Patterns and Experience of China’s Four Decades of Opening-Up
Abstract: China’s four decades of opening-up coincided with the trend of the world economy, and contributed to its own economic development. With a gradualist approach, China achieved opening-up without causing economic and social repercussions, and unleashed institutional dividends that facilitated its reform and development. This approach has breathed lasting momentum and vitality into China’s economic growth and structural transition, and improved China’s industrial competitiveness and status in the international division of labor. As a basic national strategy and one of the country’s five development concepts, opening-up is essential for China to pursue peaceful development and stand proudly in the family of nations. Facing new changes in domestic and international environments in the new era, particularly increasing competition among major countries such as China and the United States, China should proactively explore a new model of opening-up, refocus opening-up from policy supply to capacity building, and form a new pattern of opening-up on all fronts for high-quality economic development.
Keywords: opening-up, institutional innovation, major-country competition, new pattern of comprehensive opening-up
JEL classification code: F43, O43, P20
DOI: 1 0.19602/j .chinaeconomist.2018.07.03 In the late 1970s, China embraced the historical opportunity to pursue opening-up that marked a
1 brand-new chapter in its history. “Today’s world is a world of openness.” Comrade Deng Xiaoping made this observation of post-war world development and highlighted the need for China to open up to the outside world. Based on China’s reality and changing international situation, we define opening-up as a long-term national strategy. Over the past four decades, China has improved its system of openingup policies and expedited its opening-up process. This has led to remarkable improvement in the level of China’s opening-up and underpinned China’s economic growth and international competitiveness.
1. Journey, Model and Achievements of Opening-Up 1.1 Journey of Opening-Up and Policy Evolution
Since 1978, China has experienced four stages of opening-up with distinctive characteristics. 1978- 1991 : Proactive piloting and exploration. The Third Plenum of the 11th CPC Central Committee called for importing foreign equipment and engaging in economic cooperation with other countries. This marked China’s major policy transition from self-isolation to an export-oriented economy. In 1980, China established four special economic zones in Shenzhen, Zhuhai, Shantou and Xiamen with
preferential policies granted for developing an export-oriented economy. In 1984, China further opened 14 coastal cities, including Shanghai, Tianjin, Dalian, Qingdao and Guangzhou, and so on. In this stage, China’s opening-up policy was carried out by designating specific pilot cities. With respect to foreign investment, China enacted the Law on Sino-Foreign Joint-Stock Enterprises in 1979, and initially approved three foreign-funded enterprises in 1980. In 1986, the State Council established the Foreign Investment Steering Group, and enacted the Regulations on Encouraging Foreign Investment, which offered greater policy preferences for foreign investment and improved the investment environment. At the beginning, Foreign direacr investment (FDI) almost came from overseas Chinese who invested mainly in the areas of labor-intensive export processing and service sectors like hotels and restaurant. Most of these investments went to the special economic zones and coastal cities. These policy measures greatly spurred economic growth and institutional change in China’s coastal regions, serving as good examples that could be replicated.
1992-2001: From pilot cities to overall opening-up. Comrade Deng Xiaoping’s policy remarks during his tour to southern China in early 1992 provided important opportunities for China’s openingup. Through the development of Pudong New Area, China seized opportunities from international industrial relocation to increase its level of opening-up. By introducing FDI, developing processing trade and benefiting from moderately protective policies and policy instruments for Renminbi exchange rate undervaluation (Wu, 2008), China swiftly increased its exports and international market shares of manufactured products such as textiles and electromechanical products. On July 1, 1994, China officially enacted the Law on Foreign Trade, its first legislation on foreign trade. After two decades of opening-up, most of China’s special economic zones were created in three coastal regions: the Pearl River Delta, the Yangtze River Delta and the Bohai-Rim Delta. Such concentration worsened China’s regional economic imbalances. To open up the inland regions, the central government adopted the strategic decision to develop the western region in 1999. This stage was also an important period for China to fight for its re-entry into GATT and then entrance to WTO. After hard negotiations, China concluded an agreement on WTO accession with advanced economies such as the United States and the European Union and its major trading partners. To facilitate negotiations, China also reformed its trade management system, streamlined its institutions, laws and regulations, and devolved power to lower-level authorities. These efforts greatly improved its overall level of foreign trade and economic administration.
