Author: Fan Gang, President of China Development Institute
Only through further opening-up its economy can China boost its global competitiveness
The remarkable achievements China has made over the past four decades in institutional reform and economic development is a result of its opening-up policy and the development of its export-oriented economy.
Opening its economy enabled China to give its productive forces full play, and to export labor-intensive products in exchange for urgently-needed machines and technologies. Opening the domestic market and introducing foreign investment was crucial for China to grow its economy. It allowed China to learn advanced technology and science from other countries. Large numbers of students, scientists and technical professionals went abroad for studies and exchanges.
Opening-up also allowed China to engage in global affairs through joining international organizations. China's entry into the World Trade Organization in 2001 marked another milestone in its process of going global.
Today China is witnessing changes in the global landscape unprecedented in a century. The COVID-19 pandemic is having a huge and far-reaching impact on the global economy and trade, bringing more uncertainties to economic globalization. Undoubtedly, during the period of the 14th Five-Year Plan (2021-25), China will face a more complex, harsh, and changing external environment, which will bring unprecedented challenges as well as opportunities. To navigate through the complex and challenging global environment, China must further open its doors and safeguard an open world economy, thus gaining the initiative in global competition, promoting comprehensive in-depth reform and quality development, and fostering a stable and sound global environment.
With a population of 1.4 billion people, China has a per capita GDP of around $10,000, roughly one-fifth or one-sixth that of developed nations, and a large rural labor force is seeking employment in the urban economy. China needs to expand domestic demand and foster its domestic market while tapping into the global market and using global resources to fulfill its potential in production, and narrow the gap with developed nations.
Only through further opening its economy can China keep advancing its science and technology level and research capacity, and increase its global competitiveness. Although China has made significant progress in science and technology over the past four decades and is leading in some areas, it is still lagging behind in many others, while being on the lower end of the industrial chain, as well as facing external constraints in some key technologies. China should strengthen independent research and development by further opening-up.
Further opening-up would enable China to attract more innovative personnel. China should foster its own talent pool by accelerating the development of education and scientific research while also attracting global talent. China should encourage foreign enterprises to set up research institutes in China and improve its talent import systems by providing more convenient services for foreign professionals such as for visa, work permits, residency and the lives of their families to build a good work and living environment for them.
In improving business conditions, China could attract more foreign investment and prevent foreign enterprises from leaving China, as some foreign politicians threaten to decouple from China and even block China. China should shorten the negative list for foreign investment access, orderly open the service sector, encourage foreign investors to engage in research and development and allow foreign enterprises to take part in major science and technology projects. China should implement the Foreign Investment Law, treating domestic and foreign companies equally. Increased production and investment of foreign enterprises in China will help boost the country's GDP, create more jobs and elevate incomes, while strengthening China's weak links and cementing its position in the global industrial chain.
Only through further opening the economy can China promote reform and create a vibrant and competitive market mechanism. For example, further opening the financial market is driven by China's own demand for developing and perfecting the financial market. The further opening-up of the financial market and easing of access restrictions will bring in more global financial institutions which will lead to fiercer competition in the domestic market. Higher-level competition will foster stronger competitiveness. China can only integrate into the global financial system by participating in global competition. Fiercer competition will help the country identify areas in need of reform, improve market regulation and optimize the allocation of resources.
Only through further opening the economy can China optimize the management and service system for foreign investment, thus forging a group of world-class Chinese multinationals. Chinese companies need to go global to tap into resources to grow stronger.
Only through further opening the economy can China improve the international economic cooperation mechanism and boost the capacity of participating in global economic governance. A growing Chinese economy has laid a solid foundation for the country to engage in global economic governance, but it should also bolster its soft power. Especially, China should improve its capacity in line with high standard global trade rules. In this way, China will be able to counteract the trend of anti-globalization, sustain multilateralism and realize the ideal of building a community with a shared future for humankind by implementing and promoting international cooperation initiatives such as the Belt and Road Initiative.