The transformation and upgrading of China’s export industry has currently entered a key stage. China’s open foreign trade, especially the openness of import trade, has accelerated the transformation and upgrading of the export industry.

When export products from enterprises differ greatly in quality, the reduction of import tariffs under free trade policies will encourage enterprises to improve the quality and price of export products. When export products from enterprises are of similar quality, trade liberalization will have little impact on their quality, while the export price will fall due to reductions in the cost of intermediate input products.

In terms of export industrial transformation and upgrading, added value should be emphasized while export price and quality should be promoted to raise the industrial level and improve the industrial chain. In regard to this transformation and upgrading, China needs to open up further, formulate rational free trade strategies and build its trading power step by step.

First of all, the further opening up of import trade should become a focus of export transformation and upgrading policies. When selecting a policy to boost China’s export industrial transformation and upgrading, current emphasis has been put on industrial promotion, supportive policy and the openness of export markets while there is relatively insufficient understanding of the trade openness of imported intermediate goods.

Considering that import trade openness can encourage greater quality of export products, China should further open import trade markets and reduce import tariffs as much as possible. This will be beneficial to the transformation and upgrading of China’s export industry.

Then, China’s free trade zone (FTZ) networks should be built. China has established 14 free trade agreements with 22 countries and regions, including ASEAN, Chile, Switzerland, New Zealand, South Korea and Australia while negotiating the Regional Comprehensive Economic Partnership and the China-Japan-Korea Free Trade Area.

The 13th Five-Year Plan (2016-20) proposed accelerating the implementation of FTZ strategies, pushing forward the construction of an Asia-Pacific FTZ and building globally oriented high-standard FTZ networks. FTZ strategies will help promote liberalization of import and export trade, enhancing the transformation and upgrading of export industry.

In addition, export transformation and upgrading can be boosted  by the construction of the “Belt and Road” initiative. Based on the existing bilateral and multilateral mechanisms of China and relevant countries, the Silk Road Economic Belt and the 21st Century Maritime Silk Road aim to build new platforms of regional cooperation with countries along the route.

The “Belt and Road” construction not only facilitates trade between China and countries along the route but also encourages further openness and integration of trade—especially the liberalization of import trade—to enhance the transformation and upgrading of export industry.

It is also necessary to adopt different development strategies in terms of the industrial policy of opening up. Industries that have much room for improvement in terms of quality, such as high-tech industry, low-level industries and industries that are far behind foreign competitors technologically, should be pushed to open to foster the liberalization of imported intermediate goods and accelerate the realization of industrial upgrading.

For industries with little room to improve in quality, the liberalization of imported intermediate goods will have minimal impact on industrial quality. Ways of promoting their openness should be different from those mentioned.

 

Li Yao is from the Business School at the Hong Kong University of Science and Technology; Fan Haichao is from the School of International Business Administration at Shanghai University of Finance and Economics; Li Chunding is from the Postdoctoral Research Station at the Central University of Finance and Economics.