From Free Trade Zone to The Belt and Road Initiative,How does China Open its Economy?

Since the 18th National Congress of the CPC in 2012, the Central Committee of the Party with Secretary General Xi Jinping as core has made great achievements in deepening the comprehensive reforms and building up a high standard open economy. Its achievements in establishing free trade zones, the Belt and Road Initiative, and proactive participation in global economic governance have built a sound image of China under reform and opening up, and have expanded China’s international influence, which allows China to play a more active role in global economic governance.

Free Trade Zones: from Shanghai to the Whole Nation — a more fruitful implementation

China is ever more open to the world.

With the aim of implementing a high-level new opening up mechanism, the central government decided in September, 2014 to set up a pilot free trade zone in Shanghai, focused on relaxing access to foreign investment and implementing the “negative list” management model. The authorities also opened up certain sectors of service industry which had been previously restricted, and devised a series of new management models in financial reform and in reducing the level of government intervention.

Based on the experience of the Shanghai pilot zone, the government quickly promoted the free trade zone model to 3 provinces and cities – Guangzhou, Tianjin and Fujian – and at the same time expanded the coverage of pilot projects in opening up services in Pudong District in Shanghai.

On March 30, 2017, the State Council issued the list of another 7 free trade pilot zones, namely: Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan and Shaanxi.

There are now 11 pilot free trade zones covering the eastern, central and western parts of China, giving particular focus to reform and opening up in the central and western regions.

A key element of the pilot free trade zones is the negative list. Exclusions are gradually being reduced – from the original 195 subjects to 139, then to 95. This is a clear demonstration of China’s determination to expand the scope of opening up.

The spread of free trade zones has made a great contribution to reform and opening up. The reform of the business registration process in particular plays an active role in promoting the delegation of power, and in improving the government management and public service. The authorities have also derived beneficial experience from the piloting of opening up financial and capital accounts in free trade zones, which has laid a sound foundation for the roll-out of pre-establishment national treatment (PENT) and the negative list management model. The rapid rise in registrations of foreign companies also provides a new growth driver for China’s economic development.

This year is the 4th anniversary of the establishment of the Shanghai pilot free trade zone. During these 4 years, the area of the zone has expanded from 28 square kilometers to 120.7 square kilometers. The free trade zone has led the drive for reform by conducting trials and pilot projects in 7 major fields – freedom of investment, trade facilitation, financial opening up and innovation, regulation in the course of opening and afterwards, business environment optimization, promoting technology innovation, and supporting national strategies. More than 100 innovative rules and regulations have been duplicated and promoted throughout the nation. The contribution of imported foreign investment in the first half year of 2017 exceeded 90% of the Pudong district and 40% of the whole Shanghai.

The Belt and Road Initiative: Harvest Trade and Friendship along the Road

The Belt and Road Initiative was originally proposed by President Xi Jinping in 2013. After more than 3 years of experience, it has yielded fruitful results in 5 areas.

● Universal Praise

The Belt and Road Initiative has gained the universal approval and support of countries along the Silk Road, and a positive response from more than 100 countries all around the world. The Belt and Road Forum for International Cooperation held in Beijing last May was the most convincing evidence of this.

● Improvement of the Infrastructure along the Road

Infrastructure construction aimed at boosting connectivity is already under way. The establishment of 6 economic corridors is proceeding smoothly, and China’s high-speed rail is demonstrating its strength on the international stage and attracting international attention.

● Growth in Trade and Investment

The accumulated value of trade between China and participated countries along the route reached 511.5 billion USD in the first half year of 2017, a year-on-year growth of 11.4% and represented 27% of China’s total trade value. The accumulated investment of China’s companies in countries along the route was 6.6 billion USD, and the amount of new contracted projects was 71.4 billion USD, with a year-on-year growth of 38.8%. By the end of June 2017, chinese companies had built 56 overseas economic trade and cooperative zones in 20 participating countries. The related investment has exceeded 18.5 billion USD, and they have created 1.1 billion USD revenue and 180,000 jobs for the host countries. Vital projects such as the China-Laos railway and the Karachi highway have been completed. All those facts have proved the powerful growth potential and bright prospects of trade investment and development between China and other participants of the Belt and Road Initiative.

● Enhanced Financial Cooperation

With the establishment of the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund, advocated by China, the Belt and Road can obtain support from different financial resources. Financial institutions are proactively engaging in financing and offering loans for the Belt and Road projects; AIIB and the Silk Road Fund are also building active connections with World Bank, Asian Development Bank and other international financial institutions to win their participation in such projects.

● Active People-to-People Exchanges

Participating countries are increasingly active in education and cultural exchanges. A number of educational institutions, experts and academics have visited participating countries several times, on the one hand promoting the active role of the Initiative, on the other hand exploring and discussing possible forms of unofficial cooperation, such as academic exchanges, cooperation between schools and universities, and exchanges between cultural groups.

Experience is showing that China’s Belt and Road Initiative is now gaining worldwide recognition. China’s new concept of pursuing mutual benefit, win-win results, inclusiveness and development is gradually winning over people’s hearts, and China’s international influence is growing too.

Global Economic Governance: Pursuing Mutual Benefits, Win-Win Results, Inclusiveness and Development.

Since the opening of the 18th National Congress of the CPC, China has been playing an active role in major international affairs and global multilateralism.

Against the backdrop of the vulnerable recovery in the world economy and a growing trend of trade protectionism, China has successfully hosted the Hangzhou G20 Summit, the Belt and Road Forum for International Cooperation, and the Xiamen BRICS Summit. It has also participated in the APEC Summit held in Argentina and the G20 Summit held in Germany. During these summits, China highlighted the concept of pursuing mutual benefit, win-win results, inclusiveness and development. It has won respect and support from other participants, and the initiative of improving global governance has also gained a positive response.

In his speech at the annual meeting of the World Economic Forum in Switzerland in January 2017, president Xi Jinping addressed problems and conflicts in economic globalization, and pointed out that China will continue to support the multilateral trade system, fight against trade protectionism, and play a positive role in global governance.

 

(By Huo Jianguo, Vice-Chariman of China Society for World Trade Organization Studies)