t is time for China to further align its trade and investment rules with international common practice to build a better developed, more transparent regulatory framework. China should focus on this“systematic opening”
The complicated and severe external and internal environment is posing a big challenge to China’s economic growth. Internationally, the world is witnessing drastic volatility, due to rising anti-globalization, global supply chain restructuring, the Russia-Ukraine war, and rising inflation and interest rates in the US and Europe. Domestically, the three major pressures of shrinking demand, supply chain disruption and weakening market expectations have not eased much. This is compounded by the pandemic resurgence, sluggish consumption and real estate developers’ debt risk in China. All this adds up to uncertainty for China’s economic growth.
Further high-level openingup is crucial to mitigate the downside pressure on China’s economy. This has been proved in China’s experience over the past decades. The launch of the reform and opening-up policy in 1978, accession to the WTO membership in 2001 and the Belt and Road Initiative in 2013 have underwritten China’s take-off and rise to become the world’s second-largest economy and a champion in manufacturing and trade. The faster than expected growth of China’s foreign trade since the second half of 2020 has been the major driving force to stabilize the country’s economy. And it is the responsibility of China as a major country to expand its opening to the rest of the world.
After opening its market by standards even higher than its WTO commitment in terms of tariffs and market access, it is time for China to further align its trade and investment rules with international common practice to build a better developed, more transparent regulatory framework. China should focus on this “systematic opening.”
Moreover, issues like intellectual property protection, labor and environmental protection top the agenda of the international trade system today. Promoting systematic opening not only follows the trend of globalization and can optimize domestic resources distribution, but also helps create a good systematic environment for cooperation with other countries and will help lead global governance reform.
First, the negative list for foreign investment, which specifies sectors that restrict or prohibit foreign investment, should be further shortened to ensure a level playing field for competition. Wider financial market access should be offered to foreign companies in the banking, securities, insurance, fund and futures sectors. Capital market cross-border connections should be deepened. Services of customs, foreign exchange and taxation should be improved.
Second, opening-up in the service sector needs to be expanded. With percapita GDP exceeding US$10,000, Chinese consumers are spending more on services. In April 2021, four cities and one province, Beijing, Tianjin, Shanghai, Chongqing and Hainan were designated as trial areas for development of a modern service sector and more openness of the service market. Utilization of foreign funds in the service sector in the five areas accounted for 33.7 percent of the national total that year. That reform should be deepened, and successful experience should be rolled out across the country.
Third, more steps should be taken on reforms implemented in the 21 free trade zones and the Hainan Free Trade Port, covering all parts of China. Those free trade zones should have more autonomy to explore creative, comprehensive and different reforms. Their achievements on systematic innovation should be promoted throughout the country. Hainan’s reform should focus on zero tariffs for imports of goods and facilitation of trade and investment in the service sector by further relaxing restrictions on flows of people and transportation.
In this way, China will not only realize its own high-quality growth, but also create a more dynamic world economy.