Na­tion starts new eco­nomic ‘revo­lu­tion’

Global Times - - Business - By Mei Xinyu The au­thor is a re­search fel­low with the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion. bi­zopin­ion@ glob­al­

To­day’s China seems to be such a rar­ity, and that means the coun­try can start a new eco­nomic “revo­lu­tion” to mark the 40th an­niver­sary of re­form and open­ing-up.

If we were to choose a phrase that can serve as the piv­otal theme of the world econ­omy dur­ing the past week, it would have been the “openingup” of China. Amid dark clouds cast by “an epic trade war” be­ing waged by the US, tra­di­tion­ally known as a free trade stan­dard-bearer, there have been grow­ing wor­ries about the su­per­power, a law unto it­self, de­vi­at­ing from a mul­ti­lat­eral trade sys­tem.

By com­par­i­son, a raft of mea­sures were un­veiled by the Chi­nese lead­er­ship at the Boao Fo­rum for Asia in South China’s Hainan Prov­ince last week that al­low for greater mar­ket ac­cess. There was also an an­nounce­ment of plans to build the southern is­land prov­ince of Hainan into a free trade zone and port at a con­fer­ence cel­e­brat­ing the 30th an­niver­sary of Hainan’s des­ig­na­tion as a prov­ince and spe­cial eco­nomic zone. To­gether, these moves show the world China’s stead­fast com­mit­ment to even greater open­ing-up.

These ef­forts by the world’s sec­ond­largest econ­omy of­fer a ray of hope that could ban­ish fears of a re­peat of the vi­cious cy­cle of trade pro­tec­tion­ism in the 1930s and the Great De­pres­sion.

China, for its part, also set out upon “a sec­ond revo­lu­tion” as it pledged to widen mar­ket ac­cess this year, which is the 40th an­niver­sary of re­form and open­ing-up.

Let’s re­visit the plans for deep­en­ing com­pre­hen­sive re­forms an­nounced at the close of the Third Ple­nary Ses­sion of the 18th Com­mu­nist Party of China (CPC) Cen­tral Com­mit­tee in Novem­ber 2013. The sev­enth chap­ter of a de­ci­sion de­tail­ing the plans – “build­ing a new open eco­nomic sys­tem” – clearly stated: “To adapt to the new trend of eco­nomic glob­al­iza­tion, we must pro­mote do­mes­tic open­ness to­gether with open­ness to the out­side world, bet­ter in­te­grate the ‘bring in’ and ‘go global’ strate­gies … in or­der to pro­mote re­form through open­ing-up.”

Sim­i­lar ex­pres­sions have of­ten been used in the re­ports of sub­se­quent Party gath­er­ings and gov­ern­ment work re­ports.

Why should the na­tion opt to “pro­mote re­form through open­ing-up?” In terms of so­cial for­ma­tion, a so­cial­ist econ­omy is in its essence an open econ­omy. As a late-de­vel­op­ing coun­try, China had no choice but to pro­tect its lo­cal mar­ket in the early stages of in­dus­tri­al­iza­tion, but this kind of pro­tec­tion is an in­terim mea­sure, not an ul­ti­mate goal.

As China’s own in­dus­tries in­creas­ingly ma­ture and the na­tion over­comes short­com­ings that have weighed on its eco­nomic de­vel­op­ment and macroe­co­nomic sta­bil­ity, with achieve­ments that far ex­ceeded com­mon ex­pec­ta­tions, there’s need for fur­ther open­ing-up. The shar­ing of China’s growth op­por­tu­ni­ties could in­te­grate ex­ter­nal trad­ing part­ners into the Chi­nese mar­ket and align them into Chi­nese rules. Em­ploy­ing the cat­fish ef­fect in which a stronger ri­val causes weaker ones to im­prove them­selves would also lead to stronger com­pe­ti­tion and rein­vig­o­rate do­mes­tic in­dus­tries.

The sig­nif­i­cance of pro­mot­ing re­form through open­ing-up is not merely lim­ited to the eco­nomic sphere – it in­volves the en­tire so­ci­ety. There are two sides to ev­ery­thing. Long pe­ri­ods of peace­ful pros­per­ity in­evitably breed spe­cial in­ter­ests that profit through rent-seek­ing and self-deal­ing, rather than com­pa­nies that win and profit by in­creas­ing their pro­duc­tiv­ity.

The pro­lif­er­a­tion of these in­ter­est groups means an ac­cel­er­at­ing de­cline in pro­duc­tiv­ity and dwin­dling scope for up­ward so­cial mo­bil­ity. In this sit­u­a­tion, so­ci­ety os­si­fies and so­cial and po­lit­i­cal sta­bil­ity is threat­ened. Whether these in­ter­est groups can be con­tained de­ter­mines a coun­try’s fu­ture peace and pros­per­ity.

Many ac­tions taken since the 18th Na­tional Congress of the CPC have bro­ken up vested in­ter­ests that formed since the start of re­form and openingup. Fur­ther open­ing-up, both in­ter­nally and ex­ter­nally, can tackle ex­ist­ing mo­nop­o­lis­tic in­ter­est groups, end any com­pla­cency that may have de­vel­oped af­ter decades of re­form and openingup, and in­ject new vi­tal­ity into all of Chi­nese so­ci­ety.

Any so­ci­ety that has ex­pe­ri­enced pro­longed peace­ful pros­per­ity must un­der­take such a re­newal, al­though it’s dif­fi­cult to find one with the courage, res­o­lu­tion and im­ple­men­ta­tion ca­pac­ity to gen­uinely do it.

To­day’s China seems to be such a rar­ity, and that means the coun­try can start a new eco­nomic “revo­lu­tion” to mark the 40th an­niver­sary of re­form and open­ing-up.

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