China’s Expansion of Opening up Is Bringing Great Opportunities to the World

By: Institute of International Economic Studies of the Chinese Academy of Macroeconomic ResearchFrom:English Edition of QiuShi Journal October-December 2018|Vol.10,No.4,Issue No.37 | Updated: 2018-Dec-21 17:37
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While the global economy is currently showing steady improvement, the foundations of this trend are by no means solid. Economic growth lacks energy, globalization has fallen on setbacks, and the layout of global value chains is still in the process of adjustment. It is in this climate that China has put forward a series of important measures for opening up more broadly. These measures, announced by Xi Jinping at the 2018 Boao Forum for Asia, include establishing a new pilot free trade zone and free trade port in Hainan and further reform and opening of the pilot free trade zones in Guangdong, Tianjin, and Fujian, intensifying trials for the innovation and development of the service trade, easing market access restrictions on foreign capital, and significantly lowering tariffs on imports such as automobiles and automotive parts, anticancer drugs, and everyday consumer goods. These are real steps that exhibit China’s determination to pursue open development and that bring important opportunities for continued improvement of the global economy and further advancement of globalization. They conform to the evolutionary trends of global value chains amid the new round of industrial transformation and scientific-technological revolution, and are important measures for promoting the construction of a community of shared future for humanity.

I. While growth of the global economy remains sluggish, China’s expansion of opening up will provide major momentum for its continued improvement.

Since last year, a trend of continued improvement has emerged in the global economy, but this trend is by no means stable. There remains the urgent need to stimulate new drivers from both the supply and demand sides in order to achieve more stable and inclusive growth. As the world’s second largest economy and a leading innovator, China will invigorate global economic growth by opening up more broadly.

1. China’s expansion of opening up will create effective demand for the competitive products and services exported by each country.

In the next five years, China’s imports of goods and services will reach 10 trillion US dollars. Owing particularly to the transformation and upgrading of personal consumption in China, the import structure will lean toward advanced applicable technology, clean energy, premium consumer goods, and modern services. This is not only beneficial for developed countries in their export to China of durable goods such as machinery, parts, and cars, resources like natural gas, and premium services like education and training, health care and elderly care, and financial management, but also for developing countries in their export of agricultural products, energy resources, and other specialty products. The expansion of opening up will thus spur domestic investment and production in all countries, and promote global economic growth from the demand side.

Customers choose imported wine at a specialty market in Pinghu Shopping Town, Jiaxing City, Zhejiang Province on August 15, 2017.

PHOTO BY XINHUA REPORTER XU

2. Each country will have access to greater investment as Chinese enterprises continue “going out.”

China is currently in a stage where its outward investment is growing rapidly, and there are bright prospects for the “going out” of Chinese enterprises. It is estimated that in the next five years, China’s annual outward investment will be between 120 billion and 130 billion US dollars, providing host countries with greater momentum to drive the growth of their economies. Particularly with regard to underdeveloped countries, China’s energetic promotion of third-party market cooperation with developed economies will be advantageous not only for bringing in advanced equipment, technology, standards, and services, but also for introducing modern business management and concepts of market economics. This will help the progress of industrialization, urbanization, and modernization in these countries.

3. China will open up innovation, accelerating global scientific and technological progress.

As one of the world’s most influential innovators, China is actively responding to the concerns of major developed economies and multinational corporations, and is in the process of effectively strengthening protection of intellectual property rights, further improving the business environment, and promoting opening up and cooperation through innovation. This will be beneficial for boosting global collaboration in key areas like big data, cloud computing, and artificial intelligence, while also providing the creation and application of innovations with the support of market demand, policy incentives, and a favorable business environment. We will thus see more rapid breakthroughs in this new round of industrial transformation and scientific and technological revolution, which will in turn propel the global economy into a new period of sustained growth.

II. As economic globalization has fallen on setbacks, China’s expansion of opening up represents an important driver for the healthy development of globalization.

The last few years have seen a surge of anti-global sentiment. With trade and investment protectionism rearing its ugly head, the multilateral trade system represented by the WTO has come under threat. It is under these circumstances that China, as one of the world’s major open economies, has launched a series of important measures aimed at opening up more broadly. This holds extremely important practical significance for guiding and adapting to globalization, and pushing it to become more open, inclusive, balanced, and beneficial to all.

1. The great steps that China is taking in opening its market will be helpful for countering the negative impacts of protectionism.

For some time now, there are some developed economies that have been incessantly launching unilateral trade protection measures. This has upset the regular order of international trade, aggravated the risk of conflict between large trading countries, increased the international community’s misgivings about the future of free trade, and added a great amount of uncertainty for a global economy that is still in the process of recovery. It is in this situation that China has announced a series of important measures to expand opening up, welcoming high-quality goods, services, and capital from other countries into its market. China has thus significantly reduced or even eliminated the international community’s misgivings toward the future of globalization, and supplied recovery of the global economy with new momentum.

2. China will inject globalization with new energy by stepping up the intensity of reform and opening up in its pilot free trade zones.

