Understanding the Great Trend of Economic Globalization and Expanding Opening Up on All Fronts

In 2017, just as de-globalization was gaining ground and dark clouds were hanging over the world economy, President Xi Jinping delivered his historic speech at the Davos Forum, in which he declared China's firm stance on defending economic globalization and pointed out the right direction for economic globalization's future development from the vantage point of humanity's long history. His words provided a much-needed boost of confidence and positivity to the world. 

Since then, at important international arenas such as G20 summits, APEC meetings, and the China International Import Expo, President Xi has further articulated China's clear-cut position on economic globalization and multilateralism, contributing China's knowledge and showing it to be a responsible major country. China has done what it said it would do; it has opened up to the outside world on all fronts, played an active part in global economic governance, and promoted the building of a global community with a shared future. Its announcement in 2020 to accelerate the creation of a new development dynamic, featuring open domestic and international flows, is a continuation of China's Davos position. It is China's new plan for promoting economic globalization. 

I. Understanding the historical trend of economic globalization and promoting mutual opening up around the world 

President Xi has made the following important points: Economic globalization is the result of growing social productivity, a natural outcome of scientific and technological progress, and an irreversible contemporary current, not the creation of any individual or country. Whether we like it or not, the global economy is the big ocean that we simply cannot escape. The world must work together to make the pie of the global market even bigger, strengthen the mechanisms for sharing benefits globally, and explore new ways of international cooperation, so that we can give more impetus to economic globalization and remove its impediments as much as we can. The trend of de-globalization emerging in the world today amounts to nothing more than ripples in a great current, which are not enough to halt the great globalization tide. We must not be stopped by headwinds or undertows; we must stand on the right side of history and firmly proceed with opening up on all fronts. 

Economic globalization is an irreversible historical trend. 

The Xiaochantan Wharf at Yangpu Port, Hainan Province, September 23. On November 15, 2020, the ten ASEAN member countries as well as China, Japan, South Korea, Australia, and New Zealand formally signed the Regional Comprehensive Economic Partnership (RCEP). After eight years of negotiations, the official launch of the RCEP, which is the world's largest free trade area, was finally announced. PHOTO BY XINHUA REPORTER PU XIAOXU 

Economic globalization has experienced roughly three stages. The first was the stage of colonial expansionism and world market formation. In this stage, all countries were drawn into the world economic system. The second stage saw two parallel world markets, or two opposing blocs and markets, prevail after World War II. The third stage is the stage of economic globalization, in which world economic integration has accelerated since the end of the Cold War. Uneven factor endowments among countries and an ever-finer division of labor along international lines have been important forces for economic globalization. All countries face shortages of natural resources, capital, labor, technology, and markets to greater or lesser degree, as well as restrictions on their division of labor determined by the size of their markets. The geographical discoveries of the 15th century opened the way for the formation of a world market. Thereafter, scientific, technological, and industrial revolutions provided the material and technological foundations for economic globalization. Several rounds of industrial transformation dramatically reduced the cost of goods transportation, the dissemination of information, and the movement of people. In particular, new technological revolutions such as the internet have led to a leveling out in the world and to a degree of interdependence hitherto unknown. The international economic governance system and the post-Cold War market reforms have served as institutional guarantors for economic globalization. After World War II, the Bretton Woods system and the three pillars of the General Agreement on Tariffs and Trade, the IMF, and the World Bank emerged as an institutional framework for global economic governance. Coupled with the market reforms of emerging economies after the end of the Cold War, these drove a major upsurge in economic globalization. 

In summary, economic globalization is an objective historical process driven jointly by the development of productive forces and changes to the relations of production; it is not determined by the will of man. In the past, plagues, wars, and crises have impeded economic globalization, yet ultimately, its great surge continues ever onward.

An employee of Jiangsu Zhenjiang Shipyard (Group) Co., Ltd. performs a welding job on the hull of a cargo ship for export to Germany, August 27, 2020. According to data released by the General Administration of Customs, the total value of China's imports and exports of goods reached 29.04 trillion yuan in the first 11 months of 2020, representing a year-on-year growth of 1.8%. PEOPLE'S DAILY / PHOTO BY FENG JIANGJIANG 

Economic globalization has witnessed twists and turns but its general forward direction has remained unchanged. 

