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Opening-up Policy of China under New Circumstances: Objectives,Challenges and Development Trends


Guo Wei Since the implementation of the great strategic decision of reform and opening up made by the Third Plenary Session of the Eleventh Central Committee of CPC, with more than 30 years’ rapid development, China has made world-acknowledged achievements—the economic aggregate and per capita income of China improved dramatically, and the country has become a veritable economic power. In 2012, the Report to the Eighteenth National Congress of the Communist Party of China proposed to continue to adhere to the basic state policy of opening to the outside world, further improve the level of opening-up in an all-round way and enhance the international competitiveness of China. The report also proposed to promote all-around improvements to China’s open economy. “In response to new developments in economic globalization, we must implement a more proactive opening up strategy and improve the open economy so that it promotes mutual benefit and is diversified, balanced, secure and efficient”, said the report. In 2015, the Fifth Plenary Session of the Eleventh Central Committee of CPC put forward that the development policy of opening up obliges us to conform to the trend of Chinese economy integrating deeply with the world economy, champion our mutually beneficial opening-up policy and promote the development of open economy at a higher level, which fully demonstrated the confidence and determination of China to unswervingly implement the strategy of opening-up. Looking ahead, during the 13th five-year plan period and over the longer term, as one of the major development concepts, “opening up” will provide inexhaustible impetus for the economic reform and development of China. Therefore, the practice of continuing to expand opening up to the outside world should become a social consensus and play an important role in promoting the economic development of China. Ⅰ. The Strategic Objective of Opening to the Outside World From the perspective of comprehensive planning of China’s future development, the Fifth Plenary Session of the Eighteenth Central Committee of CPC enrolled “open development” into the five development principles (namely innovation, coordination, green, open and sharing), which reflected the overall strategy of opening up of China in the next five years. The profound understanding of the strategic objective of China’s opening up is conducive to our accurately grasping future development trend and making our due contribution to the implementation of the strategy of “opening up to the outside world”. First, we should create a new situation in our opening up. We should expand the domains of opening up by better coordinating the strategies of “introducing in” and “going out”. We should also optimize the structure and improve the quality of opening up, improve the system of open economy featuring benevolent interaction between domestic and international markets, win-win cooperation, safe and high-efficiency, thus forming new advantages in participating in global economic cooperation and competition under the circumstance of economic globalization. These practices also conform to the develop concept of “sharing” raised by the Fifth Plenary Session of the Eighteenth Central Committee of CPC. Second, a new system of opening up to the outside world should be formed. For this end, we should continue to, in line with the prevailing international economic and trade rules, broaden market access and protect the lawful rights and interests of our cooperative partners. The efforts of international community in aiding developing countries in enhancing their capacity for independent development, improving people’s livelihood, and narrowing the South-North gap should be supported. The new mechanism of advancing trade and investment liberalization and facilitation as well as properly handling trade frictions through consultation and collaboration should be established. Third, we should pursue a win-win strategy of opening-up. The construction of a harmonious world calls for the pursuing of a win-win strategy of opening-up. The aims of pursuing a win-win strategy of opening up include promoting all countries to share development opportunities with other countries, taking on the challenges together and working together to build a harmonious world of lasting peace and common prosperity. The implementation of mutual beneficial and win-win strategy is conducive to the realization of cooperation, the use of complementary advantages, thus promoting together the economic globalization towards the directions of balanced, inclusive and win-win cooperation, and eliminating the concern of international community about the “China threat”. Ⅱ. Major Challenges Faced by the Open Policy of China under New Circumstances In the post financial crisis era, the domestic and international circumstances we are facing are undergoing profound and complex changes—peace and development are still the themes of our era, economic globalization is an irreversible trend worldwide, countries around the world will continue to intensify their opening-up and speed up the economic restructuring so as to seize the competitive edge in the new round of international competition. The Fifth Plenary Session of the Eighteenth Central Committee of CPC proposed that China is still in an important period of strategic opportunity during which great progress can be made in development. Yet we also face complex and daunting challenges such as the superimposition of contradictions and increased hidden risks. The acceleration of world economic pattern adjustment and transformation of Chinese economic development model put forward new demands to the opening up of China. 