Implementing a More Proactive Strategy of Opening Up

From: English Edition of Qiushi Journal Updated: 2013-05-28 18:46
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The report to the Eighteenth National Congress of the CPC stressed that in response to new developments in economic globalization, China needs to implement a more proactive opening up strategy and further develop an open economy that is balanced, diverse, secure, efficient, and of benefit to all. This requirement has charted a course for China’s efforts to further expand its opening up and make comprehensive improvements to its open economy in the coming period. It serves as an important guide for us to promote opening up on a broader scope, in more areas, and on a higher level, to advance development, reform, and innovation through opening up, and to complete the building of a moderately prosperous society in all respects. 

I. Remarkable achievements in opening up

Since the institution of the reform and opening up policy in 1978, China has opened itself up to the outside world in all directions, across a broad range of fields, and on multiple levels. Owing to these efforts, an open economy with Chinese characteristics has gradually taken shape. In the decade that has passed since the Sixteenth National Congress of the CPC, China’s open economy has continued to witness steady and rapid development in spite of adverse conditions, reaching new highs as a whole. 

A historical leap forward has been made in the development of an open economy. In 2011, China’s trade volume stood at US$3.6 trillion, 4.9 times greater than the volume in 2002, lifting China from the world’s sixth largest trading nation to the second. China became the world’s second largest recipient of foreign direct investment (FDI) in the same year, with the country’s FDI sitting at more than US$100 billion for two consecutive years. In 2011, China’s overall overseas investment totaled at US$74.7 billion, 26.7 times greater than the total in 2002, making China a major outbound investor. 

China’s open economy has made important contributions to development, reform, and innovation in China’s economy and society. In 2011, China’s imports and exports as a percentage of its GDP reached 49.8%, signaling that foreign trade is playing an even bigger role in driving economic growth. Foreign related tax for the year came to almost 3.6 trillion yuan, the state’s foreign exchange reserves amounted to US$3.2 trillion, and the foreign economic and trade sector accounted for around 100 million jobs. The opening up of the economy has stimulated domestic innovation with regard to technologies, business modes, and management systems. It has promoted the reform of systems and mechanisms, and driven forward China’s social and economic development.

The open economy has significantly raised China’s international standing. As a major trading partner of numerous countries and regions as well as a major source of their foreign investment, China has become an important engine behind the steady growth of the global economy. 

Despite this, however, China’s open economy still faces the prominent problem of unbalanced, uncoordinated, and unsustainable development. This problem is primarily manifested in an inefficient mode of foreign trade growth, and an insufficient capacity to innovate and compete globally; the imbalanced utilization of foreign capital, which is in urgent need of optimization to increase technology and management spillover; and the limited scale of Chinese enterprises operating outside of China, and the insufficient internationalization of Chinese enterprises. We must pay close attention to these problems and devote major efforts to their resolution.

II. The importance and urgency of implementing a more proactive opening up strategy

The report to the Eighteenth National Congress of the CPC stated that an unwavering commitment to reform and opening up is essential for upholding and developing socialism with Chinese characteristics. At present, China is still undergoing an important period of strategic opportunity in which it may achieve great things. The implementation of a more proactive strategy of opening up is a necessity if we are to seize opportunities, respond to challenges, gain the initiative, and win the future edge.

China’s Imports and Exports Maintained Rapid Growth in 2011. / Xinhua

International and domestic changes require that we implement a more proactive opening up strategy. Internationally speaking, the trend of deepening economic globalization has not changed in spite of the international financial crisis. In 2011, global trade and international investment increased by 44% and 27% over their respective totals in 2009 when the financial crisis was at its height. Attaching greater importance to developing international markets and attracting foreign investment, many countries have laid out policies to multiply exports, bring industries back home, and reindustrialize, seeking to gain the edge in international competition for markets, resources, industries, talent, and technology. Although the WTO’s Doha Round has seen slow progress, countries have moved quickly to promote free trade zone strategies and strengthen regional and sub-regional cooperation. The United States has devoted great energies to touting the Trans-Pacific Partnership agreement, identifying trade in services and investment as priority areas to be opened up in the future. Given the profound shifts that have taken place in international trade and business, we must work to make the country more open to the outside world, and strive to seize the initiative in a new round of international competition.

