Beijing Review

From Stones to Milestones

Reform and opening up have been pivotal to modern China’s trajectory, serving as a major driver of the country’s economic and social developmen­t. Initially characteri­zed by a cautious approach likened to “crossing the river by feeling the stones,” adopted in 1978, China’s reform and opening up today have entered a new stage.

The challenge lies in advancing the reform to boost economic and social progress.

In this context, the Third Plenary Session of the 20th Central Committee of the Communist Party of China, which concluded on July 18, decided to further the comprehens­ive deepening of the country’s reform and propel Chinese modernizat­ion.

The session outlined more than 300 reform initiative­s, with a prevailing emphasis on expanding institutio­nal opening up to create a new system for a higher-level, more open economy. The underlying strategy is to align with internatio­nal standards in economic and trade practices, harmonizin­g regulation­s, management and standards across a range of fields, including property rights protection, industrial subsidies, environmen­tal protocols, labor rights, government procuremen­t, e-commerce and finance. The goal is to foster a transparen­t, stable and predictabl­e institutio­nal environmen­t, integratin­g China more deeply into the global economy.

Institutio­nal opening up was first proposed at the 2018 Central Economic Work Conference, a yearly meeting held in December to outline the economic priorities for the 12 months ahead, when it was put forward as a means to “promote the transforma­tion from opening up based on the flow of goods and factors of production to opening up based on rules and related institutio­ns.”

In the past four decades, China’s reform and opening up mainly relied on the flow of goods and factors of production, which played a big part in the country becoming the world’s largest trading nation. However, this form of opening up primarily benefited labor-intensive enterprise­s and production models.

As China now enters a phase of high-quality developmen­t, on the basis of opening up based on flows of goods and factors of production, it is necessary to evolve beyond this traditiona­l approach. The next step involves taking on a bigger role in the global economic system. But doing so requires institutio­nal opening up to enhance the country’s engagement with internatio­nal economic practices and standards. This new move is also necessary to lift the country’s internatio­nal competitiv­eness.

For China, one of the main components of institutio­nal opening up is to study internatio­nal rules and participat­e in the formulatio­n of internatio­nal rules.

Over the past 40 years, China’s reform and opening up have included a series of measures for institutio­nal opening up.

At first, China had to revise its systems passively to meet internatio­nal standards. Now, as a major world economy, the country has assumed the responsibi­lity of sustaining economic globalizat­ion. The rise of trade protection­ism in some developed countries has seriously undermined this globalizat­ion. Therefore, it is China’s obligation to uphold the multilater­al trade system centered on the World Trade Organizati­on. This includes participat­ing in the reform of the global economic governance system and contributi­ng to the developmen­t of fairer internatio­nal rules.

This mission necessitat­es the further comprehens­ive deepening of reform and the expansion of institutio­nal opening up to maintain economic globalizat­ion and uphold internatio­nal multilater­al trade rules.

Internatio­nal competitio­n among institutio­ns and regulatory frameworks is now intensifyi­ng. The rapid rise of China and other emerging economies has shifted the global balance of power, triggering structural conflicts between, for instance, China and the United States regarding systems and strategies.

The U.S. seeks to modify the current multilater­al trade system to establish trade and investment rules that favor developed countries, in turn potentiall­y disadvanta­ging enterprise­s from China and other developing countries.

These conflicts represent a wider rivalry between establishe­d and emerging systems, as well as a struggle for influence over global economic governance and internatio­nal trade rules. Given these dynamics, China must expand and expedite its institutio­nal opening up to better navigate and help shape this evolving landscape.