1．Complicated and Volatile Political and Economic Environment Abroad First, the instability of international environment increased and export-oriented economic growth model encountered huge challenges. The greatest affect brought by the financial crisis since 2008 was the plummeting exports caused by the sharp slumps of international demands, which led to the economic slowdown in China. Meanwhile, the formation, accumulation and bursting of bubble economy caused by the reckless issuing of currency by major reserve currency issuers led to the depreciation of major reserve currency like the U.S. dollar and the Euro to physical assets. As a result, the value of China’s mammoth foreign exchange reserves will be diluted. Under highly precarious global economic environment, the export-led growth model will bring heavier and heavier cost to China and the strategy of export-oriented economy will face serious challenge. With the contraction of external demand, the weakening of demands in developed countries, and even some countries attempt to relieve depression with export, China’s growth model of highly dependence on external demand came to a dead end. Second, financial crisis caused the reviewing of the practice of globalization and international political and economic structure underwent profound readjustment. Currently, with the slowdown of world economic growth, the constraint of international demands and the setback suffered by economic globalization, the willingness and ability of developed countries in promoting globalization declined, and thought of anti-globalization raised in some countries, such as economic nationalism, exclusionism and trade protectionism. As a result, the foundation of public support for free trade and open policy was weakened. In addition, global economic imbalance was one of the deep-seated reasons of global financial crisis. The growth model of developed countries of over reliance on virtual economy has been greatly affected. Recognizing the non-sustainability of the original growth model, these developed countries raised a series of policy assumptions and objectives, such as re-balancing the world economy, re-industrialization and expanding the exports of those trade deficit countries. The game among various interest groups around major global issues such as global climate change, energy and resources security, international monetary and financial systems, and rules of economic globalization become more intense, and the struggle over influence and right of speech become more complicated. 2. The Contradictions of Domestic Economic Development Increasingly Stand out. First, we are confronting the challenge of transformation of economic system. In the process of reform and opening up in the past over 30 years, China carried out simultaneously economic opening up and the reform of market system, and has brought the situation of preliminary establishment of the socialist market economic system with rapid economic development. In contrast, the political restructuring and transformation of government functions on economic management still relatively lag behind—vested interest is reluctant to give up the power of resource allocation and the position of market monopoly, reluctant to carry out radical reform and opening up, thus becoming the “hard bone” of reform and opening up waiting to be gnawed. In a sense, opening to the outside world is an indispensable “sword” for the breaking of these obstacles or “bottlenecks” hindering economic system reform. Second, we are facing the task of expanding employment. China boasts large population and abundant work force—the scale of working population and pressure of employment of China rank the first in the world. In recent years, due to the impact of the global financial crisis, some enterprises were under the state of semi-shutdown or under the risk of bankruptcy. The profit of export business of some corporations was also based on the advantage of cheap labor. For this end, the Fifth Plenary Session of the Eighteenth Central Committee of CPC proposed to implement a more proactive employment policy, take all possible measures to create jobs and strive to resolve the structural contradiction in terms of employment. Third, the export goods were of low added value and structure upgrading was constrained by lack of intellectual property rights. Though the share of high-tech products in the export goods of China was higher than that of OECD countries, it didn’t mean that the export goods of China were with high additional value. With the deepening of economic globalization, the global industrial value chain was gradually formed and China integrated into the network of international labor division starting from the end of the production chain and doing some low value-added assembling works via the means of absorbing foreign investment. The benefit of this strategy was the creation of tens of millions of jobs for China. While the disadvantage of it being that the export goods of China were of low added value and technical barriers to trade was posing more and more constraints on the export of China. For this end, the Fifth Plenary Session of the Eighteenth Central Committee of CPC proposed to promote international capacity and equipment manufacturing cooperation, and improve the technology content and added value of labor intensive products. Ⅲ. The Development Trends of Unswervingly Deepening Opening up The Report to the Eighteenth National Congress of the Communist Party of China proposed to fully improve the performance of our open economy. This new wording raised higher requirements on the practice of opening to the outside world of China, and how to open wider to the outside world under new circumstances became a subject which deserved intensive study. Only on this basis could we formulate scientific and effective practical strategies. 