The “Two Sessions,” the annual gatherings of the Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC), have just wrapped up. Li Keqiang, China’s premier, delivered the Report on the Work of the Government, which read, “In face of new downturn pressure, we will give higher priority to stabilizing economic growth. We should make holistic efforts to maintain stable growth, make structural adjustments and advance reform. We should transform the growth model and reject inefficient development.” The statement is clear. To pursue progress while ensuring stability, the practical macro-control policy does matter. However, in the final analysis, we should continue to deepen reform, transform the growth model and vitalize micro-entities. Meanwhile, we should pursue higher-level and wider opening up and integrate into the international market in a more active and deep manner, with the domestic market as the mainstay.
This year’s work report includes a big part on deeper reform and wider opening up. In terms of reform, the work report states, “We will unswervingly deepen reform and further stimulate the market vitality and the endogenous impetus of development. We should handle the relations between the government and the market properly, letting the market play a decisive role in resource allocation. We should also ensure the government plays a more effective role to eventually boost the development of a socialist market economy.”
It also raises a number of specific requirements on areas such as accelerating the transformation of government functions, developing diverse forms of ownership and promoting reforms of the fiscal, taxation, and financial systems. While in terms of opening up, the report pointed out that “We should pursue higher-standard opening up and promoting stable growth of foreign trade and investment. We will make full use of international and domestic markets and resources, continue to expand international economic cooperation and trade, and push for in-depth reform and high-quality development by promoting high-quality opening up.” The report also made arrangements for stabilizing foreign trade, making greater use of foreign investment, promoting high-quality cooperation under the Belt and Road Initiative and deepening multilateral and bilateral economic and trade cooperation. These statements address many of the concerns at home and abroad and are expected to be implemented as soon as possible, which will give a strong impetus to the stability and development of the Chinese economy. At the press conference after the closing of the Two Sessions, Premier Li Keqiang expounded on the key tasks of firmly promoting reform in China, saying “No matter how the international environment may change, China will stick to its course of wider openness, just as the course of the Yangtze and Yellow Rivers cannot be reversed,” which should be seen as great words of encouragement.
There are profound reasons for the report’s emphasis on reform and opening up. It has been more than two years since the outbreak of Covid-19, which has had a huge impact on the global economy. China’s economy has been highly resilient and still has potential and ample space to grow. On top of its 2.3% GDP growth in 2020, China’s GDP growth in 2021 grew by 8.1% to reach 114 trillion yuan ($18 trillion). China has not only maintained the normal operation of the economy and society, but has also leveraged its comparative advantages in epidemic prevention and control to timely fill in the gap in the global industrial chain caused by Covid-19. This, which has inappropriately been labeled the “epidemic dividend,” has helped China consolidate and increase its share in global trade.
It should be noted that China has not just simply been endowed with this resilience, potential and space to grow. Instead, it relies on many years’ efforts on reform and opening up. Over the past four decades, China has taken full advantage of the international and domestic markets and resources, especially the abundant labor resources in China and the available capital, advanced technology and management experience of foreign countries. China has actively taken part in labor division and cooperation of the global industrial chain. The market economy has gradually developed, the division of labor has become more refined, the industrial sectors have become more complete, and the total factor productivity has increased, which have all contributed to the present scale effect and China’s more important role in the global supply chain. Therefore, there are two keys to reform and opening up: opening up to the outside world and invigorating the domestic economy.
At present, China is facing plenty of difficulties and challenges in economic development, the most notable being the pressure of contracting demand, supply shocks and weakening expectations, as well as occasional local Covid-19 outbreaks. Globally, the pandemic is still ongoing. The events of the international geopolitical crisis such as the continued escalation of the Russian-Ukrainian War coupled with approaching interest rate hikes in Europe and the United States. The recovery of the world economy lacks drive and commodity prices remain high and prone to fluctuation. All of this is making our external environment increasingly volatile, grave and uncertain. What should China do? China should, undoubtedly, continue to deepen reform and expand opening up, just as it has always done.
Reform and opening up is a crucial choice that China has made regarding its destiny in modern times, testified by the rapid development of its economy and society in the past forty years. Forty years ago, the Chinese leaders of the time seized up the situation and took the correct decision to launch the reform and opening up, by focusing on the two themes of the time — peace and development. Thirty years ago, amidst a turbulent global environment, China made developing a socialist market economy the goal of its economic system reform. Twenty years ago, China joined the WTO. At present, China has grown to become the second-largest economy in the world, while greatly enhancing its comprehensive national strength and international influence. It can be said that China has made the right choice at each critical point in history. Therefore, the hard-won achievements of reform and opening up should be cherished by the whole nation.
Correct choices are highly dependent on the foresight of decision-makers, as well as the conditions of a nation’s history, geography, culture and population. Whether a choice is correct or not, it not only influences the development strategies but also the explicit and implicit systems, which can be seen clearly from the subsequent rise and fall of many countries that transitioned from a planned economy to a market economy during the same period. Some countries, enjoying particularly favorable natural conditions and setting out from a much higher starting point than China, are now experiencing stagnant growth, becoming social economies lacking vitality. What’s more, their industrial upgrading is seriously lagging behind as if hit by the “resource curse.” In addition, many of them have become isolated. In fact, it is all interrelated. Good systems are based on reform and opening up that gradually integrate proven international practices. A country eager for development must deepen its reform and strive to seek and maintain a good international environment.
It can be expected that the international geopolitical landscape will change drastically in the future. China’s good image as a responsible power in the international community will help it gain greater space and more favorable conditions for its development. Diplomacy is a continuation of domestic affairs. China should “do its own things well,” the most important of which is to deepen reform and expand opening up. The “stability on six key fronts,” the “security in six key areas” and the reform and opening up proposed in this year’s government work report are extremely demanding and need to be implemented with powerful actions.
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