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Gao Hucheng: All-around Enhancement of China's Open Economy


Recently, Qiushi magazine published “All-around Enhancement of China's Open Economy”—an article signed by Gao Hucheng, Party Leadership Group Secretary and Minister of the Ministry of Commerce. The full text is as follows:

This year has marked the 35th anniversary since the implementation of the reform and opening-up policy. The Third Plenary Session of the 18th CPC Central Committee has made a major strategic deployment for comprehensively deepening reform at a new historical starting point, which will certainly have a significant and far-reaching impact on the promotion of the socialist cause with Chinese characteristics. Decision of CPC Central Committee on Major Issues Concerning Comprehensively Deepening Reform (hereinafter referred to as Decision) adopted in the Plenary Session states: “To adapt to the new situation of economic globalization, it is necessary to push forward a better combination of mutual promotion, introduction and publicity of internal and external opening policies, promote the orderly free flow of international and domestic factors, efficient resource allocation and further market integration, accelerate the development of new competitive advantages in participating in and leading the international economic cooperation and promote reform by implementing an open policy”. This has pointed out the direction for further opening-up and promoting the all-around enhancement of China's open economy for the coming period.

I. Deeply understand the change of internal and external environments of China's open economy

So far, there has been a profound adjustment of global economic structure; the competition amongst systems, rules, markets, technologies and resources has become increasingly fierce. The internal and external environments for China's economic development are undergoing complex changes. Hence, it has become increasingly important and urgent to enhance China's open economy.

The driving force of economic globalization is undergoing significant changes. For the past five years since the outbreak of the international financial crisis, the world economic recovery has been filled with uncertainty after several setbacks. Since no significant progress was made in the WTO Doha Round negotiation and the regional economic integration is in the ascendant, the free trade zone has become the trend of world economic development. By July this year, there had been 249 regional trade agreements entered into force after being notified to the WTO. In particular, America and Europe bypassed the World Trade Organization and carried out Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and other “high-level” negotiations concerning free trade zones, which has a far-reaching impact on international economic and trade environment. International industrial specialization confronted with new changes; some medium and high-end manufacturing industries flew back to developed countries, and service outsourcing and service investment became newly popular in international economic and trade cooperation, all of which created opportunities for China to improve its position in global value chains.

The competition of international economy and trade regulations is becoming fiercer day by day. Faced with the new changes of the world economy and trade pattern, each country carries out fiercer contention with respect to international market and capitals, and a profound change is about to take place in the global economic governance system. In order to hold an advantage in the future international competition, developed countries devote themselves to making new investment rules of international trade and actively promote negotiations about new issues of “the 21st Century" such as “competition neutrality”, labor standards, environmental protection, etc. The situation demands immediate actions without retrogression. With an eye to the reality that economic benefits spread all over the world, China must fully participate in the negotiations of major economy and trade cooperation and seize advantages over the new rulemaking of goods trades, service trades and investments.

The traditional competitive advantages of China are faced with periodical changes. The situation that the cost advantages of cheap resources and labor forces serve as important advantages supporting the development of export trade of China changes a lot. A new pattern of labor supply and demand that surplus total and local shortage coexistent begins to appear due to continuous transfer of labor forces from villages to cities and towns during the massive urbanization. The extensive growth pattern which simply relies on high investments and high consumptions is difficult to continue because of the long-term rise of costs of labor forces and strengthening restraint of resources and environment. The competitive advantages of China need to be transformed from “quantity and price advantages” to “quality and efficiency advantages” to form a new competitive advantage.

There is huge room for China’s open economy. Remarkable achievements of the development of China’s open economy have been made since reform and opening-up, especially since China’s participation in WTO. The average annual growth of China’s gross exports reached 21.3% from 2002 to 2012, which rose to the 1st place from the previous 6th place in the world. China’s total volume of foreign trades in the year of 2012 reached USD3,867 billion, which ranked the 2nd place in the world. With the deepening of economic globalization and the expansion of global value chains, huge development potential still remains in China’s open economy. In the aspect of foreign trades, the global goods exports comprised 11.2% of China’s goods exports in the year of 2012, which is not outstanding in the history of global trade development. According to the relevant information of Secretariat of WTO, the global goods exports comprised 18.9% of British goods exports in the year of 1870, and 22.4% of American goods exports in the year of 1921, which are obviously higher than those of China. The total export-import volume of China’s service trade ranks the 3rd place in the world, among which the total export volume ranks the 5th place in the world, so huge room for development exists in this aspect. In the aspect of foreign investment, China’s direct foreign investment volume in the year of 2012 ranked the 3rd place in the world. However, this investment volume only amounted to 10.2% of that of the US, 29.4% to Britain and 34.4% to Germany, because China’s foreign investment started late. The full promotion of open economy and efforts in enhancing the endogenous power of open economy development shall be made to translate China’s huge development potential into achievements.