There is momentum both for and against economic globalization: the new round of scientific and technological revolution and industrial transformation are providing driving forces, while resistance is coming from unilateralism, protectionism, and hegemony. Overall, the forces propelling economic globalization are greater than those pulling it back, and openness and cooperation remain the main trends of development. Economic globalization is experiencing a slowdown rather than a decline. Save for a few years of crisis, trade in goods has remained stable, with global exports of goods in 2019 up 17.1% when compared to the period prior to the financial crisis in 2008. Trade in services has flourished, with global service exports in 2019 up 52.4% compared to 2008. There has also been a boom in digital trade. The size of the global cross-border e-commerce market has grown at an average annual rate of nearly 30%, with an explosion in cross-border digital trade expected in the coming years. Regional integration has deepened. Compared to before the financial crisis, 237 more free trade agreements have been reported to the WTO and entered into force. Major countries are also promoting higher levels of openness through regional trade arrangements. The focus of negotiations has shifted from trade barriers on the border to regulations behind the border, reflecting the general trend of deeper economic globalization. In the era of the global village, the global value chain has been greatly extended. All countries are more closely bound together in communities of shared interests, common responsibilities, and a shared future. Thus, to reverse history and return to a state of isolation is simply not in the common interests of humankind. 

Over the past 40 years of reform and opening, China has implemented a basic state policy of opening up. It has continuously opened its door wider to the world, achieving a great historical turnaround from a closed and semi-closed state to one of all-round opening up. It has been both a beneficiary and important contributor to economic globalization. 

Promoting high-quality trade. China has created new ways of developing foreign trade, cultivated new business models, made continued improvements to its trade structures, and reduced tariffs and non-tariff barriers. It has liberalized and simplified trade, expanded imports of high-quality goods, and made innovations in trade in services. In 2016-2019, China's import and export trade registered an average annual growth rate of 7.5%, maintaining China's status as the world's largest exporter for 11 years running. In services, trade imports and exports grew at an average annual rate of 6%, the second fastest in the world. In the first 11 months of 2020, China's exports of goods grew by 0.6% year-on-year. Growth is expected to be positive for the year as a whole, thus further consolidating its status as a major trading country. Going forward, China will enhance its overall competitiveness in foreign trade and steadily develop itself as a trader of both quality and quantity. 

Raising the level of utilized foreign investment. China has actively expanded access to its markets, eased restrictions on foreign ownership in the banking, securities, and insurance sectors, increased the openness of high-end manufacturing and services, and improved the protection of intellectual property rights. The business environment has been continuously improved, becoming a vast "gravitational field" for international investment. From 2016 to 2019, China's utilized foreign investment totaled US$549.6 billion, making it the world's second-largest receiver of inbound investment, with an average annual growth of 24% in high-tech industries. In the first 10 months of 2020, actual utilized foreign investment was US$115.1 billion, up 3.9% year-on-year. Going forward, China will continue to widen market access and protect the legitimate rights and interests of foreign enterprises in accordance with law. It will ensure that foreign investors can stay and develop in China over the long term. 

Developing new methods of outbound investment. In line with the global trend of industrial relocation, China has encouraged its enterprises to "go out," improved its industrial arrangements with other countries, and better allocated resources at the global level. It has built Chinese investment brands and fostered a global network of trade, investment, production, and services. From 2016 to 2019, China's outward direct investment reached US$634.4 billion, ranking among the highest in the world. Through outward investment and cooperation, it has driven more than US$500 billion of exports. By the end of 2019, Chinese investors had established 44,000 enterprises in 188 countries and regions. More than 2.2 million foreign employees were employed in Chinese enterprises, which are contributing to industrialization and people's wellbeing in the regions where they have a presence. In the future, China will improve the legal, policy, and service systems for promoting and protecting overseas investments, and help enterprises improve their ability to operate across borders, in order to create closer shared interests and promote common development. 

II. Focusing on global governance reform and contributing China's knowhow 

President Xi has pointed out that the world today is undergoing momentous changes of a kind unseen in a century. The Covid-19 pandemic has accelerated these changes, and the world is entering a period of turmoil and change. He has declared that practicing the law of the jungle and winner-takes-all approaches will only lead to a dead end and inclusive growth for all is surely the right way forward; that the present competition for the initiative in global governance and international rule-making is extremely intense; and that China should contribute its strength to the reform and improvement of global governance. Together, Xi has argued, the world must work to make economic globalization more open, inclusive, and balanced for the benefit of all. 

Reform of the global governance system has reached a historical turning point.