The pilot free trade zones and free trade port mentioned above are China’s main platforms for meeting international high-standard trade and investment regulations, and for making active participation in the process of globalization an integral component of China’s own reform and opening up. China will thus explore a new path and offer its wisdom for the healthy and sustained development of globalization.

III. With the layout of global value chains still in the process of adjustment, China’s expansion of opening up is an important engine for further carrying the development of global value chains.

As emerging technologies like mobile Internet, artificial intelligence, and additive manufacturing have continued to be enthusiastically applied, costs in the global value chain for each country’s enterprises, especially small and medium-sized enterprises, are being rapidly reduced, while business models are becoming more diverse with each passing day. The division of labor according to vertical specialization directed by traditional large multinational corporations is already out of sync with the new demands of global economic cooperation. Now, a new type of global value chain represented by collaborative innovation, platform-based cooperation, and grid-based division of labor is rapidly developing, and will become an important compliment to traditional value chains. With China’s launch of a series of important measures aimed at opening up more broadly, the country will be able to make greater contributions to the innovative development of global value chains.

1. Actively expanding imports and significantly easing market access restrictions will help China build new value chains with other countries.

In the new type of global value chain, research and development, production, and service links such as final product design, final product manufacturing, component design, component manufacturing, brand development, and marketing will be integrated and interconnected at a profound level. This will create huge demand for trade in both goods and services. China is an important participant in global value chains and one of the countries with the greatest demand potential. Therefore, by taking the initiative to expand imports and significantly ease market access restrictions, China will effectively reduce the costs for enterprises from all countries to jointly construct new global value chains, and markedly enhance the efficiency of value chains.

2. Strengthening protection of intellectual property rights and optimizing the business environment will aid collaborative innovation.

Within the innovation chain, developed economies have an advantage in their strong abilities to propose new ideas and create original innovations, but these do not directly translate into economic benefit. China’s advantages, on the other hand, are those that directly create economic benefit, such as relative concentration on marketing and applied innovation. By strengthening protection of intellectual property rights and optimizing the business environment, China will be able to better integrate its advantages in applied innovation and marketing with those of developed countries in original innovation. This will help both sides achieve mutual benefit through collaborative innovation.

3. Dialing up the intensity of opening up in inland and border areas will facilitate cooperation between China and other countries on global value chains.

There exists massive market potential in China’s large inland and border regions, but their degree of integration with global value chains is far below that of coastal regions. Enhancing opening up in inland and border regions will not only be beneficial for unleashing the advantages that come from their natural endowment of factors and realizing high-quality economic development through integration with global value chains, it will also provide enterprises of all countries with more opportunities by expanding global value chains at a higher level and with a broader range.

IV. The idea of a community of shared future for humanity has won popular support, and China’s expansion of opening up is an important step for building this community.

Building a community of shared future for humanity is the proposal that China has put forward and the choice it has made for addressing the dearth of peace, development, and governance facing humanity. This plan is now receiving broader acknowledgement and acceptance, and is being formally written into major resolutions such as those of the UN General Assembly. China’s decision to open up more broadly will help develop an open global economy, starting with building a community of shared interest that features inclusiveness, universal benefit, and common prosperity, and then gradually upgrading this into a community of shared responsibility and a community of shared future.

1. China’s expansion of imports will help deepen its win-win partnerships with other countries.

All countries can benefit from increasing their exports to China, whether they are developed economies or developing countries. Doing so will help increase domestic employment, raise personal incomes, and maintain economic growth in these countries. At the same time, Chinese enterprises and consumers will be able to enjoy more high-quality products and services.

2. China’s expansion of foreign capital utilization will help push multinational corporations to play a greater role in world peace and development.

Along with the rapid growth of international direct investment since the 1980s, multinational corporations have become an important force influencing the global landscape, in addition to the influence of sovereign states. As multinational corporations have accumulated broader and more deeply rooted interests in every corner of the world, their desire and motivation to safeguard peace and development has become stronger. With trade and investment protectionism currently cropping up and some developed economies pushing their multinational corporations to return home, China is instead welcoming these corporations to come to China to invest and launch business ventures. This will help multinational corporations play a better role in eliminating trade and investment friction and a more active role in propelling economic and trade cooperation between their home countries and host countries, thus aiding the development of peaceful and stable major country relations.

3. China’s advancement of the Belt and Road will help efforts to reduce poverty along the initiative’s route.

The improvement of infrastructure in underdeveloped countries, and especially in regions that have fallen behind the times, plays an extremely important role in cutting poverty, growing employment, and raising the quality of people’s lives. China has made infrastructure connectivity one of the Belt and Road Initiative’s preeminent goals, and has actively promoted greater linkage between countries along the route in terms of planning and technical standards. China has placed particular emphasis on improving rail, highway, energy, and water infrastructure in regions that have fallen behind, and is promoting the flow of talent, capital, and other top grade resources to relatively undeveloped regions. This will spur economic development and employment in these areas, greatly contributing to anti-poverty efforts along the initiative’s route.

The article was written by Yang Changyong, Li Dawei, Jin Ruiting, and Yuan Qian.

(Originally appeared in Economic Daily, June 7, 2018)