Chi Fulin

29 October 2022

Continuing to deepen reform and opening-up, and giving top priority to development! This is an important signal the 20th CPC National Congress has sent out to the world that China is committed to reform and development.

The world in the next 10 years will be in a critical period of accelerated evolution of changes unseen in a century, and will be at a new crossroads where globalization is headed. In the face of new situations and new challenges, the 20th National Congress of the Communist Party of China made major strategic planning: to resolutely follow the Chinese path towards modernization; resolutely build a high-level socialist market economic system; resolutely advance high-level opening-up; and resolutely promote high-quality development. This is a major choice in line with the trend of the times, which will lay a solid foundation, and provide an important guarantee, for building China into a great modern socialist country in all respects, thus making new and important contributions to the rebalancing of the global economy.

1. Deepening reform will ensure the biggest prospect of development. And we should enhance the expectation for high-quality development by building a high-level socialist market economic system.

1.1 Enhancing all parties’ expectations of, and confidence in development by pragmatic actions of deepening market-oriented reforms. China is a big developing country still in a critical period of economic transition and economic development. Unleashing its economic growth potential requires market vitality and advancing high-quality development by building a high-level socialist market economic system, which is major goal of deepening reform and opening-up. At present, under the influence and impact of multiple factors, weaker expectation and lack of vitality have become prominent problems that have to be solved in our country’s economic and social development.

The vivid practice of reform and opening-up over the past four decades has fully proved that positive expectation and confidence in development mainly comes from reform expectation. When market reform is firm and effective, market and economic vitality will be strong, and confidence in development will be positive. Since the 3rd Plenary Session of the 18th CPC Central Committee, "China has been comprehensively deepening reform with great political courage," giving rein to the decisive role of the market in resource allocation and enabling the government to better play its role. This has boosted domestic and international confidence in China's development and brought along relatively rapid economic growth. At present, to stabilize and enhance the development expectations of all parties, especially that of enterprises, structural policies need to be adjusted and, more importantly, and new breakthroughs have to be made in comprehensively deepening reform and opening-up. We must adhere, in accordance with the requirements of the Party's 20th National Congress, to the direction of reform for socialist market economy. We must speed up the process of deepening market-oriented reform of production factors so as to lay a solid foundation for development, enhancing confidence in development. and we must continue to enable “the market to play the decisive role in resource allocation" with greater determination.

1.2 Further stimulating the vitality of market entities by deepening market-oriented reform. China's economic development has huge potential. In terms of demand potential, China is the world's largest market with the greatest potential, which has 1.4 billion citizens and more than 400 million middle-incomer. Looking from its supply capacity, China has, at present, registered 160 million market players. Currently a major problem is that enterprises’ expectation is weak, especially that of micro, small and medium-sized enterprises, and consumer expectation is unstable. All this has constrained the release of market potential and vitality.

Since the start of reform and opening-up, China’s economy has been continuously growing rapidly. The key lies in invigorating the market and businesses to stimulate social vitality and economic operating efficiency. Practice has proved time and again that effectively stimulating the internal motivation of market players and fully unleashing their huge potential are important factors for rapid economic growth. The report to the 20th National Congress of the Communist Party of China has once again made clear that we must "uphold and improve the basic socialist economic system, unwaveringly consolidate and develop the public sector, and unwaveringly encourage, support and guide the development of the non-public sector". It calls to "optimize the development environment for private enterprises, protect their property rights and entrepreneurs' rights and interests according to law to support private sector to develop and grow stronger". It also calls to "promote entrepreneurial spirit and accelerate the construction of world-class enterprises", etc. To implement the principles of the Party's 20th National Congress, we must protect the property rights of private enterprises and entrepreneurs’ rights and interests in accordance with the requirements of marketization, law-based governance and internationalization, encourage emergence of a new generation of entrepreneurs, make 160 million market players willing to do business and have the courage to invest, and encourage entrepreneurs to be motivated, diligent, and innovative.

3. Optimizing the development environment with a focus on properly handling the relationship between the government and the market. Objectively speaking, the current weak market expectation and lack of vitality are not only the result of influence of external factors such as the pandemic, but also a result of poor implementation of reform measures and improper implementation of policies.