Momentous changes in the world of a kind unseen in a century are now unfolding at an accelerated rate. As global challenges mount, strengthening global governance and reforming the global economic governance system have become the underlying trends of our times. The most revolutionary aspect of these changes is the shift from West to East in the global balance of power. Emerging markets and developing countries are rising at the same time. Their share of the world economy and trade has grown by about 20 percentage points since the 1990s, and their share of foreign investment has increased by 18 percentage points. There is a marked trend toward multi-polarity in global governance. The willingness and ability of developing countries to participate in governance has grown continuously, but sustained efforts are needed to promote a more just and equitable governance system. 

Current international trade rules are not suited to new changes. 

Deep-rooted problems in global development are becoming increasingly prominent: global issues are increasing, but solutions have been found wanting; the number of global rules has increased, but international coordination is lacking; the global market is expanding, but regulation and supervision are inadequate. The focus of global governance has shifted. Innovations in international trade and investment are relentless, and "on-border" measures like the opening of markets are being replaced on the global governance agenda by "behind-border" regulations on issues such as subsidies, labor, and the environment. New global governance challenges and issues like cybersecurity, digital sovereignty, and data flows, brought about by the new scientific and technological revolutions, have intensified. 

China promotes more balanced economic globalization and works to build an open world economy. Decisively opposing trade and investment protectionism, it has sought to put global governance rules onto a more democratic and law-based footing. In doing so, it has become an important participant and contributor to global economic governance. 

Chinese ideas and solutions have gained greater recognition. China has put forward the vision of a global community with a shared future, adhered to the principle of pursuing the greater good and shared interests, and championed a vision for global governance featuring extensive consultation, joint contributions, and shared benefits. These efforts fit with the trends of the times. They offer additional points of convergence for the interests of different countries, and ultimately enrich the concept of global governance. China is also actively providing global public goods; it has hosted major diplomatic events such as the Forum of China-Africa Cooperation and the China International Import Expo, and it has initiated the establishment of the Asian Infrastructure Investment Bank and worked with other BRICS countries to set up the New Development Bank. A host of China's proposals, solutions, and initiatives have become international consensus, and the international community is looking to China to play a more constructive role in trade and investment, digital governance, and other areas. Going forward, China will better coordinate its domestic and international imperatives, put forward initiatives for the practice of global economic governance, and work to safeguard international fairness and justice. 

Concrete progress has been made in joint efforts to pursue the Belt and Road Initiative. China has acted on the principles of extensive consultation, joint contribution, and shared benefit, and adhered to a vision of green development, openness, and clean governance for the Belt and Road Initiative. It has diligently implemented the outcomes from the Belt and Road Forum for International Cooperation, and given shape to a connectivity framework featuring six corridors, six routes, and multiple countries and ports. A host of highly efficient, pacesetting projects have taken root. In 2019, China's total trade in goods with countries along the Belt and Road grew to 29.4% of its total foreign trade, and direct investment rose to 13.7%, up 3.7 and 5.2 percentage points respectively from 2016. In the time ahead, China will continue to pursue high-quality cooperation on the Belt and Road, working with its BRI partners to develop a platform for cooperating on challenges, protecting people's health, promoting economic recovery, and unlocking growth potential. 

China has deepened multilateral and regional cooperation. China has been active in WTO reform, putting forward "three principles" and "five propositions" for the reform (the principles are 1. upholding the core values of the multilateral trading system, 2. safeguarding the development interests of developing members, 3. taking consensus-based decisions; the propositions are 1. not altering the status of the multilateral trading system as the main medium of trade, 2. prioritizing key issues that threaten the WTO's survival, 3. addressing the fairness of trade rules and meeting the needs of the times, 4. ensuring special and differential treatment for developing members, 5. respecting members' respective development models). It has also promoted the formulation of rules in emerging areas such as e-commerce. China has signed 19 FTAs with 26 countries and regions. Particularly noteworthy is the freshly inked Regional Comprehensive Economic Partnership Agreement. The agreement's 15 member countries account for about 30% of the world's total population, economic output, and trade. The deal is not only a landmark achievement in deepening regional cooperation in East Asia but also a victory for multilateralism and free trade. China has worked to keep China-US relations generally stable and deepened its strategic cooperation with Russia and cooperation with the EU. It has accelerated negotiations on a China-EU investment agreement and a China-Japan-South Korea free trade agreement, and expanded practical cooperation with developing countries. Looking to the future, China will work to play an active role in WTO reform, implement a strategy of upgrading free trade zones, complete high-standard free trade agreements with more countries, and continue to expand its "circle of friends" and promote open development worldwide. 