2002-2012: Opening-up at all levels in various fields with clear priorities. In December 2001, China officially acceded to the WTO. China’s WTO entry expedited and expanded its opening-up process. In the transition period with WTO membership, China shifted the priority of opening-up from industrial sectors to service sectors by deepening financial, trade and foreign exchange reforms, and from coastal regions in eastern China to central and western regions. In line with international practices, China’s economy is increasingly integrated into the world economy. On the one hand, the mass inflow of multinational firms increased the level of global factor allocation, making China’s economy more dependent on external resources and international markets. On the other hand, China had been playing a bigger role in world economic growth, and a rapidly growing and increasingly open Chinese economy contributed an increasing share to the world economy. The enactment of the Enterprise Income Tax Law in 2007 marked a crucial step towards unifying tax rates for domestic and foreign enterprises. This also marked a shift in China’s policy orientation from offering ultra-national treatment as an incentive for foreign companies to promoting market standardization and fair business environment. To address these problems of rapid increases in foreign exchange reserves and trade surplus, Renminbi appreciation, labor and energy price hikes, environmental constraints and trade frictions, China shifted its policy priority from encouraging export earning to balancing trade. Specific policy measures included imposing a tariff on the export of natural resources, lowering tax rebates for certain products and putting a brake on lowtechnology processing trade. Transforming the trade developentment pattern was identified as a key objective of China’s industrial upgrading. In the opening-up process, many Chinese companies gained
experience in complying with international trade rules and dealing with international competition. These companies helped China overcome the global financial crisis.
From 2013 to present: Forming a new pattern of comprehensive opening- up. The 18th CPC National Congress decided to continue opening- up as a basic national policy. Since the 18th CPC National Congress in 2012, China has adopted the innovative Belt and Road Initiative, established the Asian Infrastructure Investment Bank (AIIB), expedited the pilot programs of free trade zones, and implemented the negative list approach, among other strategic initiatives. In its Decisions on Major Matters Concerning the Comprehensive Deepening of Reforms, the Third Plenum of the 18th CPC Central Committee called for creating an open economic system and “relaxing the investment threshold, developing free-trade areas, and opening up interior provinces and border regions”. These Decisions led to a new wave of deepening foreign trade reform and promoting innovative foreign trade and economic cooperation. The Fifth Plenum of the 18th CPC Central Committee identified “openness” as one of the five development concepts to promote a new round of two-way openness on all fronts for win-win results. The eruption of the 2008 global financial crisis presented China with falling external demand and challenges from trade protectionism. In this context, China deepened supply-side structural reforms and promoted trade facilitation, which led to improving imports and exports. The 19th CPC National Congress called for “fostering a new pattern of comprehensive opening-up”. Despite the setbacks of globalization, China steadfastly safeguarded the multilateral trading system, and took it upon itself to promote globalization as a historic mission. While making full use of international platforms such as the G20, China has increased its right of discourse, called for creating a community of shared destiny for mankind, contributed to a more innovative, vibrant, interconnected and inclusive world economic system, and shared its wisdom for the recovery of world trade. Through these efforts, China’s economy continued to serve as an “anchor of stability” for world economic growth. In April 2018, President Xi Jinping announced China’s plans to relax market access, create a more attractive investment environment, enhance intellectual property rights protection, increase import and expand opening-up. He sent a clear message to the world: “China’s open gate will not close. It will open wider and wider. This is a strategic choice of China based on its development needs, and also represents China’s real action to
2 promote economic globalization for the benefit of humanity.”
