Key reforms usher in fresh hopes for China's greater openness
The most important meeting on China's political calendar this year offers a full-throated pledge for greater openness, with more specific measures in the pipeline.
The just concluded third plenary session of the 20th Communist Party of China Central Committee, a much-anticipated political event in China that traditionally unveils key reform measures, has renewed the country's firm stance to further open up its economy to the rest of the world.
The four-day meeting was wrapped up on July 18 with a resolution, in which over 300 reform measures covering all key socio-economic dimensions were announced, all of which involve reforms on the levels of systems, mechanisms, and institutions.
Centering on "deepening reform comprehensively to advance Chinese modernization," the resolution describes opening up as a "defining feature of Chinese modernization."
As a legacy of the epochal third plenum in 1978 when Deng Xiaoping launched the reform and opening-up drive that has fueled China's economic prosperity, the third plenum this year went further and defined its mission as "improving the institution and mechanism for high-level opening up."
China's policymakers have instructed that the opening-up efforts should focus on the following aspects:
Steadily expand institutional opening up
Deepen the foreign trade structural reform
Further reform the management systems for inward and outward investment
Improve planning for regional opening up
Refine the mechanisms for high-quality cooperation under the Belt and Road Initiative
These objectives are an encouraging call for its trade partners and global investors, particularly in an era when the global economic recovery is threatened by an escalating protectionism that could result more trade barriers.
For readers looking for a detailed analysis of these policies that will shape China's reform agenda in foreseeable future, I will examine the opening-up drive from some of the keywords transcribed from the reform measures listed in the Resolutions.
Institutional opening-up
The term "institutional opening-up" made its debut in China's political vocabulary at an annual central economic work conference held at the end of 2018, when the country's reform efforts have entered a "deep water zone," underscoring the urgency for the second largest economy to ride on the wave of globalization and cultivate new advantages in international economic cooperation and competition.
"It is imperative to adapt to the new situation and grasp new characteristics, and promote the transformation of opening-up from the flow of goods and production factors to the rule-based and institutional opening-up," the 2018 economic work conference noted.
After that, the term is echoed through many high-level meetings and documents, signaling that China is scaling up its openness on an institutional level, and steering from simply optimizing industrial policies to creating a more enabling economic environment for high-quality development.
According to the resolution adopted at the just concluded third plenum and the English version published by China's state news agency Xinhua, the country will:
"Promote alignment with high-standard international economic and trade rules and harmonize rules, regulations, management, and standards relating to property rights protection, industrial subsidies, environmental standards, labor protection, government procurement, e-commerce, the financial sector, and other areas, in an effort to create an institutional environment that is transparent, stable, and predictable."
Definitely, such policy arrangement is positive, signaling China's resolve to further optimize its business environment to enhance its appeal to global investment and to ease external concerns over its growing manufacturing prowess, as tougher rules will incur compliance costs in the short term but enhance the country's trade resilience in the long run.
It is also in line with the country's commitments to expanding its global network of high-standard trade rules. China has applied the highest standards in implementing the Regional Comprehensive Economic Partnership agreement, and is taking proactive steps to align its economic and trade rules with the high standards of the Comprehensive and Progressive Agreement for Transpacific Partnership and the Digital Economic Partnership Agreement. More detailed measures are expected to be explored in the reforms at the grassroot level.
Foreign investment
Inward and outward investment is another focal point of the country's opening-up reform measures announced in the resolution.
"This is the first time that both inward and outward investment is proposed as a whole, and also the first time that deepening reform of management institutions concerning both aspects of investment are brought up," said Wei Jianguo, vice chairman of China Center for International Economic Exchanges and former vice minister of commerce.
It is emphasized in the resolution that a lot of work will be done to ensure that foreign investors enjoy equal rights, rules and opportunities in China, said Wei in an interview with Yicai (第一财经).
The resolution made it clear, vowing to foster a first-rate business environment that is market-oriented, law-based, and internationalized, expand the catalog of encouraged industries for foreign investment, appropriately shorten the negative list for foreign investment, as well as ensure national treatment for foreign-funded enterprises in terms of access to factors of production, license application, standards setting, and government procurement, among areas.
The commitment has given a positive response to foreign investors' concerns about whether the Chinese market is investable or not. Last year, U.S. Commerce Secretary Gina Raimondo said the U.S. companies had complained to her that China was "uninvestable" because it had become too risky, according to a CNBC report.
However, experts and businesspeople hold a totally different view.
In another interview with CNBC, JPMorgan strategist John Bilton said despite its economic difficulties, China should not be treated as "un-investable."
"I don't think you can treat the world's second-largest economy as either an alternative investment or un-investable, that would be wide of the mark," Bilton said, according to the CNBC report.
He said that there are opportunities for investors in China, citing the government bonds, the immense size of China's fixed income market and stock market.
The data paint a similar picture, as the country has seen a year-on-year increase of 14.2 percent in newly established foreign-invested enterprises in H1 this year.
Han Wenxiu, executive deputy director of the Office of the Central Committee for Financial and Economic Affairs, was optimistic about China's lasting charisma as a destination of foreign investment.
As its business environment continues to improve and market opportunities increase, China's attractiveness to foreign capital will continue to expand, he said in a follow-up press conference on the guiding principles from the plenum.
Han said the recent unilateral visa-free policy for certain countries has achieved satisfactory results, pledging to further improve the accommodation, medical treatment, payment and other convenient systems for foreign visitors to China.
Voluntary opening-up
"The country will further expand voluntary opening-up by opening China's commodity, services, capital, and labor markets wider to the outside world in an orderly manner and unilaterally opening our doors wider to the world's least developed countries. "
the Resolution
In the above-mentioned press conference held after the plenum, Mu Hong, deputy head of the National Development and Reform Commission, said the key to coping with current risks and challenges is to "stay focused, enhance confidence and focus on doing our own things well."
Mu was responding to a question on whether the mounting uncertainties abroad will impact China's reform and opening-up drive.
"External uncertainties have increased, but they will not alter China's firm determination and confidence to continue deepening reform and further opening up."
Mu Hong, deputy head of the National Development and Reform Commission
From the escalating geopolitical conflicts to recent U.S. and EU tariff hikes on Chinese imports, successive shocks have jolted the global economy and kept uncertainties high.
Rhetorics such as "decoupling" and "de-risking" has been floating around the United States and its western allies as a way to scapegoat China and explain their recent protectionist trade policies, Chinese analysts said.
But the key is to keep the line of communication open as dialogues and compromises are always essential in the pursuit of interests, they said.
Zheng Yongnian, a scholar with Chinese University of Hong Kong (Shenzhen), argues that by stressing voluntary opening-up, China aims to expand the opening to more areas even against the backdrop of so-called "decoupling" strategies by some Western economies.
"'Decoupling' is based on ideological logic. If we open up unilaterally, we can follow the logic of the market. ... Under this logic, capital goes where opportunities go, and this trend cannot be disrupted by ideological logic."
Zheng Yongnian, a scholar with the Chinese University of Hong Kong (Shenzhen)
This is why we need to open up to the Western economies even though they claim to pursue decoupling from China, Zheng was quoted as saying by the Inewsweek. Historically, both Britain and the United States had carried out unilateral opening-up according to their own needs, which brought them up to such a big hub of high-end talents and high-quality capital, he said.
Written by Joyce Gao