III. Adapting to the new trend of economic globalization in the post-Covid world and promoting a new development dynamic 

President Xi has pointed out that, as the world enters a period of turmoil and change, a backlash is occurring against economic globalization. He has argued that changes in the global political and economic environment have intensified the trend of de-globalization, as some countries have engaged in unilateralism and protectionism, thus significantly weakening the traditional international flow. China's new development dynamic, President Xi has stressed, is not a closed loop, but rather made up of open and mutually reinforcing domestic and international flows. China does not seek to develop only itself or to engage in zero-sum games, nor will it pursue development behind closed doors; rather, it aims to foster, over time, a new development dynamic that is focused on domestic flows while facilitating positive interplay between domestic and international flows. This will create more space for China's economic development and add impetus to global economic recovery and growth. 

The world economic landscape is going through profound changes. 

The international environment is increasingly complex, marked by a significant increase in instability and uncertainty. Global trade and investment growth is sluggish. Before the international financial crisis, global trade grew twice as fast as the global economy, but since then, growth in global trade and economy has roughly been on the same level. International organizations estimate that global trade would fall by about 30% in 2020, and will rebound by only 7.2% in 2021. Global direct investment would fall by 40%, with a further fall of 5% to 10% predicted for 2021. As populism and trade protectionism intensify, they are spreading from traditional industries to emerging and high-tech industries. Restrictions on international investment have been tightened. 

The conditions of China's development are changing. 

China's traditional advantages are being diminished while new ones are still in the process of being cultivated. In recent years, China's working population has gradually decreased, its cost advantages have been weakened, and some important resources have been in short supply. In 2019, China imported 80%, 72%, and 86% of its iron ore, crude oil, and soybeans, respectively. New advantages in areas like R&D, technology, standards, branding, and marketing still need to be further improved. The task of achieving high-quality development is indeed urgent. Yet, the advantages of China's vast market are obvious. China's economy is the second largest in the world. It has a per capita GDP of over US$10,000, a population of 1.4 billion, and a middle-income group of more than 400 million people. It possesses the world's most complete and largest industrial system with a full set of supporting capabilities. China is the world's most promising large market and its international attractiveness continues to grow.  

In the face of major changes in the domestic and international environments, as well as the arrival of a new stage of economic development, China will follow a new development philosophy, promote high-quality development, and accelerate the creation of a new development pattern. China will continue to implement the strategy of expanding domestic demand, it will open wider to the world on all fronts, and it will promote positive interplay between domestic and international flows. 

Building a large unified market accessible to the world. China has promoted far-reaching reform with high-standard opening up. It has improved urban and rural circulation networks, developed consumption, including spending on services, in urban and rural areas, promoted the integration of domestic and foreign trade, and expanded imports through its hosting of the China International Import Expo. In 2019, China's total retail sales of consumer goods reached 41 trillion yuan, second in the world. Imports reached US$2.1 trillion, and are expected to grow to US$22 trillion over the next decade. The Third China International Import Expo generated deals worth US$72.62 billion, helping to expand international demand despite the Covid-19 epidemic. Going forward, China will promote consumer spending in all domains, modernize trade flows, and expand imports of high-quality goods and services. We will make the Chinese market a market for the whole world to share in. 

Workers sort goods at a Cainiao overseas warehouse in Guadalajara, Spain, November 11, 2020. Despite the continued spread of the novel coronavirus, "Double 11" or "Single's Day" brought on a new wave of online consumption in Spain. PHOTO BY XINHUA REPORTER MENG DINGBO 

Attaining new standards in opening up. China will align its efforts to create a new development dynamic with the implementation of its coordinated regional development strategy and the development of pilot free trade zones. It will encourage pilot free trade zones to boldly carry out trials, make breakthroughs, and drive change. The development of Hainan's free trade port will also be accelerated. To date, 21 pilot free trade zones have been established, and 260 proven innovation outcomes have been replicated and applied elsewhere. The general plan for the development of the Hainan free trade port has been launched; it will promote the free flow of goods, services, capital, people, and information. In the coming period, China will push for high-quality development of pilot free trade zones and ports, developing them as important strategic nodes for the country's new development. 