In accordance with the requirements of the Party's 20th National Congress, we should introduce and implement targeted reform measures to further optimize the relationship between the government and the market. Particularly, we should prevent the "short-termism of long-term strategies" and "fallacy of synthesis". And we further standardize and optimize the government's regulation and control over economic operations. At the same time, we should strengthen the legal guarantee for the development of private economy, create a fair market environment by breaking administrative monopoly, optimize the market order of fair competition, and establish a standard and scientific market supervision system. We should strictly implement stipulations such as "resolutely prevent simplification, one-size-fits-all and adding more measures at every lower level for epidemic prevention and control" to ensure scientific and precise prevention and control, thus creating a stable and good development environment

To implement the spirit of the Party's 20th National Congress, breakthroughs should be made in market-oriented reform in order to form a momentum of stable and sound economic development. This will not only serve as an important foundation for China's high-quality development, but also provide important impetus to the world economy confronted with challenge of recession.

2. Structural transformation has huge potential for development. We need to deepen structural reform with structural transformation as the main goal so as to take the initiative in development

2.1 The structural transformation in the new stage contains great potential for development. Modernization is a historical process based on mode of production and way of life of industrialization. "Chinese path to modernization" not only has the common characteristics of the modernization of all countries, but also has Chinese characteristics based on its own national conditions. After more than 40 years of development since the start of reform and opening-up, our country now has entered the late industrialization stage as a whole. In this period, our country’s economic transformation inevitably has its own outstanding characteristics. On the one hand, the economic transformation in the new stage still contains huge potential for development, which gives the greatest confidence in achieving relatively fast economic growth in the next 10-20 years. On the other hand, important changes are taking place in the consumption structure of China's more than 1.4 billion people, creating internal driving forces for new development paradigm and high-quality development.

2.2 Deepening structural reform with structural transformation as the main goal. China is a big country in economic transition. Structural transformation is not only a development issue, but also a reform issue. Practice has proved that the process of China's industrialization is not only a process of continuous adjustment and optimization of its economic structure, but also a process of gradually deepening of reform and continuous consummation of its institutional arrangement. Looking at the current situation, advancing structural transformation requires to constantly crack structural contradictions between policy and system, system and system, short and medium term and so on. It also calls for removing structural contradictions between demand and supply, between industry and services, and between economic growth and social development.

At present, our country’s structural transformation is faced with many challenges of structural contradictions and problems. To solve these problems need not only adjustment of structural policies, but also breakthroughs in structural reform. On the one hand, structural policy adjustments should be advanced with the main goal of stabilizing economic growth by adopting more flexible policies for economic transformation and social development. On the other hand, structural reforms in line with structural transformation should be advanced to create powerful driving forces for medium - and long-term economic growth. To adapt to the trend of transforming the industrial structure and consumption structure, we should focus on the service sector to break market and administrative monopolies and promote deep integration of development of modern services with advanced manufacturing to realize a virtuous circle of consumption and supply. To adapt to the trend of upgrading the structure of science and technology, we need to deepen the reform of the science and education system and the personnel management system, improve the system and mechanisms for enterprises to invest in basic research and development in order to significantly enhance the international competitiveness of "hard science and technology". To adapt to the transformation of urban-rural structure, we should advance system reform for two-way free flow of public resources and production factors, and improve the investment system of urban and rural infrastructure, and so on and so forth.

2.3 The structural transformation of a country with a population of 1.4 billion is not only a major opportunity for China's development, but also a major boon to world economic growth. Different stages of development require different economic structures. The structural transformation in our country will be through the whole process of modernization, which will continuously unleash great growth potential. In the next 10 to 15 years, if structural reforms for the purpose of facilitating structural transformation are firmly advanced, China's economy will have favorable conditions and possibility to grow at an average annual rate of around 5%.

The structural transformation in our country will contribute huge new demand to the market in the world. At the same time, it will make contributions to a more stable, diverse, balanced and inclusive world economy.

CIRD’s research team began to pay attention to structural problems in the process of economic and social development relatively early. For example, in 2000, CIRD put forward the "judgment of, and suggestions on, shifting the focus from basic reforms to structural reform". In 2016, it put forward "structural reforms with economic transformation and upgrading as the main goal" in its book entitled "Winning at the Turning Point: The General Trend of China's Economic Transformation". In 2022, CIRD set up a team to conduct thematic research on structural transformation and has produced a 2022 annual reform research report entitled "Structural Transformation -- Crossing the Threshold of High-quality Development". This report has been published recently by China Workers Publishing House.

