The new face of opening-up

China embarked on the course of reform and opening-up in 1978. In the initial stages of opening-up, China's foreign trade was small, although the overseas market was still open and vast enough to accommodate the growth of its foreign trade. Except for the companies set up in Hong Kong and Macao to attract foreign investment and establish overseas contacts, the overseas direct investment on the Chinese mainland was not large enough to demand diplomatic efforts to persuade its trading partners to open their markets wider to China-made products and Chinese investment.

In terms of "bringing-in", China had only a limited volume of import and foreign capital inflow, and thus the side effects of opening up its commodity and investment markets were not that visible - or were simply downplayed because of the given advantages. After all, what China needed most was foreign investment to fill the gap in capital and foreign exchange reserves, as well as advanced technologies and equipment to upgrade the domestic industrial system. In the interim period, it needed to import some newly upgraded goods to prepare for the potential explosion in domestic consumption in the future.

However, after more than 30 years of reform and opening-up, China has accumulated enough capital to meet its development needs, and the gap in its foreign exchange reserves has become history. In particular, in the 10-plus years since its entry into the World Trade Organization, China's economy has become highly dependent on trade; China is even said to be the largest beneficiary of globalization since the 1990s.

The side effects of unilaterally opening up China's commodity and investment markets are getting obvious, with the marginal gains from the opening-up drive sloping downward while the marginal costs keep rising. China's economic interests abroad have increased manyfold, with massive investment in a wide range of areas, including raw materials and energy. But many of its trading partners are now resorting to trade protectionism and imposing a ceiling on the entry of China-made products and Chinese investment into their markets.

If China intends to maintain its competitive edge across the world, it is advised not to open its markets wider to the outside world without asking its trading partners to open up their procurement, sales and investment sectors to China. In this sense, the new wording of "building an open economy", indicative of China's consistent pledge to open up its market to the outside world and its goal of getting wider access to the global market, reflects initiatives that may lead to substantial changes.

The author is a researcher at the International Trade and Economic Cooperation Institute, affiliated to the Ministry of Commerce.

(China Daily 11/28/2013 page11)