The Port of Rizhao in Shandong Province, Jan. 30 Photo: CFP

The report to the 20th CPC National Congress stated that “we must fully and faithfully apply the new development philosophy on all fronts, continue reforms to develop the socialist market economy, promote high-standard opening up, and accelerate efforts to foster a new pattern of development that is focused on the domestic economy and features positive interplay between domestic and international economic flows.” Based on the economic characteristics of the new development stage, exploring China’s high-standard integration into the global economic flow  with the theme of “high-standard opening up” is of great significance.

Model in transition

The current international economic circulation system can be referred to as the core-periphery system. For the past 40 years, China has been one of the most significant peripheral countries in this system.

At present, China has entered a new development phase. First, in terms of economic scale, China has become a powerhouse. From the perspective of balanced development, a reasonable export growth rate should be commensurate with the growth rate of the exporting target country’s economy (or market scale). Second, the comparative advantage of labor resources has become less obvious. Third, the supply-side constraints on economic development have become increasingly significant, and therefore demand-side contributions to economic growth should receive more attention. Technological improvements will become the major driving force for economic growth, though the role of consumption in the domestic market will become increasingly prominent. Fourth, Chinese foreign exchange reserves have been adjusted.   

Dual circulation 

With China entering the new development phase, the industrial transformation and upgrading propelled by technological improvements has become the main driving force of China’s constant economic growth. In a core-periphery system, China needs to shift to the core area. However, as a major developing country, new challenges are certain to accompany China’s industrial transformation and upgrading.

The new development pattern has become the guidance for China’s transition in its opening up strategy. The external environment has undergone profound and complex changes. In the context of a continuous global economic downturn, a shrinking global market and rising protectionism, China has actively fostered a new pattern of development that is focused on the domestic economy and features positive interplay between domestic and international economic flows.

China’s fostering of the new development pattern is based on the following facts: first, China has a very large population, forming a super large-scale domestic market. Second, China has the most complete industrial system of the largest scale in the world. 

Simultaneously, China’s new development pattern by no means suggests a closed domestic flow; rather, it is an open interplay between domestic and international economic flows. In the new development phase, China’s opening up should represent a higher standard opening up. The successful implementation of the Belt and Road Initiative (BRI), a new international economic circulation system advocated by China, is different from the core-periphery system. Countries along the BRI that have a natural complementary relationship with China in terms of productivity and natural resources will be cooperative partners in China’s opening up, and will accordingly achieve new breakthroughs.

Promoting the BRI

The BRI has already achieved significant results as a major innovation in China’s opening up, but how can it be better promoted in the new development phase? 

First, the expansion of imports should be actively pursued. China’s imports expansion contributes to the common development of the developing countries. Second, the internationalization of the RMB should be promoted. Third, China’s outbound investment should be globally oriented. Promoting the high quality development of the BRI requires countries along the routes to improve technologically. These new incremental infrastructure demands have become major outbound investment directions for Chinese enterprises. Fourth, the BRI development should be supported by supply-side structural reform. Technological improvements should be propelled by independent R&D, and high-end products should be constantly provided for the BRI. 

An open economic circulation system will provide more choices for China and the world. Peace and prosperity should be fostered with common development.

Gong gang is dean of the School of Economics at Yunnan University of Finance and Economics.

Edited by ZHAO YUAN