1. Accelerate the Alternation of Foreign Trade Growth Pattern The sixth part of The Proposals for the 13th Five-Year Plan for National Development proposed to accelerate the optimization and upgrading of foreign trade and realize the transition from a large trading country to a powerful trading country. The transform to a strong trading country calls for the alternation of growth pattern of foreign trade. First, we should improve the quality and efficiency of foreign trade, get rid of the development model of relying mainly on the advantage of low costs and large scale in terms of export, call an end to the extensive and quantity-oriented development pattern, and promote the diversification of forms of the main participants of foreign trade and forms of international trade. Second, we should optimize import structure and enforce the strategy of vitalizing trade with the support of science and technology. Priority should be given to the importing of high-tech products, equipments and technologies which are indispensable, of great significance or in urgent need as well as strategic resources. And the importing of strategic resources should realize the diversification of sources and forms as well as the stability of channels. Third, we should encourage the development of trade on green products. Catering to the international trend of environmental protection, we should perfect our environmental protection standards, exercise strict control over the trade of energy and pollution-intensive products, thus establishing a trading structure in favor of conserve resources and protect the environment. We should also attach importance to eco-environmental benefits, accelerate the development of domestic pollution-free industries, expand the export of green products, and strive to take a bigger share in the global market of green products. 2. Innovate the Methods of Utilizing Foreign Capital We should not only make proactive efforts to bring in foreign capital, but also more importantly utilize foreign capital reasonably and effectively, so as to bring into full play the irreplaceable role of foreign investment in promoting the economic development of China. As to the specific measures, first, we should not only integrate the introduction of foreign capital with the optimizing of industrial structure and the improving of technology, but also integrate the introduction of foreign capital with promoting the coordinated development of all regions and promoting independent innovation capability of enterprises. Via the introduction of foreign investment, we should strive to realize the transformation, enrichment and improvement of existing corporations, so as to alter the situation of slow technical progress and outdated productive technology and equipments, realize scale operation based on the optimizing and upgrading of technologies, and optimize the structures, improve economic performance, and strive to realize scale benefit and regional division benefit. Second, by utilizing foreign capital rationally, we should enhance the development of open economy, reverse the situation of unreasonable economic structure, poor product quality, and low added value, and accelerate the optimization of industrial structure via the introduction of high-tech, high value added foreign products. At the same time, we should also ensure the assimilation, conversion and re-innovation of imported technologies. Third, the quality of the utilization of foreign capital and the guidance on the industrial and regional selection of foreign investment should be improved. By grasping opportunities of international industry transfer, we should strive to enlarge the scale of foreign direct investment, encourage foreign investors to participate in basic construction projects encouraged by the national government, including integrated agriculture development, and construction projects in terms of energy, transportation and major raw materials. 3. Actively Implement the Strategy of “Going out” The implementation of the development strategy of “going out” is an important move of opening to the outside world under new circumstance, as well as the essential requirement of carrying out the strategy of sustainable development. First, we should optimize the allocation of resources on a global scale, realize survival and development on the world market, take full advantage of the natural resources, technological resources and human resources abroad, carry out strategic overseas investment, establish research institutions and high-tech companies in technology intensive countries and regions. Second, we should export our technical equipments and products, bring into play our comparative advantages, actively carry out international economic cooperation, and promote the economic development of China in the process of win-win cooperation. At the same time, it can also promote the exports of commodities, technologies and service, and improve the share of Chinese products in the global market. Third, in the process of carrying out outbound investment, we should adhere to the principles of taking enterprises as the main players, market orientation and aimed at improving economic benefit and enhancing international competitiveness. (Guo Wei, Associate Professor of Department of Economics, Party School of the Central Committee of CPC)