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

CPC Leadership Group of the Ministry of Commerce

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.

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.

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.

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.