China’s opening-up since 1978 is unprecedented in history. All its steps and achievements have been made based on China’s own choice, and are consistent with the trend of history. Obviously, China’s opening-up is a gradual process that started with a few pilot programs before scaling up nationwide. It started from China’s coastal regions to the whole nation, expanded from manufacturing to service sector, and evolved from trade and FDI attraction to international economic cooperation at all levels. With the initial objective of unleashing demographic dividends, China’s opening-up started to offer institutional dividends. In a matter of four decades, China has evolved from an economically and socially isolated country to a fully open country, a journey rarely seen in human history. Under the joint effects of internal reforms and external openness, China created a growth miracle of industrialization for a late-moving large country, and has become a major stabiliser and driver of world economic growth.
1.2 Main Achievements and Experiences
The achievements of China’s opening-up are manifested in the expansion of its open sectors. In 1978, China’s total import and export volume of merchandise goods stood at 20.64 billion US dollars. In 2017, this figure rose to 4,105 billion US dollars, up about 198 times over a period of 40 years, or 14.5% on an annual average basis. As a result of import and export growth, China’s international status of
merchandise trade has increased substantially, ranking first in the world in 2017, up from 32nd in 19783. China’s total import and export of merchandise as a share in the world total increased from 2.9% in 1978 to 12.0% in 2017. In addition, China has also made great achievements in attracting foreign investments. According to the Ministry of Commerce, since the incorporation of the first Sino-foreign joint stock enterprise in China in 1980, China had cumulatively approved the incorporation of 885,000 foreigninvested enterprises and attracted FDI inflows 1.85 trillion US dollars by 2017. Among developing countries, China boasted the largest FDI inflow for 25 consecutive years. As an important channel for opening-up, China’s foreign economic cooperation also developed strongly. Overseas investments by Chinese companies increased substantially. By 2017, China’s non-financial overseas direct investment inventory reached 1.48 trillion US dollars (see Table 1).
China’s basic experience is that opening-up and market-oriented reforms reinforced each other. First, opening-up transcended the institutional barriers of economic development, increased diversification in competition entities, and promoted market-based factor flow and allocation. At the beginning of China’s reform and opening-up, decision-makers adopted a variety of experimental and regional policy measures for trial and error (Jiang, 2008). Such a gradualist approach was highly consistent with the “incremental
reform” path. Unlike the “shock therapy” of some transition countries, China’s gradualist approach mitigated the social and economic impacts of reform and opening-up. Meanwhile, China’s opening-up policy was implemented in an incremental manner. A typical example was China’s FDI policy. Foreignfundeded companies increased China’s market vibrancy through competition between their peer and with local companies. With their advanced corporate governance structures and diverse competition strategies, foreign-invested companies served as examples for Chinese companies and especially SOEs to learn from and reform their own operation and governance structures, while competitive pressures forced Chinese companies to reform and reorganize, and inefficient local companies were forced to exit the market. This also improved the exit mechanism for some sectors in China. At the regulatory level, diversification in competition entities required a higher degree of market standardization. By enacting a host of laws and regulations including the Anti-Unfair Competition Law, the Anti-Monopoly Law and the Mergers and Acquisitions Law, China greatly increased its level of legislation on market standardization. For local governments, streamlining approval powers, increasing administrative efficiency and optimising investment and business environment represented important directions and components of institutional reform. China’s WTO entry marked an important upgrade of China’s opening-up on all fronts, and created a new institutional supply. According to the WTO’s requirements, the framework of China’s economic system should gradually come to terms with international practices, and the WTO principles such as “fairness, transparency and nondiscrimination” have become the basis for legislation on trade and economic cooperation and law enforcement. In addition, external pressures from WTO entry created opportunities for China to remove institutional barriers and expedite reforms for its SOEs and automobile, banking and telecom sectors.