II. Accurately understand the connotation of all-around enhancement of China’s open economy

Continuously further opening-up and driving reform with opening-up is fundamental to comprehensively enhance the open economy. To adapt to the new trend of economic globalization requires a more proactive opening-up strategy so as to break through the constraint of ideology and shackle of interests fixation, overcome the malady of systems and mechanisms, distribute the dividend of deepening reform, and speed up the formation of new competitive advantages in participating and leading international economic cooperation.

Achieve positive interaction between reform innovation and opening-up. The opening-up of many areas in China is still at a low level and the reform of many key areas is still in need of external driving force through opening-up. The successful experience of manufacturing’s opening-up and development shows that protection only facilitates backwardness. Comprehensively enhancing the open economy is bound to promote significant transformation of foreign law system, governmental management methods and even the ideology of people, give full play to the driving role of reform, break through the ideological shackle and realistic obstacle in the way of open economy development, and speed up the perfection of socialist market economy system.

Achieve positive interaction between opening up both externally and internally. Opening up internally is the basis and precondition of opening up externally. While deepening opening up externally, we also need to put more emphasis on opening up internally. The Decision points out: “The public sectors and non-public sectors of the economy are all important parts of socialist market economy and important foundation of China's economic and social development.” It is required to create a new pattern that various ownership economies are kept in equal competition and mutual promotion, and that further strengthens the economic development vitality and promotes sustainable and healthy development of economy through the interaction between opening up both internally and externally.

Achieve positive interaction between expanding domestic market access and exploring international market. Since reform and opening-up, China has focused on global allocation of resources and elements and effectively utilized international and domestic markets and resources. The Decision points out: “To establish unified and open market system in orderly competition is the basis for market to play decisive role in allocation of resources”; “implement an unified market access system”. While proceeding with the active opening-up of domestic market and improving quality in utilizing foreign investments, we should adhere to the principle of interests exchange and reciprocal opening-up, eliminate the obstacles in the way of foreign investment and cooperation, pay equal attention to expanding external demand and boosting domestic demand, promote orderly and free flow of international and domestic elements, and continuously expand room for China’s economic development.

Achieve positive interaction between deep participation in globalization and prevention of economic risks. As the international and domestic markets are deeply fused, internal and external environments become variable and complicated, and we will be confronted with more risks and challenges during introduction and going global. It is required to deepen opening up externally on precondition of effectively preventing risks, and strengthen the risk prevention ability while improving the opening-up level. Besides, emphasis should also be put on the prevention of systematic risks and industrial impact brought by the opening up of domestic market as well as the protection of the rights and interests of participants and assets during oversea market expansion.

Achieve positive interaction between consolidating traditional advantages and developing new advantages. While consolidating the development advantages of labor intensive industry and promoting the transformation and upgrading of traditional industries through technical transformation and technological innovation, we should also speed up the development of new advantages in participating and leading international economic cooperation and competition. This is the core element for improving the international competitiveness of our products and services, the solid foundation for open economy to keep inexhaustible motive force in development, and the significant support for transformation and upgrading from a large economic and trade country to a powerful economic and trade country.

III. Ideas and measures for all-around enhancement of China’s open economy

It is critical for all-around enhancement of China’s open economy to place the foothold of development promotion on improvement of quality and benefit, adjust economic structure, change development mode, arouse new development forces of various market entities, and form new innovation-driven development power and constantly long-run development stamina.

