Wei Jianguo: Maintaining an Appropriate Trade Balance

By Wei Jianguo, Member of the Senior Expert Advisory Committee of CCIEE

The Chinese government has officially approved the Regional Comprehensive Economic Partnership (RCEP). The countries involved in the RCEP have different economic development and political systems and thus, it is not easy for them to reach an agreement. Without China’s promotion and efforts, it would be impossible to achieve a consensus among all the parties.

The RCEP is bound to play a significant role in China’s reform and opening-up during the “14th Five-Year Plan” period and we need to cherish this great opportunity. First of all, China will become an even bigger market. After the pandemic, the global manufacturing industry, capital, technology and talents will all move eastward. The North American region, the European Union, and the China-Japan-South Korea region will become the main driving force for the world economy after the pandemic due to the emergence of RCEP.

The RECP also represents a rare opportunity for Chinese entrepreneurs, even better than the opportunity brought by the WTO. Joining the WTO connected China with the rest of the world and made China the world’s factory, but the RCEP will provide China with a step through which private enterprises can move to a more advanced stage of free trade.

Therefore, private enterprises should seize the opportunity and make full use of the policy advantages brought by RCEP. The RCEP will help entrepreneurs to gain more tariff reductions and international experience, enabling Chinese entrepreneurs to have a broader global perspective.

De-globalization will occur within one to two years after the pandemic.

Globalization has brought a lot of benefits to all countries, including China and the United States. It also allows all countries to maximize their comparative advantages. Nonetheless, globalization also has its shortcomings and the biggest one is that it does not keep up with the times and did not give enough consideration to regional development level, inclusive development, scientific development and balanced development.

China will propose new plans after the pandemic, remain to be a responsible country, solve the problems in globalization, and promote a balanced, inclusive, mutually beneficial and sustainable globalization. The new globalization will be recognized by all countries and cover a wider range of fields, including not only trade and investment, but also new infrastructure, 5G, robots, big data, smart cities, cloud computing, new materials, new processes and so on.

China will propose new globalization during the “14th Five-Year Plan” period and act as a leader in globalization.

It is impossible for the WTO to collapse in the future. President Biden has changed Trump’s approach, especially his “withdraw” approach. Biden will send officials to maintain the operation of the WTO. At the same time, the United States will continue to use some of the WTO rules and systems to contain China. In particular, the reform of the WTO will develop in a direction that is more beneficial to the United States. In the future, the competition between China and the United States in the WTO will remain fierce.

In order to maintain the UN-centered global governance system and the global trading system and multilateral system dominated by WTO rules, China and the United States will reach an agreement in the WTO. Despite the differences between the two countries, both China and the US are very important for the WTO. I am optimistic about the WTO reform and believe that China and the United States will play a better role in this regard.

China’s foreign capital inflows will continue to grow at a double-digit rate this year.

During the “14th Five-Year Plan” period, China will implement a comprehensive and high-level opening-up in terms of trade liberalization and investment facilitation, concerning both coastal and inland cities. China will build a market system based on marketization, rule of law and internationalization. It will continue to increase the protection of intellectual property rights, create the world’s best business environment and increase the opening of free trade zones. At the same time, it will also enhance bilateral and multilateral Free Trade Agreement (FTA) negotiations with countries along the “Belt and Road” route.

During the “14th Five-Year Plan” period, especially this year, China will introduce intensive policies for further high-level opening-up, such as further opening the service and the financial sectors.

A large inflow of foreign capital will bring more opportunities for cooperation and joint ventures for Chinese companies. After implementing the new “Foreign Investment Law”, China has absorbed US$163 billion of foreign investment in 2020. As the global foreign direct investment (FDI) declines, China has surpassed the United States to become the largest recipient of foreign capital. This year, China’s foreign capital inflows is likely to continue to grow at a double-digit rate and if possible, they can exceed US$180 billion.

China and the EU have great potential for cooperation.

The impact of the pandemic had made China’s trade surplus continue to expand. However, China will not expand its trade surplus and on the contrary, there may be a trade deficit because China’s imports will continue to increase. It has a huge market and is the only country in the world with a middle-class population of 400 million. In the future, China’s import of iron ore and coal, including agricultural products, forest products, aquatic products, and high-tech products will increase continuously. Its trade deficit will get bigger and bigger. China does not want to pursue a large trade surplus, maintaining an appropriate trade balance will be just good enough.

ASEAN will continue to be China’s largest trading partner. If China-EU trade proceeds well, the EU will surpass ASEAN and become the largest trading partner of China. The EU is a good partner of China and it will not actively choose any side in the US-China trade competition. It has its own unique methods and forms. After the EU signs the China-EU Investment Agreement, it will continue to strengthen cooperation with China.

Increasing domestic consumption is a top priority.

It is very important to increase domestic consumption in terms of creating a new economic structure dominated by the so-called dual circulation. Whether China can build the new economic structure of dual-circulation, lies on domestic consumption.

This year, China will surpass the United States as the country with the largest domestic consumption. In the future, China will have a total domestic consumption of 7 to 8 trillion US dollars, which is also the foundation for China’s new development pattern.

In the US and some European countries, domestic consumption contributes 80% to 90% of GDP growth, which means China still has a lot of room for improvement. In the future, China’s consumption will play a leading role in economic development.

Beijing still has huge potential for the development of headquarter economy.

A new pilot free trade zone was established in Beijing last year with a focus on developing service trade. With regard to headquarter economy, Shanghai has set a great example for other cities in China. As of November 19, 2020, 763 multinational corporate headquarters and 477 foreign-funded R&D centers were established in Shanghai. However, this is not good enough if compared with some of the best countries. For example, Singapore has more than 1,200 headquarters of foreign companies and Dubai has more than 1,500. Thus, Beijing still has great potential for developing headquarter economy. Beijing must strengthen its advantages in talent attraction, scientific research, geography and transportation. Furthermore, developing service trade is a top priority of Beijing.

The development of the Guangdong-Hong Kong-Macao Greater Bay Area will not have a siphonic effect on the construction of Hainan Free Trade Port.

Hainan Free Trade Port is currently the only free trade port in China and it will play a very important role in the next five years. It has carried out a series of reforms to create the best business environment.

The development of the Guangdong-Hong Kong-Macao Greater Bay Area will not have a siphon effect on the construction of the Hainan Free Trade Port. Because the Greater Bay Area aims to form a scientific research and development base, but the focus of the free trade port is opening-up.

The free trade zone will exist for a long time. The good experience we draw from the pilot project must be applied to the rest of China.

China’s GDP growth rate may reach 8.5%-9% this year.

Last year, the annual growth rate of China’s GDP was 2.3%. This year, some scholars expect it to be 7% or 8%, and my expectation is even higher, maybe 8.5% to 9%. The global economic recovery will be better than expected, especially after more people have the vaccination against the COVID-19. China is the first country to resume work and production, and its foreign trade turned positive in June last year, which has laid a solid foundation for the high-quality economic development

This year is the first year of the “14th Five-Year Plan” and China’s GDP growth is likely to be 8.5% to 9%, better than the 2.3% of last year. In 2021, China’s economy will exceed the level before the pandemic.