Furthermore, opening-up promoted China’s technological progress and structural improvement. From the late 1970s to the mid-1980s, openness of China’s industrial sectors was relatively low to foreign direct investment (FDI), with purchased production lines and equipment as a main form of technology importation. Although this approach increased the production capacity of industrial products and particularly durable consumer goods, China still faced the “two-gaps” constraint (savings gap and foreign exchange gap) in accelerating industrialization due to the low level of capital accumulation and limited foreign exchange earnings from exports. In such case, China adopted a “market for technology” strategy in the context of worldwide structural adjustment and industrial relocation to attract FDI in order to expand production capacity and improve the level of industrial technology. Since the 1990s, China’s industrial sectors accelerated their opening-up to foreign capital, resulting in a huge inflow of FDI into China’s manufacturing sectors. Compared with other sectors, China’s manufacturing sector had relatively complete industrial systems, supporting capabilities and more sufficient competition, which created necessary conditions for China to receive international industrial relocations. When investing in China’s manufacturing sectors, foreign investors faced a relatively more relaxing regulatory environment in terms of investment method and equity ratio requirement than other sectors. This encouraged multinational companies to relocate manufacturing capabilities to China on a large scale, contributing to China’s industrial upgrading and improving its export structure (see Table 2). In addition, empirical research extensively shows that opening-up exposed China to more sources of advanced technology and that FDI had a positive effect on China’s technological progress (Jiang, 2002; Wang et al., 2006). This is manifested in direct technology transfer, promotion and assimilation from multinational companies, as well as the learning effect of operational methods, know-how, patents, trademarks, technical procedures, product standards and management models of foreign-fundeded companies. Since the dawn of the 21st century, multinational companies have established various R&D centers in China, further increasing the level of internationalization for China’s R&D system. There remains controversies regarding technology transfer by multinational companies and its spillover effect, as well as differences in the technology spillover effects for FDI of different sectors and places of origin (Chen, 2003; Xie, 2007; Shao, 2017). Overall, however, opening- up created a favorable institutional environment for China to receive
international industrial relocations. Of course, the limitations of technology transfer by multinational companies and the reliance on external technology have also restricted China’s choice of pathways for industrial restructuring and technological progress. This problem is especially prominent for China’s high-tech industries. Over a rather long period of time, about 80% of China’s high-tech products were exported in the form of processing trade with limited value-added, locking China into the middle- and low-end links of the global value chain. In the face of fierce international competition, the lack of core technologies and critical links of the global value chain has exposed China’s high-tech sectors to major shocks amid changing world markets and international economic and trade relations.
Moreover, opening-up increased China’s international competitiveness. First, opening-up unlocked China’s economic potentials. Huge demand from international and domestic markets supported rapid development of China’s industrial production and exports over a short period of time, achieving economies of scale that underpinned China’s status as an industrial powerhouse. Second, opening-up broadened the channels and scope of resource utilization for China’s industrial development. While China used to be a large developing country with a weak industrial foundation, backward technology and limited per capita resources, opening-up helped China bring external resources, including energy, advanced technologies and institutional systems, into its own economic system. This provided muchneeded external resources for China’s industrialization. At the micro-level, corporate competitiveness served as the linchpin of industrial and national competitiveness. Opening- up exposed Chinese companies to risks and competition both at home and abroad, giving them opportunities to be experienced with international market operations. These companies are not only the “ballast stone” of China’s economy, but also are vital to China’s structural upgrade and high-quality development. Third, opening-up followed the principles of division of labor and efficiency, shifted agricultural workforce to industrial and service sectors, unleashed comparative advantages, and helped achieve industrialization and urbanization. Under the joint effects of these factors, China’s manufactured goods developed unique international competitiveness (see Table 3).
