Opening-up continues apace

Opening-up is China's basic national policy and a distinctive feature of Chinese-style modernization. The 2018 Central Economic Work Conference first proposed the transition of opening-up from the flow of commodities and production factors to the change of rules and other systems. Since then, China has aligned its opening-up framework with high-standard international trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement.

At the just-concluded third plenary session of the 20th Central Committee of the Communist Party of China, the commitment to steadily expanding institutional opening-up was reaffirmed with new concepts.

First, the plenum called for harmonizing rules, regulations, management and standards relating to property rights protection, industrial subsidies, labor protection and other areas, to create a transparent, stable and predictable institutional environment. This demonstrates China's strong determination to align with high-standard international trade rules.

Second, it emphasized on seizing the initiative to unilaterally open up to the least developed countries. In addition to opening China's commodity, service and capital markets, it also proposed an orderly opening of the labor market to the outside world. This shows that China does not demand reciprocal opening, which highlights its confidence in the opening-up policy.

Third, it stressed the importance of safeguarding the multilateral trading system centered around the World Trade Organization, actively participating in the reform of global economic governance, and providing more global public goods. It also committed to expanding the globally-oriented network of high-standard free trade areas, establishing compliance mechanisms that are coordinated with prevailing international rules, and optimizing the environment for opening-up and cooperation. This indicates China's willingness to promote inclusive economic globalization by providing public goods.

From pilots and tests to expansions and upgrades, China's institutional opening-up has achieved successes in recent years.

First, pilot free trade zones have flourished. Between September 2013 and November last year, a total of 22 FTZs were established, which carried out over 3,400 pilot reforms, more than 1,700 institutional innovations and 278 innovations nationwide.

Second, the business environment has significantly improved. From 2015 to 2020, China's global ranking in business environment rose from 90th to 32nd, with continuous improvements in the ease of starting a business, obtaining construction permits, getting electricity, registering property and obtaining credit.

Third, restrictions on foreign direct investment have been reduced. From 2015 to 2020, China's FDI restrictiveness index dropped from 0.395 to 0.214. Restrictions on market access, equity, and personnel have been considerably relaxed, and the negative list for foreign investment access has been further shortened.

Fourth, the service sector has been opened in an orderly manner. From 2018 to 2023, China's service trade restrictiveness index for 18 sectors, including courier and financial services, has dropped, thanks to reduced foreign investment access restrictions and other discriminatory barriers, as well as increased regulatory transparency.

In the next five years, China's institutional opening-up is expected to expand steadily.

First, the institutional opening-up in FTZs will be promoted on a larger scale, in a broader range of areas and at deeper levels. FTZs have already introduced the one-stop service system, free trade accounts and negative lists. The number of items on the negative list for investment access have been reduced from 190 to 27, with zero items in manufacturing and much relaxed access in the service sector.

FTZs will fully align with international high-standard trade rules, with harmonized rules in opening-up the service sector, facilitating the flow of commodities, labor protection, government procurement, e-commerce, industrial subsidies, environmental standards, intellectual property protection and post-border management.

In December 2023, the State Council issued the overall plan for comprehensively connecting with international high-standard economic and trade rules and promoting the high-level institutional opening-up of the China (Shanghai) Pilot Free Trade Zone, which set out 80 measures across seven areas, including expanding opening in the service trade.

Second, the business environment will become more market-oriented, law-based, and aligned with international rules. Efforts will be made to steadily align with international high-standard trade rules in areas such as intellectual property and competitive neutrality, establishing a regulatory and market system in line with international standards to reduce institutional transaction costs for the allocation of production factors.

Paying taxes will be made easier by optimizing processes and reducing time and cost. Trading across borders will be facilitated by further cutting the cost and time to import and export. It will be less difficult for enterprises, especially private and foreign-funded ones, to get bank loans and credit. The enterprise bankruptcy system will be fully utilized to stimulate market vitality and stabilize market expectations.

Third, market access for foreign investment will be further relaxed. The latest edition of China's negative list for foreign investment access includes 31 items and is expected to be further shortened, with all restrictions on the manufacturing sector removed.

Equal support will be provided for both domestic and foreign enterprises, ensuring that foreign enterprises receive national treatment in accessing production factors, qualification licensing, standard setting, government procurement and bidding. Under the premise of ensuring national security, cross-border data flow restrictions and localization requirements will be minimized.

Fourth, the service sector will be further opened-up. The negative list for the cross-border service trade will be fully implemented to orderly expand the opening-up of finance, telecommunications, internet, education, culture and healthcare sectors.

In the financial sector, financial infrastructure will be gradually opened up, cross-border capital management will be optimized, and restrictions on cross-border data flows will be relaxed. In the telecommunications sector, market access restrictions, competitive barriers, and other discriminatory barriers will be reduced. Pricing for telecommunications service will be optimized and quality will be improved. In the education, culture and healthcare sectors, entry barriers will be further lowered, the qualification licensing system will be improved, and policies on the residence and stay of foreign personnel will be optimized.

Ma Yingying is an associate research fellow of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences. Su Qingyi is a senior fellow of the Institute of World Economics and Politics at the CASS and director of the Department of International Trade at the CASS. The authors contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.