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China’s opening up presents distinct characteristics of the times

Author  :  Zhang Youwen     Source  :    Chinese Social Sciences Today     2017-01-03

Opening up to globalization is critical for a country’s development. Since China initiated the reform and opening up policy, it has grasped the globalization trend and has actively integrated into the world economy by expanding foreign trade and exchanges based on its own situation. China’s opening up has a clear direction and harbors distinct characteristics of the times.

Globalization has deepened and cross-border flows of production increased after the end of World War II. In particular, technology, brands, patent, management skills and other advanced factors flowed to developing countries along with capital from developed ones. Combined with local labor, land and other resources, they together promoted transnational production.

At the initial stage of the reform and opening up, China followed the globalization trend, vigorously developing its export trade. At that time, China had a large amount of labor. But due to the low quality and grade of the products, it was hard to enter the international market. In order to make breakthroughs and open up the international market, China endeavored to attract foreign capital. Foreign capital brought with it technology, brands and other advanced production factors, which accelerated the development of China’s processing trade which in turn drove the rapid development of exports.

This model of development, referred to henceforth as the “factor cooperation” model, reflected the features of the times and suited the stage of development at that time. Meanwhile, market-oriented reform of the economic system made it easy for the flow of production factors and changed the situation regarding efficiency and idle capacity. As a result, labor flowed from rural areas to cities and also from central and western areas to eastern areas. Other resources and factors flowed from industries with low productivity to those with high productivity.

The aggregation of production factors promoted China’s rapid growth. Two advantages in China’s system further strengthened this kind of aggregation from two aspects. The first is that China established many special economic zones, development zones, bonded areas, export processing zones, and high technology zones, and implemented supporting measures as well as preferential policies, which created favorable conditions for investment and business for both domestic and foreign enterprises. The second advantage is that local governments made policies to attract projects and support enterprises, creating favorable environments for trade and business.

However, a country’s opening up policy should upgrade alongside its development level advancing. The factor cooperation model helped China to join the international division of labor. But because it was located at the middle and low end of the industrial and value chains, China could only obtain low profits. As China became the world’s second biggest economy, largest goods trader, and the country with second largest outward foreign direct investment, it needed a high-level opening up economy.

To answer the call of the times, China implemented the innovation-driven strategy for development and improved the structure of factors to enhance China’s status in global industrial and value chains. It also promoted the construction of pilot free trade areas to initiate another round of opening up to boost reform and increase China’s advantages in engaging in economic globalization.

Nowadays, China’s opening up has changed. It is no longer just about introducing foreign investment; it instead lays equal emphasis on both bringing in and going out. Overseas mergers and acquisitions are good for Chinese enterprises to make use of international high-level production factors and also help promote the integration of Chinese manufacturing with international brands and marketing networks, while upgrading manufacturing to boost exports of domestic products.

The “Belt and Road” strategy is an important symbol of China for enhancing its opening up to the world. It is also a public good that China is offering to the world, which will bring shared development opportunities. Within the framework, Chinese enterprises are going out through connectivity in policies, facilities, trade, and capital as well as between people with countries along the route to promote mutually beneficial cooperation.


Zhang Youwen is vice president of the China Society of World Economics and a research fellow from the Institute of World Economy, at the Shanghai Academy of Social Sciences.

Editor: Yu Hui

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