expanding local tax sources and enhancing tax administration. A transparent, rules-based, performance-oriented budgeting system will improve the efficiency of public spending, enabling fiscal policy to better support growth, structural upgrading, public services and risk prevention.

More important, the Party's overall leadership is the guarantee that reform can move in the same direction across all sectors. Modernizing governance requires aligning top-level design with grassroots innovation, and integrating reform across the economic, social, political and environmental fields. Mechanisms for coordination, monitoring and evaluation must be strengthened to remove institutional blockages and make reform mutually reinforcing.

In a world undergoing rapid geopolitical and economic shifts, the reform measures advanced at the conference aim not only to clear obstacles to China's high-quality development but also to create new opportunities for international cooperation. By building a system in which efficient markets, well-functioning government, high-quality factors and fair rules operate in harmony, China seeks to unlock its economic potential and reinforce the foundations of a modern socialist economy.

The author is a professor at the Institutes of Science and Development, University of Chinese Academy of Sciences.

The views don't necessarily represent those of China Daily.