By actively integrating into the world economy, China has become increasingly interconnected with world commodity and factor markets over the past four decades of opening-up, and witnessed
the transformations in international division of labor. In recent years, China’s participation in the international division of labor has increased in depth and scope, and the pattern of its participation has evolved from product specialization to factor specialization and from interindustry specialization to intraindustry specialization in the global value chain. In terms of natural resources and the environment, China has paid a price. But China is also a major beneficiary of this round of globalization. Despite China’s improving status in the international division of labor, China’s economy has been dependent on the international market and external resources as a result of its participation in the international division of labor with cheap factors of production. Cheap Chinese exports have also stimulated consumer demand in developed countries. Financial innovation in developed countries also provided credit support to the consumption of inexpensive goods imported from China. As countries become more correlated and interactive with each other in their industrial structures, China’s industrial sector as an open system has evolved through interactions with that of other countries. However, China’s fixed pattern and roles in participating in the international division of labor have also restricted its autonomy in conducting structural adjustment.
2. Major-Country Competition and Further Opening-Up in the New Era
In the new era, both the external environment and internal conditions for expanding opening-up have been changing. The practice and experience of opening-up have become valuable assets for China’s economic and social development, influencing the world economy and international order in profound ways. Changes in the industrial competitiveness of countries transformed the pattern of international competition as well. China must seize the strategic opportunities from a new round of technology revolution, global industrial upgrade and deepening division of labor. China should also cope with increasingly fierce international competition, especially major-country competition with the United States on all fronts from technology to energy, trade, investment and international right of discourse. This is a major test for China’s resolve of opening-up and global governance capabilities.
2.1 Technology and Innovation Are the Top Priorities for Major-Country Competition
In recent years, industrialized countries have all adopted strategic plans for technology innovation and economic transition to lead a new round of technology and industrial revolution. As can be seen
from the history of technological research and application, disruptive innovations have always been dominated by a few countries in the world, and the concentration of global innovations tends to increase. The United States, Japan and the European Union still account for 80% of global innovations. Over the past century, the United States has always been the most innovative country, boasting one of the highest commercialization rates for R&D results in the world. The U.S. predominance in science and technology will meet more challenges in the coming two or three decades, but no other country is expected to surpass the United States on all fronts. Countries compete for innovation not only because of their national power and development stage - such competition is largely a result of change in the organizational pattern of scientific research. Given the complexity of innovation in the 21st century, it is unlikely for major scientific research programs to be achieved single-handedly by a few persons. Rather, innovation needs to be supported by systematic and organizational inputs over a long period of time. Developed countries have formed an effective scientific research system, where government technology input is able to invite more corporate capital and social resources that boost the efficiency of innovation and industrialization.
Having made great progress in the research of science and technology, China is now in a position to compete with developed countries. While major industrialized countries have their respective advantages in the new round of technology and industrial revolution (see Figure 1), the ready-made experience for China to follow and targets to exceed are becoming fewer and fewer as China narrows its gaps with advanced world levels of science and technology. When it comes to cutting-edge technology, key equipment and components, the “low-hanging fruits” of technology transfer from multinational companies which China has picked easily through industrial relocation are diminishing, and China faces
various risks and uncertainties in its transition from a follower to a pacesetter.
2.2 Distribution of Dividends from Globalization Is Uneven and Plagued by Conservatism and Protectionism
In modern times, the history of trade development usually reflects the rise and fall of a nation. China’s status as the world’s largest nation of merchandise trade embodies its achievements of accelerating industrialization and modernization from an agricultural country. China’s brilliant economic performance is recognized worldwide, and so is its model of opening-up and economic development. Although quite some Chinese industries remain in the low-value links of the global value chain, China is increasingly taking an active stance in globalization as its trade aggregate grows and manufacturing system improves. According to data released by the Ministry of Commerce, China is the largest trading partner for over 120 countries and regions, and it both exports and imports various types of goods and services. Before China, only the United Kingdom and the United States became the largest trading nations measured in goods, and China is the only developing country that has enjoyed this status to date. It is also the most open major developing country. China’s role as the largest nation of merchandise trading is unique and influential in various ways.