Efforts will be made for expansion of inland opening-up along the inland borders and improvement of new comprehensive pattern of opening up. The opening-up for west, east and middle areas will be promoted under cooperative work, and the new open economic pattern of work division and interactive development will be formed gradually. The Decision points out “grasp the change for reconstruction of global industries and improve the harmonious development in inland trade, investment and technical innovation” and to “quicken the development along borders and allow to implement special modes and policies for key border ports, border cities and economic cooperation areas in terms of personnel communication, processing and logistics and tourism, etc.” For the purpose of deepening development of inland and opening-up along the borders, this gives clear focal points of policy. The east area shall give full play to its leading role, take the lead in realizing transformation and upgrading, develop the global advanced manufacturing base and upgrade the international service level. The inland is required to depend on its local advantages, to improve and absorb international and domestic industry transformation capabilities and accelerate to develop characteristic export-oriented industry. The border area is required to comprehensively consider the requirements of economic development, border stabilization, ethnic unity and perimeter harmony, and arrange infrastructures in a reasonable manner. Efforts will be put for construction of the economic belt of Silk Road and the Maritime Silk Road, and promotion of policy communication, road link, trade smoothness, currency circulation and connection to common aspiration of the people, so as to form a west to east all-round international economic cooperation belt with full coverage from point to area and from line to piece.

Efforts will be made to relax investment admittance and improve the comprehensive benefit by using foreign capital. The utilization of foreign capital will be combined with adjustment of economic structure, transformation of economic development direction and promotion of competition in domestic market. It is required to pay more attention to introduce advanced technology, management experience and high-quality talents, and give full play to technology spillover and comprehensive driving effect by using foreign capital. The Decision points out “uniform laws and regulations of domestic and foreign capital and maintain stable, transparent and predictable foreign policies”. This is a major measure to reform foreign investment management system in our country. It is required in the Decision to take the chance of construction of pilot free trade zone in Shanghai, China, to explore national treatment plus negative list mode before admittance, accelerate the innovation of foreign capital management mode, promote the transfer of governmental functions, and “for the purpose of comprehensively deepening the reform and expanding the opening-up, to explore new approaches and accumulate new experience”. It is also required to establish the scientific evaluation system by using foreign capital and guide to use foreign capital from the emphasis on scale to improvement of quality and comprehensive benefits. With reference to successful experience of main economic subjects, the national economy security mechanism will be improved.

Efforts will be made to speed up the pace of “going gobal” and enhance capacities of global value chain integration and international operation. The Decision points out "expand investment of enterprises and individuals to foreign projects and establish the subject status of investment of enterprises and individuals to foreign projects." This will further strengthen the main micro-subject of the policy “going gobal” in our country and release the potential of foreign investment cooperation. It is required to actively, orderly and safely carry out the foreign investment cooperation, lead substantial enterprises and individuals to integrate and extend the industrial chain overseas, improve the capacity of our country to allocate element resources globally and promote the transformation from the country with many capital inflows to the country with many capital outflows. It is also required to strengthen planning guide, support a variety of ownership enterprises to conduct international business in accordance with the prevailing international rules, absorb advanced factors of production, set up overseas marketing network and cultivate international famous brands. The “going global” service supporting system will be improved and security of overseas assets and participants will be reinforced.

Efforts will be made for planning for bilateral and multilateral cooperation as well as regional and sub-regional cooperation, and for speeding up the construction of free trade zones. The Decision points out “adhere to the rules of the world trade system, stick to the bilateral, multilateral, regional and sub-regional opening-up and cooperation, expand the interest confluences with other countries and regions and accelerate to implement the strategy of free trade zones based on the surrounding conditions." For the purpose of perfecting foreign economic and trade relations in the new period, this gives clear key points. At the bilateral level, it is required to innovate the cooperation mode with developed countries, strengthen policy coordination, promote opening-up and mutual trust, and to complement each other with advantages, realize stagger competition and maintain common interests with emerging market countries and developing countries. At the multilateral level, it is required to maintain the main channel position of multilateral trade system, oppose all forms of protectionism, reduce and eliminate barriers to trade and investment, and to actively participate in preparation of international economic and trade rules and make the international economic orders fair and reasonable. At the regional level, on the basis of the surrounding conditions, it is required to speed up the implementation of free trade zone strategy, actively participate in the negotiation on new issues and form the world-wide high-standard free trade zone network. At the sub-regional level, it is required to deepen the cooperation in greater Mekong River area, Pan-Beibu Gulf area, greater Tumen River area and other areas, and form a new geo-economic and politic pattern to our benefits.

Translated by Chen Jianhui

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