3. Expanding areas of opening-up is an important condition for development. We should coordinate development and security by advancing high-level opening-up

3.1 Promoting high-quality development through high-level opening-up. The key to coordinating development and security lies in advancing high-level opening-up. For example, we need to take the initiative in importing high-quality goods and services from around the world to gain the initiative in unleashing domestic demand potential. We need to give more attention to opening-up behind the border and win the initiative in forcing on deep-level market-oriented reform with high-level opening-up to promote smooth connectivity between domestic and international markets. And it is necessary for China to more deeply participate in global industrial division of labor and cooperation, form a larger scope, higher-level safe development paradigm featuring “a bit of me in you and a bit of you in me”, further smoothen the connection between domestic and international circulations, and strengthen weak links in industrial, supply and innovation chains.

Market economy is an open economy. Allocating assets globally not only optimizes resource allocation, but also promotes the development of global industries. For example, as a technology-intensive industry, a finished chip requires thousands of processes and more than 70 cross-border transactions. The high degree of internationalization of the chip industry drives the high degree of internationalization of related enterprises. The attempt of a major power to create "chip infarction" and to contain China with chips for the purpose of maintaining its hegemony is not only hard to change the general trend of development of highly internationalized chip industry, but also unlikely to bring any benefits to the world economy which is on the brink of recession. China has taken the initiative to open its industries with a higher and higher degree. This is a process of "continuously making the global economic pie bigger", which certainly will not "crowd out industries of other countries", but on the contrary, will help promote technological cooperation and advance technological progress, thus creating greater space for global industrial cooperation.

3.2 Steadily expanding institutional opening-up with a focus on trade in services. At present, service trade has become the focus of global free trade and the focus of our country’s efforts to advance high-quality development. The key to promoting high-level opening-up with a focus on trade in services lies in implementing the plan of "steadily expanding institutional opening-up of rules, regulations, management and standards" put forward in the report to the Party's 20th National Congress. For example, we should (1) accelerate the process of opening-up service sectors such as health, education, information and culture both internally and towards the outside world by fully implementing pre-establishment and post-establishment national treatment; (2) proactively align with market rules, talent standards and development regulations of international advanced service industries, and innovate institutions and mechanisms for free and convenient trade in services; (3) promote the transformation and upgrading of pilot free trade zones with a focus on trade in services, accelerate the integration of trade in services among Guangdong, Hong Kong and Macao, and forge a high ground for opening-up trade in services; (4) significantly improve the international competitiveness of our country's trade in producer services such as intellectual property rights and finance; and (5) actively participate in negotiations on global rules for service and digital trade rules to promote bilateral and multilateral cooperation in trade in services.

3.3 Upholding a diversified and stable international economic structure through high-level opening-up. In the face of challenges from multiple global crises on top of each other, China is firmly advancing high-level opening-up. This is not only a practical choice based on its own need to coordinate development and security, but also an important measure to actively share with the rest of the world China's big market. It is not only conducive to the building of a development paradigm with domestic and international circulations reenforcing each other, but also will help create favorable conditions for global economic growth and for rebalancing the world economy.

At present, China is taking firm steps to advance the RCEP process, which has taken effect this year. The RCEP covers China and ASEAN, two emerging economies with the biggest market dynamism and development potentials. Fully releasing RCEP’s dividends will not only have a major impact on regional economic integration and growth in East Asia, but also make important contributions to world economic recovery and global economic rebalancing. To implement the RCEP in a high quality, we should coordinate the layout of opening-up internally and towards the outside world. For example, we should strengthen China-ASEAN comprehensive strategic partnership based on RCEP rules and build Hainan Free Trade Port into an important hub for China-ASEAN comprehensive strategic cooperation.

On September 23 this year, an RCEP Think Tank Network jointly initiated by China Institute for Reform and Development and the East Asian Institute of the National University of Singapore, was officially launched together by 13 think tanks from 9 RCEP member countries. Here, we welcome more think tanks from China and other RCEP member countries to join us to jointly build up this open and shared cooperation network, and to provide intellectual support for the RCEP process.

"Empty talk harms the country, while hard work makes it thrive". At present, the complexity of solving problems and the enormity of continuing to advance reform and opening-up are obviously much larger, which not only requires forward-looking thinking and overall planning, and more importantly, energetic efforts to ensure that major reform measures are effectively implemented.