In this round of globalization since the 1980s, there is no doubt that capital has benefited the most. With their traditional comparative advantages of labor and factor costs, emerging economies like China have shared in the dividends of globalization by serving as destinations for international industrial relocations and reshaped the pattern of world trade (see Table 4). There seems to be consensus on this assessment. But the influence of globalization is obviously more complicated. Change in the relative industrial competitiveness among countries has increased the imbalance in the distribution of dividends from globalization, arousing resistance from low- income groups in developed countries against globalization. Such resistance has been magnified by the slow recovery of world economy after the global financial crisis. Our world previously flattened by information technology and trade liberalization has become uneven once again and is fraught with “anti- globalization” noises. While unbalanced distribution gave rise to antagonism and isolationism, sovereignty demisability and denationalization in the process of globalization have been criticized by nationalists, populists and other anti-globalization forces (Ernst Benda, 2004). Despite the prevalence of conservatism and escalating protectionism, China established its important position in international trade as a developing country as one of the major beneficiaries of globalization. However, globalization has its intrinsic limitations, and China has deep- seated contradictions in its institutional systems. These limitations and contradictions have enhanced China’s weaknesses and barriers in further opening up and improving its development quality and competitiveness.
2.3 Major-Country Competition between China and the U.S. Intensified
In the fierce international competition, competition between China and the United States draws the most attention. In today’s world, Sino-U.S. relationship is the most important bilateral relationship. Under the conservative “America first” policy, the Trump administration has increased pressures on China in such fields as iron and steel and nonferrous metal products and tightened trade policies against China, then unilaterally launch a trade war in June, 2018. Undoubtedly, the industrial systems of both countries are still to some extent complementary, offering potentials of cooperation in various fields. However, the reality is that both countries have started to compete on all fronts. China and the United States have serious disagreements over trade deficits, trade in high-tech products, protection of intellectual property rights, service sector openness and government industrial subsidy. Some of these problems, such as trade deficit, have resulted from change in factor distribution in the course of globalization over the years, as well as distortions in the current trade statistical system. Historically, it was justified for China to maintain a trade surplus over a long period of time as the largest trading nation of merchandises. As Figure 2 shows, during the period between 1978 and 2017, there were 24 years that China has trade surplus - not as many as the US, Germany and Japan once had. Moreover, China’s trade
surplus is not simply a quantitative problem, but more of a reflection of structural problems. Since more than 95% of China’s export products are manufactured goods, under the current acounting syestem of total value rather than value-added, China has trade surpluses with 75% of countries and regions in the world. In 2017, China’s trade surpluses with the United States and the European Union as its two major trading partners accounted for 65.0% and 30.1% of its current-year total trade surplus respectively, while in 2011 China’s trade surpluses with these two trading partners were 1.33 and 0.93 times of its total balance of trade. In comparison, China’s trade surpluses have reduced in recent years, and so did the imbalance of surplus sources. Given the differences in the economic structures, political systems and decision-making mechanisms of both countries, the trade frictions between China and the United States cannot be resolved with one attempt. The complex domestic political situation of the United States will increase uncertainties in competition between China and the United States as two major countries (Yan Guoming, Zhang Anyuan, 2004). Sino-U.S. competition is becoming a real challenge for China, and China must make sufficient strategic and tactical preparations, identify the interests of various parties, maximize common ground, and seek cooperation and development amid competition.
