The Development of China’s Commerce Since the Seventeenth National Congress of the CPC

From: English Edition of Qiushi Journal Updated: 2013-02-18 18:02
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Since the Seventeenth National Congress of the CPC, China’s commercial departments have thoroughly applied the Scientific Outlook on Development, actively implemented a mutually beneficial strategy of opening up, and continued to balance domestic considerations with international ones. This approach has allowed us to withstand the global financial crisis and various other major challenges and emergencies, effectively promote the restructuring of commerce and the transformation of the way that we develop commerce, and make a positive contribution to the cause of socialism with Chinese characteristics. 

I. A leap forward in commerce

Over the past 5 years, the global economy has been shaken by the huge impact of the international financial crisis. At the same time, China has also come up against a complex economic predicament at home, with the country facing the arduous tasks of transforming its mode of development and restructuring its economy. Grasping the theme of scientific development and focusing on accelerating the transformation of our mode of economic development, China’s commercial departments have overcome difficulties, worked to serve wider interests, and ensured the rapid yet steady progression of China’s various commercial initiatives. 

China’s domestic consumption has begun to increase at a rapid pace. In the wake of the global financial crisis in 2008, the CPC Central Committee and the State Council made an accurate assessment of the situation and promptly announced a response package consisting of measures to increase consumption and stimulate domestic demand. China’s commercial departments have worked hard to develop new policies, such as using fiscal subsidies to stimulate consumption for the first time. The introduction of policies subsidizing the purchase of home appliances and automobiles in rural areas and the trading-in of old automobiles and home appliances for new ones has been effective in unlocking the spending power of residents in urban and rural areas. Commercial departments have also adopted a series of measures to benefit the people, such as the straight-to-supermarket distribution of farm produce, the transportation of vegetables from south China for sale in north China, and the development of a system to trace the origins of vegetables and meats, in addition to promoting e-commerce, on-line shopping, and other new forms of distribution. Moreover, efforts have also been made to step up the intensity of market supervision and early warnings in order to ensure the steady and smooth operation of markets. Total retail sales of consumer goods increased from 8.9 trillion yuan in 2007 to 18.4 trillion yuan in 2011, representing an average increase of 19.9% per year. This was one of the fastest periods of growth for domestic consumption in China since the launch of the reform and opening up drive.

China’s imports and exports over the past 10 years. / Graph complied by Xinhua reporter Chen Chen  

Exports and imports have become more balanced during the course of development. Confronted with a series of serious tests posed by the global financial crisis, China’s commercial departments have worked hard to achieve the steady growth of foreign trade by adhering to the central government’s overall demands of expanding markets, adjusting structures, and promoting balance. From 2007 to 2011, China’s total import and export volume increased from US$2.17 trillion to US$3.64 trillion, vaulting China’s position in world rankings from third place to second place. In the same period, China’s share of total global exports increased from 8.8% to 10.7%, while its share of total global imports increased from 6.7% to 9.7%. The country’s annual trade surplus decreased from US$261.8 billion in 2007 to US$155.1 billion in 2011, while its ratio to the GDP dropped from 7.5% to 2.1%. In addition, the total volume of service trade increased from US$250.9 billion in 2007 to US$419 billion in 2011. China went from being the world’s seventh largest exporter of services to being the fourth largest; and from the fifth largest service importer to the third largest.

New progress has been made in “bringing in” and “going global.” In recent years, the flow of capital in the world economy has fluctuated rapidly. Working actively to overcome unfavorable circumstances and seize opportunities for development, China has made substantial progress in its efforts to “bring in” and “go global.” From 2007 through 2011, China accumulated a total of US$524.6 billion in foreign direct investment. In 2011, China made actual use of over US$120 billion in foreign direct investment, more than any other developing country. Foreign investment has played a more prominent role in promoting scientific and technological innovation, industrial upgrading, and balanced development among different regions. Efforts to “go global” have also been accelerated by a considerable margin. Non-financial overseas investment increased from US$24.8 billion in 2007 to US$60.1 billion in 2011, ranking fifth in the world. The quality and profitability of overseas contracting projects continued to increase, and with a turnover of US$103.4 billion in 2011, these projects have boosted the export of mechanical and electrical equipment and created large numbers of jobs overseas.

Foreign trade ties have advanced to a new level. Our business ties with major economies have been progressively deepened. China has become the largest trade partner of the EU, Japan, and Russia, as well as the second largest trade partner of the US and India. At the same time, we have expanded mutually beneficial cooperation with other developing countries, making major gains in the fields of trade, investment, and infrastructure. The level of foreign aid that China provides has also been greatly increased. China has also participated actively and constructively in the Doha Round of talks, gradually going from being a peripheral member to being part of the core negotiating group. We have accelerated our strategy of establishing free trade zones, signing and implementing a total of 10 deals on free trade. We have been involved in the development and reform of multilateral mechanisms of the G20 and other international organizations, presenting ourselves as a responsible large country and safeguarding and enhancing the rights and interests of developing countries in international economic governance. 