Domestically speaking, China has succeeded in establishing a relatively mature, open economy following more than 30 years of reform and opening up. The development of the national economy is dependent on both domestic and international markets, and on both domestic and international resources. As such, the long-term, steady development of China’s economy is largely underpinned by sound usage of the huge international market and various international resource factors. At the same time, China’s social productivity and overall national strength have grown significantly, its industrial system has become more comprehensive, and its ability to engage in international competition and cooperation has improved remarkably. Compared with the early days of reform and opening up, or even 10 years ago when we joined the WTO, China now boasts a base and conditions for further opening itself up. Besides, given that China’s mode of economic growth remains inefficient, and that the country is being confronted by increasingly acute resource and environmental constraints, a daunting task in economic transformation and restructuring, as well as a number of barriers in systems and mechanisms that are hindering economic growth, it is essential that we continue to open up, to draw upon the fine achievements of other countries, and to gather impetus from opening up in order to tackle difficulties in reform and transformation. 

Taking into account changes in global and domestic conditions, we must understand that only by implementing a more proactive strategy of opening up can we make better use of both domestic and foreign markets and resources, create more room to maneuverer for the development of our economy, make constant improvements to our systems and mechanisms amidst international competition, stimulate innovation in technology and management, increase our international competitiveness and capacity to innovate independently, raise the living standards of the people on a constant basis, and attain the grand goal of completing the building of a moderately prosperous society in all respects. 

While implementing a more proactive opening up strategy, we should keep the initiative in our own hands and promote China’s further opening up to the outside world in light of our own needs in development, reform and innovation. Expanding opening up is the choice that China has made in order to accelerate its own development. We must find a better balance between domestic development and opening up, and unwaveringly push forward opening up with greater courage and determination. Working in line with requirements for improving the socialist market economy and accelerating the transformation of our economic growth model, we must identify priority areas for further opening up, maintain an appropriate pace and intensity for expanding opening up in an orderly way, and work constantly to expand our opening up in terms of both scope and depth. 

While implementing a more proactive strategy of opening up, we also need to be adept at employing the strategy of opening China up to the outside world in the hope that the outside world will open up for China. In other words, we will exchange our opening up for the opening up of our trade and business partners in terms of trade in goods and services as well as bilateral investment, thus creating a sound external environment that is conducive to China’s development. From a broader global perspective, this strategy will also facilitate the liberalization of international trade and investment, and help to create a more open and fair developmental environment for the entire world.

III. Further developing an open economy that is balanced, diverse, secure, efficient, and of benefit to all

In implementing a more proactive opening up policy, the first thing we need to do is further develop an open economy that is balanced, diverse, secure, efficient, and of benefit to all. We should move more quickly to change the way that China’s open economy grows, and work towards optimizing its structure, widening its depth, and yielding higher returns. 

We will work constantly to extend our open economy in all directions. We will encourage coastal, inland, and border areas to draw on each other’s strengths in opening up. By exploring new modes for opening up, we will encourage coastal areas to take the lead in transforming and upgrading their external-oriented economies, move faster to develop major global manufacturing centers in inland areas, and step up the pace of opening up in border areas, so as to create a new regional layout for China’s opening up in which the various regions each assume their own tasks and work in collaboration with one another, draw on each other’s strengths, and develop in a balanced and coordinated manner. We will form open areas that will assume leading positions in international cooperation and competition. We will consolidate the advantage that eastern coastal areas and major national urban centers enjoy in opening up, accelerate their shift from global processing and assembly centers to R&D and advanced manufacturing centers, and encourage them to lead the way in opening up service sectors. We will develop a number of national and international economic, trade, shipping, and financial centers and sub-centers in the Yangtze River delta, the Pearl River delta, and the Bohai Sea rim. We will cultivate leading areas in opening up that will drive regional development. We will improve the geographic distribution of open areas in inland China, and encourage eastern regions and inland regions to collaborate in the establishment of joint development areas, so as to form a number of global manufacturing centers along major transportation routes such as the Yangtze River and the Lianyungang-Lanzhou, Beijing-Guangzhou, and Beijing-Kowloon railways. We will move more quickly to open border provinces to neighboring regions, accelerate the development of key ports, border cities, and border or cross-border economic cooperation zones, and promote the interconnection of infrastructure with neighboring countries. 

