Higher level of opening up boosts new development paradigm

The 2020 China International Travel Mart was convened to boost domestic and international markets. Photo: Yin Liqin/CNSphoto

To build a higher level of new economic system that is open is an important obligation as China pursues a new development paradigm. But different opinions exist as to why high-level opening up should be implemented, what this new economic system will look like, and the real relationship between high-level opening up and the new development paradigm. One opinion holds that since the new development paradigm takes the domestic circulation as the mainstay, the main task for China to accomplish in the future is to accelerate self-reliant innovation and expand the domestic market, and its importance should prevail over that of high-level opening up. The other opinion considers the overwhelming trends of protectionism, isolationism, and anti-globalization, and predicts that the economic relationship between developed countries and China will indisputably be impacted.

Dysfunctional international rules

Over the last several decades’ rapid development since the reform and opening up, China has basically established an open economic system that conforms to the socialist market economy with Chinese characteristics. A major step toward this system was that China joined the WTO, and integrated itself into the world economic system in a comprehensive way, becoming the chief component that fosters the new international economic order. However, as imbalances within the global economy grow, especially with the ascent of emerging economies represented by China, the existing globalization structure and complete set of international economic and trade rules, as well as governance systems that come with it, become increasingly outmoded. As a result, the structural contradictions which persist within the world economy are ever more prominent. The outbreak of a global financial crisis in 2008 and the long-term economic recession that ensued was the archetype of such outmodedness and contradiction. Since the crisis, the global economic system and the “central-peripheral” structure have been waning. Existing international rules have gradually proven to be dysfunctional and new international orders are called for.

Especially since the COVID-19 pandemic, world economies have been severely impacted, and international trade and investment relationships have also experienced heavy blows. The consequence is that various conflicts and interest disputes have been exacerbated. Meanwhile, China’s economic development and drive to upgrade have determined that the country should not continue to merely play the producer role in the medium and low-end of the global supply chain and industrial chain.

Necessity for closer international ties

The new development paradigm that China proposes thus aims to respond to the great changes unseen in a century that the world currently faces. It was proposed based on China’s own economic and social needs, realistic conditions, and the challenges and opportunities brought by the external economic environment. The path of economic transition and upgrading should transcend beyond a central-peripheral pattern and help China rank among high-income economies. In this process, to rise above the traditional international labor division pattern necessitates opening up on a higher level and with newer forms, which binds China closer to other countries and regions.

A consensus exists among the vast majority of countries that people around the world should share the fruits of economic globalization. Even with the sluggish international economic environment over the past few years, China has established a Regional Comprehensive Economic Partnership (RCEP) with neighboring countries, the China-EU Comprehensive Agreement on Investment (CAI) with the EU, and other trade and investment treaties with other economies.

Solution to eliminate bottlenecks

To build the new development paradigm which takes domestic circulation as the mainstay, the biggest obstacle lies in self-reliant technological innovation and internal demand, which should be expanded. To eliminate these two bottlenecks, international cooperation and communication as well as high-level opening up are indispensable.

In terms of innovation, China has made laudable achievements in terms of high-tech and applied research. However, self-reliant technological innovation does not mean resistance to external resources. It should value the many channels that possibly brought about innovation.

In terms of internal demand, the situation of one-way reliance on foreign markets, particularly the markets of developed countries, must be altered to build the new development paradigm which takes domestic circulation as the mainstay. The advantage of a super-scale market within China can be utilized to make internal consumer demand the chief engine of economic growth. In this respect, the potential of China’s native market is being tapped in a large sense as the policies formulated by the Party and the country have been gradually enacted. Accounting for a steadily higher proportion of economic growth, the internal demand has become a bedrock that ensures the stable functioning of the Chinese economy. Meanwhile, the paradigm also requires that domestic circulation and international circulations reinforce each other since the expanding of internal demand and a larger overseas market are not mutually exclusive but instead, they complement each other. Especially considering that the pandemic has led to a serious world economic recession, export should continue to be one of the long-term drivers of China’s economic growth.

Wang Yuesheng is a professor from the School of Economics at Peking University.