II. Development of business theories and practices

Looking back over the past 5 years, we have gained a deeper understanding of our commercial initiatives. Confronted by the severe impact of the global financial crisis and the profound changes that have taken place both domestically and internationally, we have upheld the guiding position of the Scientific Outlook on Development in our work, engaged in trials during the course of practice, and given serious consideration to a series of major theoretical and practical issues regarding the relationships between domestic and external demand, between imports and exports, between “bringing in” and “going global,” between bilateral, multilateral, and regional cooperation, and between domestic development and the opening up drive.

First, we have attached greater importance to balancing domestic demand and external demand so as to increase the capacity of our national economy for sustainable development. In the wake of the global financial crisis, the CPC Central Committee and the State Council adopted a strategy of expanding domestic demand while seeking to stabilize external demand. We have come to realize that domestic demand and external demand are closely interlinked and mutually reinforcing. The relationship between the two must therefore be viewed from a dialectical perspective. With a population of 1.3 billion, China has huge potential domestic demand. Prioritizing the expansion of domestic demand, and especially consumer demand, is a key prerequisite for speeding up the transformation of China’s mode of economic development, and the substantial measure for expanding consumption is to increase employment and incomes. To achieve this, we need to tap the potential of the domestic market on the one hand whilst entering global markets and integrating into the world economy on the other. In practice, we have made efforts to stimulate distribution and expand consumption while working to retain our markets and market shares in foreign trade. We have also made efforts to stabilize prices and benefit the people while working to restructure the economy and transform our mode of economic development. These initiatives have helped us to achieve the steady growth of both domestic consumption and import and export trade, which in turn has played an important role in ensuring economic growth and employment stability.

Second, we have given more attention to balancing imports and exports in order to speed up the transformation of our mode of development in foreign trade. Despite having grown by leaps and bounds since the launch of the reform and opening up drive, our foreign trade has also come up against a number of deep-rooted issues and problems. Following the outbreak of the global financial crisis, we turned pressure into motivation by speeding up the development of export innovation bases; carrying out trials for the transformation and upgrading of the processing trade; placing tight controls on the export of resource products and products whose production is energy-intensive and highly polluting; and making greater efforts to promote the export of services with rich local features. These efforts have helped us to further optimize the balance of imports and exports, the layout of markets, and the breakdown of participants engaging in trade. In addition, by adopting policies such as stimulating imports, sending investment and trade promotion groups on overseas procurement trips, carrying out trials for the settlement of cross-border trade in RMB, and adopting measures to make importing easier, we have not only been able to increase the import of energy resource products, advanced technologies and equipment, and key parts and accessories that China is either short of or in desperate need of, but have also been able to boost the import of consumer products for which there is demand in China. These policies have helped to exert the positive role that imports play in promoting restructuring and macroeconomic balance.

Third, we have given more attention to the integration of “bringing in” and “going global” in order to better utilize domestic and foreign markets and resources. Whereas in the past China was a mere recipient of international capital, in recent years China has entered a crucial stage in which investment coming into the country and investment going out are coming into balance. On the one hand, we have utilized foreign investment as a medium for the introduction of advanced technology, managerial expertise and high-caliber talent by promoting the upgrading of eligible development zones at the provincial level and implementing various policies to support service outsourcing. On the other hand, taking into consideration the demands of domestic reform and industrial development, we have also modified the Catalogue of Industries for the Guidance of Foreign Investment and established a security review system for foreign mergers and acquisitions. At the same time, in response to the changing situation, we have encouraged Chinese enterprises to allocate resources globally, accelerated the formulation of a system to provide policy support, service guarantees, and risk control for Chinese enterprises “going global,” promoted cooperation in infrastructure construction with neighboring countries and regions and the development of overseas economic and trade cooperation zones in a pragmatic fashion, and strengthened efforts to guarantee the safety of overseas assets, rights and interests, and personnel. 

Fourth, we have made greater efforts to balance bilateral, multilateral and regional cooperation in order to enhance our mutually beneficial strategy of opening up. In recent years, as the global political and economic landscape has undergone major changes, China’s relationship with the international community has entered a phase of deep mutual engagement combined with careful fine-tuning. Upholding the principle of mutual benefit through cooperation as equals, we have enhanced strategic talks with major global powers, such as the US, EU countries, and Japan, so as to improve mutual political trust and expand mutual rights and interests. We have deepened economic and trade ties with developing countries, pursuing closer cooperation in various forms of trade and investment as well as the development of infrastructure. We have worked to develop a model for the provision of foreign aid with Chinese characteristics, helping recipient countries to enhance their capacity for independent development. We have actively participated in multilateral economic and trade affairs and the governance of global issues, promoting regional and sub-regional economic cooperation and the construction of free trade zones, and playing a constructive role in responding to the international financial crisis and promoting the steady recovery of the world economy among other global issues.

