[China]What is the new meaning of China's "high level of opening up" in the new era?

Author: Yujing Shen, Associate Research Fellow at the Chongyang Institute of Finance, Renmin University of China.

Translated from https://mp.weixin.qq.com/s/FOHMv91WqPFW7rjx55rSyA

On the new journey to build a modern socialist power, China's opening-up has taken on a new connotation. As pointed out in the report of the 20th Party Congress, it is necessary to promote a high level of opening up to the world. In the new era, China's high level of opening up to the world should give more prominence to autonomy, security and adhere to a sense of responsibility.

The 20th Congress Report points out that a high level of opening up to the world should be promoted and institutional-based opening such as rules, regulations, management and standards should be steadily expanded. Compared to product-based opening or factor-based opening, "system-based opening" emphasises a deeper level of opening, and China's system-based opening should be combined with a new development pattern of double-cycle. We need to use internal institutional reform to drive external institutional opening, and external institutional opening to force domestic institutional innovation. In other words, internally we should break down institutional constraints and promote central and regional synergies, while externally we should strengthen the coordination of international rules and seek to take the lead in establishing institutions.

The world today is facing unprecedented changes, and hegemonic and bullying practices such as bullying, trickery, and zero-sum games are deeply harmful. Against the backdrop of such a turbulent international situation, China's opening up to the world should be premised on safeguarding security.

First of all, the security of the industrial chain of the supply chain should be guaranteed. China's manufacturing industry is the largest in the world, and building a strong manufacturing country is an important element of a modern industrial system. The advantages of our whole industrial chain have become an important stabiliser for China to cope with the world changes. Under the environment of rising global trade protectionism and economic globalization encountering counter-current, China should promote international cooperation in supply chain and deeply integrate into the global supply chain reshaping with networked supply chain development.

Secondly, the security of scientific and technological innovation should be guaranteed. Led by the strategy of developing the country through science and education, China has made great progress in science and technology innovation in recent years, but the problem of "stuck necks" in areas such as chips is still prominent. In the global cooperation in science and technology innovation, we should take more ownership of the core aspects of research and development and design, and steadily promote the replacement of core systems with domestic ones.

Finally, financial security should be ensured. Against the backdrop of China's deepening financial opening and building a strong financial country, financial risks must be well guarded. Facts have proven that the current global financial system is very fragile, with a lack of coordination of macro-financial policies and obvious negative spillover effects. Coupled with the current increased interconnectedness of financial markets across countries and the emergence of new risks arising from some financial innovations, China has to guard against the occurrence of systemic financial risks and build a solid financial safety net under the path of financial openness.

At present, the international situation facing the world is even more complex than during the financial crisis in 2008. Geopolitics, energy crisis, debt crisis, huge changes in technology, economic recovery in the post-epidemic era and many other issues have posed unprecedented challenges not only to developed countries but also to many small developing countries. China has in recent years adhered to the concept of a community of human destiny and contributed Chinese power to global development. The Belt and Road Initiative is a public product proposed by China in active fulfilment of its responsibilities as a great power.

On the whole, trade and investment financing along the Belt and Road have effectively withstood epidemics and other shocks, maintained a good growth momentum, and achieved significant growth in 2021. Among them, China's total import and export to countries along the Belt and Road exceeded 11 trillion yuan, an increase of 23.6% over the previous year; non-financial direct investment amounted to US$20.3 billion, an increase of 14.1%.

In terms of policy communication, China has signed more agreements with countries along the Belt and Road, which are not only more numerous but also more concrete and implementable, with new progress in cooperation against epidemics and green and sustainable development.

In terms of facility connectivity, China is gradually "going global" with technology and standards, leading to a significant increase in the quality of overseas projects.

In terms of trade connectivity, China and ASEAN are now each other's top trading partners, and China is the EU's top merchandise trading partner, while China's trade volume with Latin America is growing rapidly and has become the second largest trading partner of Latin America.

In terms of financing, China has provided financial support to Asian countries to improve their infrastructure development through the Asian Infrastructure Investment Bank(AIIB), and has taken a practical approach to providing international public goods to the international community. In the process, it has also promoted the internationalisation of the RMB to hedge against the global risks posed by the US dollar system.

As we enter a new era, the international and domestic situation has undergone profound changes, and China's opening up has taken on new characteristics. China's opening up in the new era is an inside-out opening under the new development pattern, a sustainable opening under the security of the supply chain, the independent control of core technologies and the prevention of systemic financial risks, and a responsible opening under the joint response to global challenges and the fulfilment of international obligations.