As the Chinese Spring Festival is approaching, China’s new measures of reform and opening up are also about to begin.
Speaking at the 2018 annual meeting of the World Economic Forum in Davos, Switzerland, Liu He, Director of the Office of the Central Leading Group on Finance and Economics, interpreted China’s economic policies, saying that China will launch new reform and opening up this year and some measures will beyond the expectation of the international community. Besides, he said that China will continue to promote comprehensive opening up, strengthen its connection with international economic and trade rules, ease market access substantially and expand the service sector, especially open the financial industry to foreign investors.
At an exclusive interview with China Business News(CBN), Wei Jianguo, former Vice Minister of Commerce and Vice Chairman of China Center for International Economics, interpreted China’s new measures for further reform and opening up. Wei Jianguo has actively engaged in many important projects such as the AIIB, Silk Road Fund, and Guangdong-Hong Kong-Macau bay area and has led a number of researches on free trade port.
He explained that these measures exceeded international expectations, including building the best business environment in the world, enhancing the protection of intellectual property, establishing a just, open and transparent legal environment, and exploring the establishment of a free trade port.
Creating the world’s best business environment
CBN: How do you see the signal released by Liu He in Davos?
Wei Jianguo: This has signaled the entire world that China will continue to further open its market and conduct more reforms, which is very important as the international community is gradually becoming more conservative. The concept of “America First” adopted by the U.S. Trump administration shows that the United States is no longer interested in the global economic and political governance system established after World War II.
IMF President Lagarde said in July last year, if China and other major emerging markets continue to keep their strong growth momentum and such kind of growth can be reflected in the IMF voting rights, the IMF Headquarter may be relocated to Beijing, China 10 years later. The World Trade Organization (WTO) also has a sense of crisis as the Trump administration has repeatedly said it may withdraw from the organization. The EU worries that the United States will withdraw from the global fair trade negotiation, especially in the areas of steel and aircraft, which may lead to escalating conflicts between the American and European manufacturing industries. Japan and Australia worry that if the United States returns to the Trans-Pacific Partnership Agreement (TPP), they will have to start the re-negotiate process, including the import and export of agricultural products, beef and cars that have already been concluded.
The United States is increasingly trying to get rid of the multilateral system and bringing its focus back to bilateral economic and trade negotiations and hence, the structure and system of international trade policies will undergo a disruptive change. After the US has formed an entrepreneurial mentality, China has clearly made three points in relations to global governance system, economic, trade and financial mechanism.
First of all, China should make more financial contribution to international organizations to increase its share and say. Secondly, China should send more middle-level personnel to the United Nations and other international organizations. At present, we can see some Chinese working as senior officials at some of the top international organization, such as Yi Xiaozhun, the Deputy Director-General for WTO. However, we need more of them, especially the middle-level personnel. In the past, Indians were benefited from their high level of English proficiency and low cost, but now there are always more Chinese choose to study abroad to make themselves more competitive.
Third, we should introduce China’s rules and solutions. Rather than making disruptive changes, these rules and solutions are all aimed at improving the old rules that can no longer keep with the international economic development. Like a decaying temple, Trump called for demolition, China, however, wants to fix it and make it more gorgeous.
I have to emphasize that the purpose of these actions is to create a common community of shared future for all mankind, rather than focusing on its own development.
CBN: In addition to its support for the global governance (multilateral) system, how should we comprehend the new reform and opening up that will be launched by China this year? In particular, some of the new measures are beyond the expectation of the international community?
Wei Jianguo: This year marks the 40th anniversary of China’s reform and opening up. Some of the policies that the Chinese government is working on will certainly exceed the international expectation.
Firstly, China plans to create the best business environment in the world and attract more foreign capital to China. That means China will promote fair competition for all enterprises. Enterprises established in China, whether state-owned enterprises, private enterprises or foreign enterprises, should be treated equally. They should enjoy the equal rights and opportunity.
Second, China will increase the protection of intellectual property rights. At present, China’s protection of intellectual property rights is not good enough. If China continues to maintain its existing policies, it will seriously affect innovation, especially “the mass entrepreneurship and innovation” program. In the future, we should strengthen IPR protection in accordance with international requirements and establish the best business environment in the world.
Last but not least, we should build a just, open and transparent legal system so that the investors, businesses, consumers and other parties could have a stable expectation of China.
In the recent five years, China has seen a decline in attracting foreign investment. In the field of manufacturing, China had only managed to make some breakthrough in attracting foreign investment to the field of processing trade. Compared with Germany and Japan, China still has a long way to go. China still needs the supply-side reform in improving the efficiency, productivity and profitability of attracting foreign capital.
Lastly, we should explore the establishment of a free trade port, which is vital for establishing the best business environment.
Free Trade Port will be a new playing field of reform and opening up
CBN: How to understand that free trade port is the best way to establish the best business environment in the world. What is the difference between the Free Trade Port(FTP) and Free Trade Zone(FTZ)?
Wei Jianguo: In the past years, CCIEE has completed many researches on the construction of the free trade port.
The number of China’s free trade pilot zones has been gradually expanded from 1 to 11, but they are two different concepts and have different strategic positioning. FTZ can be seen as “experimental field”, conducting exploration and experimentation in specific regions and hopefully, the successful experience can be replicated to various parts of the country. However, the FTP is the new height of liberalization. The exploration of free trade port is vital for creating the best business environment in the next 5 to 10 years and will be the new areas of China’s reform and opening up in the next 20 to 50 years. As the most open area in the world, the FTP requires a series of special arrangement in market accession, financial system, taxation and other aspects.
At the same time, the FTZ focuses on the liberalization of the circulation of goods while the free trade port is a full-scale liberalization that includes the circulation of currency, personnel, information and more importantly, legal and regulatory changes.
The FTZ has made a lot of progress, for example, the current declaration and approval system has been changed to the negative list and after-events management, nonetheless, many areas still need declaration. In contrast, the free trade ports are free to enter without declaring the goods, which has a higher requirement on legislative bodies and government regulators. For example, the monetary circulation involves the entry of foreign-funded banks, the opening up of the RMB exchange rate and the liberalization of capital. Other issues such as tax relief, highly-skilled employees, and the free flow of information also require new institutional arrangements.
The most crucial change comes from the government reform, which requires a government that is more efficient and can provide better services than Singapore, Hong Kong, Rotterdam, and the Netherlands.
CBN: What are the breakthroughs for the new reform and opening up policy?
Wei Jianguo: In summary, there are four areas.
First of all, we should relax the access to the financial markets as soon as possible and increase the reform and opening up in the financial field.
Second, we should take the initiative to actively expand imports and promote the internationalization of the renminbi. For example, China has a big trade surplus with some developing countries and thus, it can decrease the trade surplus by importing rice from neighboring countries such as Cambodia, Vietnam and Laos. Furthermore, China can import seafood such as fish, shrimp, octopus from countries like Canada, and import high-end consumer goods, such as perfumes, clothing and jewelry.
China needs to further reduce its import tariff in some other areas such as the imported cars. The first Import Commodities Fair will be held in Shanghai in November this year and its size may exceed the Canton Fair Exports.
Third, we must strengthen the building of the Belt and Road.
Fourth, we should further open the advanced manufacturing industry and the modern service industry. For example, how to speed up the construction of the Bay Area of ??Guangdong, Hong Kong, Macau and how to allow Hong Kong play a leading role in the service and financial industries. In the field of manufacturing, we should further open the industries of shipping, rail transit, telecommunications and medical equipment. In the service sector, the proportion of foreign equity in healthcare, pension, highly sophisticated instruments and medical services should be increased. These measures of opening up will largely exceed international expectations.