Fifth, we have made greater efforts to balance domestic development and the opening up drive, and improved systems and mechanisms to guarantee the development of our open economy. As we have become further integrated into the process of globalization and our domestic interests have become progressively intertwined with foreign ones, the need for overall coordination in opening up and balance between domestic and foreign policies has become increasingly great. We have launched a series of new initiatives and platforms for regional cooperation so as to increase the level of openness in coastal areas, inland areas, and border areas, making positive progress in this regard. With regard to industrial security, we have improved our response mechanisms for trade friction and our early warning mechanisms for industrial damage. In addition, we have employed standard international practices such as anti-monopoly investigations and security reviews to safeguard fair competition. With regard to our investment environment, we have launched campaigns to crack down on the infringement of intellectual property rights and the manufacture and sale of counterfeit and substandard goods, decentralized review and approval rights, and increased transparency in the implementation of laws, regulations, and policies. Given that this year is the 10th anniversary of China’s entry into the WTO, we have taken stock of our experiences in opening up to the outside world, so that we have reasserted our confidence in promoting development, reform, and innovation through opening up.

III. Promoting new progress in commercial initiatives

For a period of time to come, the development of China’s commerce will continue to take place amidst deep changes in both the domestic and international environments. Internationally speaking, the underlying impacts of the global financial crisis are still emerging on a constant basis, there are still many uncertainties and destabilizing factors in world economic development, the likelihood is that slow growth will prevail for a long-term period, and competition over human resources, capital, technology, services, energy and rules is set to become increasingly intense. Domestically speaking, China is currently at a key stage of its transition from a lower-middle-income economy to an upper-middle-income economy, and still enjoys significant potential and advantages for economic development. Despite this, however, we are losing some of our traditional advantages, and the issues of imbalanced, uncoordinated, and unsustainable development are becoming increasingly evident. 

Faced with a new situation and new requirements, we need to further open up our economy and build on what we have already achieved by promoting the steady and rapid development of commerce under the guidance of the Scientific Outlook on Development. First, we need to make great efforts to increase consumer spending in urban and rural areas. Based on the strategic requirement of expanding domestic demand, we will improve policies to promote consumer spending, develop distribution networks in urban and rural areas, and establish permanent mechanisms for stimulating distribution and increasing consumer spending. At the same time, we will also enhance the capacity of the market to respond to emergencies and regulate itself so as to ensure the steady operation of markets. Second, we need to optimize the regional layout of our open economy. By adhering to the reform and opening up policy, we will strive to create a favorable international environment for our development. At the same time, we will coordinate the opening up of coastal areas, inland areas, and border areas, so as to develop rationally-positioned new growth poles that exhibit unique features. Third, we need to continue promoting the transformation of our growth mode for foreign trade. While maintaining a rational growth rate, we will shift the focus of our efforts towards improving the competitiveness of our products and increasing the overall profitability of foreign trade. We need to take advantage of the accelerated transfer of international service industries to speed up the cultivation of our core competitiveness and raise China’s position in the global industrial distribution of labor. Fourth, we need to balance “bringing in” and “going global.” We will continue to guide foreign investment towards sectors such as high-end manufacturing, new energy, energy conservation and environmental protection, and modern services. By doing so, we will seek to change the way that we attract foreign investment by relying on an attractive market and soft environment instead of low costs of production factors and policy incentives. At the same time, we will accelerate our efforts to “go global” by encouraging more enterprises to engage in overseas investment and cooperation. Fifth, we need to improve mechanisms backing up the rational development of commerce. We will better coordinate our foreign trade and investment policies with fiscal, monetary, and industrial policies, and build a better framework of systems for anti-monopoly investigations, early warnings for industrial damage, and responses to trade friction. This will help us to better withstand international risks in an open economic environment.

China has relied on reform and opening up to achieve more than 30 years of rapid economic development, and must continue to rely on reform and opening up to achieve development in the future. Having come to a new starting point, our commercial initiatives are about to embark on a new journey of development. We need to implement the reform and opening up policy more conscientiously and more resolutely, forge ahead and work in a pragmatic way, and take our initiatives to new heights in order to boost the sustainable and healthy development of our economy and society.

(Originally appeared in Qiushi Journal, Chinese edition, No.20, 2012)

Author: Minister of Commerce of the People’s Republic of China and Secretary of the Leading Party Members’ Group of the Ministry of Commerce

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