[haiwainet.cn]Wang Xiaosong: What initiative does China have to put forward to open up to the outside world?

Author’s Note: In April 2018, at the 2018 annual meeting of the Boao Forum for Asia, General Secretary Xi Jinping announced China’s major measures to expand its opening up, including significantly relaxing market access, creating a more attractive investment environment, strengthening intellectual property protection and initiatives and expanding imports, and emphasized that these initiatives will be launched as soon as possible. These measures are powerful weapons for resolving the major contradictions in the society in the new era, and are concrete examples of the continuous improvement of the level of macro-control by the Communist Party of China in practice.

Relax market access

Relaxation of market access can strengthen competition, which is an important measure to solve the imbalance in the development of the three major industries and within each industry. China is a big manufacturing country and has a strong competitive advantage in many manufacturing industries. The trade in goods keeps a high surplus throughout the year. In contrast, China's service industry, especially in the financial, telecommunications, logistics, and other industries, has a low starting point and slow development. After China’s accession to the World Trade Organization, China’s trade in goods has entered a new stage, while the service industry development and service trade have performed slightly worse. In 2017, the Chinese government announced the relaxation of restrictions on foreign shareholdings in banking, securities, and insurance industries in order to reduce restrictions on the establishment of foreign financial institutions, expand the scope of business of foreign financial institutions in China, and broaden the scope of Chinese-foreign financial market cooperation, resulting in a wide range of services, fundamentally improving the development level and competitiveness of China's service industry. At the same time, the development within China's manufacturing industry is uneven. Although China has achieved opening up in most sectors of the manufacturing industry, it still retains restrictions in industries such as automobiles, ships, and aircraft. With the continuous improvement of Chinese science and technology, these industries have made great progress. Relaxation of foreign capital holding ratio restrictions can fully strengthen the integration of domestic and foreign investment, strengthen competition, and fundamentally improve the competitiveness of these industries, thus enabling China's manufacturing industry to achieve more balanced and fuller development.

Further improve the investment environment

To further improve the investment environment, we can make full use of external resources to resolve the contradiction in the development of foreign-funded enterprises in the past. Over the past 40 years of reform and opening up, China has made full use of external resources and vigorously attracted foreign investment, which has promoted the continuous improvement of the open economy, and has promoted the rapid growth of China's economy. However, in the past, China’s attraction of foreign capital was mainly based on preferential policies and resource endowments. Foreign-funded enterprises valued preferential policies such as taxation, land and abundant labor resources and used China as an overseas production base and export platform. Foreign-funded enterprises are mainly engaged in assembling, processing, and other aspects in China. R&D, design, and production of core components are still carried out in the home country. This has created an imbalance in the development of domestic and foreign-funded enterprises, manifested in the false prosperity of huge export of foreign-invested enterprises, attracting China’s employment by attracting investment activities, and raising tax revenue, but failed to improve China’s technological level and management capabilities, and failed to enhance China's independent research and development capabilities. After 40 years of development, China has put forward higher requirements for foreign investment, and it no longer stays at the primary goal of using funds and absorbing employment. Therefore, China will strengthen its connection with international economic and trade rules, increase transparency, strengthen protection of property rights, and fully implement the pre-entry national treatment plus negative list management system, so as to realize the full utilization of external resources and the balanced development of domestic and foreign-funded enterprises.

Strengthen intellectual property protection

Strengthening intellectual property protection is an important guarantee for balancing the speed and quality of development. In fact, strengthening the protection of intellectual property rights is the most important aspect of perfecting the property rights protection system, and it is also the greatest incentive to increase China’s economic competitiveness. For a long time, due to the national conditions, China has the problem of ineffective protection of intellectual property rights, tacit approval of economic growth, and even brutal growth. This can reduce the cost of enterprise development and promote the overall development of the company and even the Chinese economy in a certain period. However, the extensive growth based on infringement and piracy cannot guarantee the quality of growth. It will also curb domestic R&D and innovation activities, and it will also cause foreign-funded enterprises to lose information on China’s investment in science, technology, and R&D, and influence China’s image in the international community. In response to this, China urgently needs to strengthen its law enforcement efforts in the area of intellectual property rights and raise the costs of illegal activities to fully utilize legal deterrence. The key connotation is to ensure that Chinese and foreign companies carry out normal technical exchanges and cooperation and protect the legal intellectual property rights of foreign-funded enterprises in China.

Actively expand imports

The initiative to expand imports is a direct requirement to meet the people's need for a better life. After 40 years of development, China has steadily solved the problem of food and clothing for more than one billion people. It has generally achieved a well-to-do society and is making solid progress towards building a well-to-do society. In this context, the characteristics of demand diversity highlight the fact that domestic products have not been able to fully meet the needs of consumers. Expanding imports is a direct and effective measure to resolve this contradiction. For example, in terms of food, China’s food consumption structure continues to escalate, leading to huge demand for agricultural products, while the United States and other developed countries have a strong comparative advantage in agricultural products. Increasing the import of agricultural products from these countries is conducive to optimizing the supply structure of the Chinese food market and fully satisfying their national food and health needs. In another example, in the energy market, not only does China’s energy demand increase, but energy consumption and imports are also linked to important goals such as improving the quality of the environment and adjusting the ecological structure. The United States has sufficient supplies of energy such as oil and natural gas, and increasing imports from the United States will be of great significance to China's diversification of energy imports. This will be conducive to the stable supply of China's resources and alleviate the phenomenon of "gas shortage" that has emerged in recent years.