2.4 Difficulties for Comprehensive Opening-Up Increased as Reform Entered Uncharted Waters
In recent years, price hikes of production factors like labor, energy and land have dented China’s traditional comparative advantage with factor cost as the core advantage. In comparison of labor cost between both countries, shift in industrial competitiveness has also led to change in relative manufacturing factor cost between China and the United States (see Figure 3). In face of the process of globalization being blocked, China should promote liberalization and persist with the basic directions of trade and investment liberalization. However, China is faced with various pressures and barriers in expanding opening-up. First, China’s export growth has slowed down compared with the rapid growth after its WTO entry, and contribution of net export to GDP reduced substantially. In 2006, China’s net
export contributed to 28.89% of GDP, but this ratio dropped to 3.47% in 2017. As the growth driver of export lost steam, China’s economy now mainly relies on the two other drivers of investment and consumption (Qu et al., 2018). From the perspective of acttracting FDI, as China’s capital accumulation and innovation capabilities increased, the role of FDI in China’s capital formation has becoming less important (Yang et al., 2017), as manifested in the falling share of FDI in China’s total fixed asset investment after peaking in the mid-1990s (this ratio was 15.65% in 1995). After the 2000s, this ratio reduced rapidly. In 2010, the share of FDI in China’s total fixed asset investment dropped to 2.84%, and this ratiowas only 1.22% in 2016. During the same period, FDI actually ultilized in China’s manufacturing sectors as a share in total paid-in foreign investment reduced to 29.3% in 2016, down from 70% in the late 1990’s. These indicators reflected the changing role of open sectors in China’s economy, likely making some Chinese less motivated to pursue further opening-up.
After four decades of opening-up in a few rounds with different priorities, China has gradually fully opened sectors with relatively smaller costs and repercussions, while accumulaing problems and major contradictions in the sectors remained un-reformed and un-opend. To address these institutional problems, it requires not only new concepts, approaches and models, but synergy between reform and opening-up as well. But the reality is that as China’s reforms enter uncharted waters, intricate interests present growing difficulties and barriers to China’s gradual and incremental reform approach, obstructing the contribution of opening-up to reform and development. Policy implementation problems due to vested interests have led to a mismatch between the choice of industrial policy instruments and trade policy orientation. Despite China’s improving business environmentin recent years, some localities are not motivated to attract more foreign capital and have yet to improve the soft investment environment and streamline government administration. These problems have seriously compromised the strategy implementation and policy effect of a new round of opening-up.
3. Forming a New Pattern of Comprehensive Opening-Up
China’s economic development over the past four decades could not have been achieved without opening-up. In the future, China’s high-quality economic development also requires a higher level of openness. As a major development concept, openness is essential to China’s peaceful development, national rejuvenation and prosperity. In this sense, China should pursue a new model of openness, create a new pattern of openness and develop into a strong trading nation (Wang, 2017; Zhong, 2018). In accordance with the commitments for a new round of opening-up mentioned by President Xi Jinping in his keynote speech at this year’s Boao Forum for Asia, we should significantly relax market access conditions, steadily open up sectors like finance, culture, tourism, professinal serive and high-end manufacturing, coordinating the opening-up of land and sea, and balance domestic openness with external openness. In addition, the interests of various localities and departments must be aligned to
facilitate policy implementation and unleash the dividends from a new round of opening-up. In the new era, China’s international competitive advantages must be reshaped and upgraded. This requires Chinato forecast the trends of a new round of technology and industrial revolution and change in the mode of production. By promoting institutional innovation and corporate transition, we should unleash the potentials of new economy, new technologies, and new industries and models (see Figure 4).
Under the theme of responding to global challenges and seeking common development, China shouldunswervingly pursue a path of peaceful development and become a key player in promoting a new international economic order for win-win results. In the new situation, the government should transform its function from policy formulation to service provision and capacity building, focusing on the following priorities: developing high-quality free trade port, further simplifying the negative list, improving the business environment, enhancing intellectual property rights protection, deepening cooperation with countries along the Belt and Road. With the goal of building a community of common destiny for mankind ( Feng and Tang, 2017), China should properly deal with the overlapped and different interests of various countries, establish a new concept of global governance, take initiative to assume international responsibilities and obligations compatible with its capabilities and status, and proactively participate in the supply of global governance and public goods. It also calls for the Chinese government toincrease international coordination with respect to economic, political and foreign policies, strive to address prominent issues such as global development in balance, the digital gap and sysmetic financial risks so as to offer Chinese solution and contribute Chinese wisdom to the constant improvements of the global governance system to become more efficient, effective, balanced and able to reflect the wills and interests of most countries.