We will move faster to create new competitive advantages in foreign trade. We will improve the competitiveness of Chinese exporters. Whilst maintaining and bolstering our traditional advantages, we will encourage enterprises to establish new advantages in regard to technology, brands, quality, and services, thereby promoting the leap forward from “Made in China” to “Created in China.” We will promote the transformation and upgrading of the processing trade, and encourage extension from processing and assembly to higher ends of the industrial chain, such as R&D, design, the manufacturing of core parts and components, and logistics and marketing. We will improve policies for promoting foreign trade, and increase the capacity of enterprises to engage in self-propelled technological innovation and transformation. We will devote major energies to developing the service trade. We will put in place a sound system for promoting the service trade. We will work hard to increase exports in cultural products, technology, traditional Chinese medicine, and software, as well as in new services such as information services, goods distribution and logistics, and banking and insurance. We will also increase imports in services such as R&D, technological testing and analysis, management consulting, and advanced technological services for environmental protection and pollution control. We will actively develop service outsourcing, and improve the related policies and measures. We will promote the balanced development of foreign trade. We will significantly increase the import of advanced technology, energy and resources, key equipment, and parts and components, and appropriately increase the import of consumer goods. We will improve the systems we employ to administer and regulate imports, and increase our ability to negotiate import prices. We will urge developed countries to ease restrictions on the export of hi-tech products. We will diversify the sources of major imported commodities. In addition, we will improve trade remedies and the early warning mechanism to prevent industrial damage in order to ensure the security of key industries. 

We will work to promote the more effective utilization of foreign capital. We will increase our overall advantages in the utilization of foreign capital. We will shift from relying primarily on low costs to relying mainly on qualified personnel, the investment environment, and the market in utilizing foreign capital. We will improve laws and regulations in regard to utilizing foreign capital. We will carefully study the standard practices of international investment regimes, such as national treatment and negative lists. At the same time, we will deepen the reform of the foreign investment system, and make the investment environment more transparent and facilitating. We will strengthen the protection of intellectual property rights, improve the market credit system, and protect the legitimate rights and interests of investors. We will improve the security review mechanism for mergers and acquisitions involving foreign capital, and conduct anti-trust reviews in accordance with the law. We will promote the integration of efforts to attract capital, technology, and high-caliber professionals from overseas. We will encourage transnational corporations to set up regional headquarters, R&D centers, procurement centers, financial management centers, and other functional departments in China, and to work with Chinese research institutes and enterprises in carrying out R&D and the industrial application of research results. We will step up efforts to promote the transformation, upgrading, and effective integration of all types of industrial parks. We will encourage foreign investment in the development of platforms for public science and technology services, such as science and technology intermediaries and innovation incubators.

We will accelerate the implementation of the going global strategy. We will actively expand overseas investment cooperation. We will make improvements to the institutions that support Chinese enterprises in going global, such as policy promotion, service provision, and risk control. We will support enterprises in investing in production facilities, developing infrastructure, and exploiting energy resources overseas, and in carrying out agricultural cooperation with other countries. We will create new modes for developing overseas economic and trade cooperation zones, and encourage Chinese enterprises to go global in clusters. We will improve the quality of overseas contracting projects and labor services, and work to turn “China Construction” and “China Labor Services” into global brands. We will increase the capacity of enterprises to operate internationally. We will support enterprises in integrating resources and value chains via transnational acquisition, stock swap, listing on foreign stock exchanges, and association and reorganization with foreign enterprises, and assist them in developing international R&D, production, and sales operations, thereby giving rise to a number of globally influential transnationals. We will increase our capacity to respond to risks and emergencies in regard to overseas investment and cooperation, and fully protect the legitimate rights and interests of Chinese enterprises and employees operating overseas.   

We will take a holistic approach towards bilateral, multilateral, regional, and sub-regional opening up. We will deepen all bilateral economic and trade ties. We will develop new modes of cooperation with developed countries, and enhance mutual trust in opening up. We will deepen pragmatic cooperation with emerging markets and developing countries so that different countries can specialize in differentiated but mutually-beneficial aspects of competition in the interests of all sides. We will reduce or exempt tariffs on imports from the least developed countries. We will further strengthen and improve foreign aid initiatives, focus on improving the capacity of recipient countries to achieve self-development, and work for mutual development. 

We will actively support the multilateral trade system. We will continue to respect the position of the WTO as the major channel for facilitating and liberalizing global trade and investment, and promote the Doha Round of trade talks. We will resolutely oppose all forms of protectionism, and work to promote the development of a balanced multilateral trade system that benefits all sides and cares about development. We will take an active part in the formulation of international economic and trade rules, work to make the international economic order more equitable and rational, and seek to create an institutional environment that is favorable to China’s development. We will move faster to implement our free trade zone strategy. We will establish a layout of rationally situated free trade zones that will allow different areas to develop in coordination and eastern and western regions to complement one another. We will further open up free trade zones, and work to raise the level of cooperation in investment and service trade while at the same time deepening commodity trade cooperation. 

(Originally appeared in Qiushi Journal, Chinese edition, No.24, 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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