Promoting more open rules and institutions. Working to ensure alignment with international economic and trade rules, China has enhanced transparency, strengthened the protection of property rights, encouraged competition, and opposed monopoly practices to achieve a sustained improvement to its business environment. It has improved the management system for foreign investment, fully instituted a pre-entry national treatment plus negative list management system, and enacted the Foreign Investment Law. China's business environment has moved up to 31st place in the international rankings from 78th in 2017. The areas open to foreign investment have been consistently expanded to cover 120 of the 160 service sectors defined by the WTO. China has furthered reforms to streamline administration, delegate power, improve regulation, and upgrade services in the areas open to foreign investment in both inland and border regions. In the future, more attention will be paid to rules, regulations, management, standards and other forms of institutional openness, as China works to create a new and improved open economic system. 

IV. Guarding against the risks of economic globalization and establishing safeguards in the process of opening up 

President Xi has argued that economic globalization is a double-edged sword; in global economic downturns, all countries, developed and developing alike, will experience pressure. He has said that our open development environment is creating more benefits than ever, but the associated problems, risks, and trials are also unprecedented. The more open we are, he has pointed out, the more attention we must pay to security, properly managing both development and security so that we can make ourselves impervious to risks. President Xi has further pointed out that development and security mutually reinforce each other on a fundamental level, that development provides the greatest guarantee of security and the "master key" for solving security issues, and that we must continually open up, improve the quality of opening up, and leverage greater openness to promote reform and development—this is an important vehicle that will continually yield fresh success in China's development. 

Economic globalization creates both development opportunities and security risks. 

As the economic globalization "pie" has become bigger, the issue of properly sharing the pie out has come to the forefront. The conditions, systems, and development stages of countries differ, as do their development contexts. While developing countries have reaped benefits during economic globalization, ineffective policy adjustments have resulted in the hollowing out of their industries, inadequate employment, and a growing gap between rich and poor. The success that developing countries have had in opening up is self-evident, but their lack of development strength and inadequate capacity to respond to risks makes them susceptible to external shocks. The globalization of economic risks demands stronger cooperation and a collective response. The economies of all countries are interdependent, and economic security is a global issue from which no country can seal itself off. Stronger international cooperation to achieve individual and collective security during the process of opening up is a practical choice for all countries. 

While participating in economic globalization, China has grown stronger and more secure but also faced new challenges. 

In a period of more than 40 years, China has managed to maintain independence while expanding opening up. It has increased its composite national strength and gained a stronger capacity to maintain security on one side, while properly managing the intensity and pace of opening up on the other, keeping a close focus on guarding against risk. Having developed from a small to a large trading nation, China is now in the process of becoming a trader of quality and quantity. As it plays a deepening role in economic globalization, its impact on the world, and the world's impact on China, will increase notably. At the same time, as unilateralism and protectionism rise, China will face more external risks that need to be addressed in the right way. 

Promoting development and security. As China opens its window wider to the world, it must establish safeguards to ensure economic security. In the new stage of development, economic globalization must serve as the backdrop for domestic development planning. We must leverage international and domestic markets and resources, promote market reform and high-quality development with greater opening up on all fronts, ensure economic security with stronger competitiveness in industry, a stronger economy, and greater composite national strength, and achieve greater economic security as we take part in a higher level of economic globalization. Following the laws underlying the development of major economies, China will proceed with the fundamental task of expanding domestic demand, accelerate the creation of a new development dynamic, and pursue opening up, reform, and development in a coordinated way to strike an optimal balance between openness and security. 

Guarding against and mitigating risks effectively. We will keep in mind worst-case scenarios, and hold fast to redlines in free trade negotiations. We will resolutely implement the decisions and plans of the CPC Central Committee, ensure general stability in foreign trade, work to keep global industry chains and supply chains stable, and guard against risks with regard to the Belt and Road Initiative with practical steps. We will properly manage the intensity, progress, and level of opening up. We will actively respond to both traditional and non-traditional security threats and better protect national economic security. 

Enhancing China's ability to participate and lead in economic globalization. We will improve China's ability to participate in setting rules for multilateral, regional, and bilateral ties. We will play an active role in the new round of rulemaking, taking a firm stance against protectionism while standing up for free trade and multilateralism. We will improve our capacity to ensure security through the use of international norms and rules, enhance industrial security mechanisms and early warnings for economic security risks, and enhance reviews of foreign investment projects, early warnings for industrial injury, and trade remedies. We will improve our capacity to develop international economic, legal, management, and negotiation talent, work to increase China's representation in international organizations, foster a more attractive domestic environment for international talent, and strive to create an international environment that is favorable for China, so as to protect our country's period of strategic opportunity. 

(Originally appeared in Qiushi Journal, Chinese edition, No. 24, 2020)