China Should Strive for 'Independent and Fully Open'
is not entirely surprising that the geopolitical
landscape today has changed so dramatically. Research articles and policy
analyses over the past decade have clearly shown that the trajectory of the
trend is consistent with reality.
The question going forward is, we all know that the geopolitical landscape has
changed a lot, but how exactly has it changed? This requires sorting out some
major issues and defining them appropriately.
of all, globalization is the issue that has been most affected by the changes
in the geopolitical landscape. Now we are in the anti-globalization stage of
globalization, so we are facing a great situation of contraction, correction,
and adjustment of the world market. It is clear that sustained growth is gone,
and that is a big change. Many scholars and officials have talked
about globalization for decades, and their planned global industrial chain is
based on the globalization. Therefore, anti-globalization has disrupted their position to some extent. However, it may not be too late to change the
position now. In short, the global external market is in dispute, and it is
difficult to get involved in and profit from it.
Second, China will experience a prolonged
period of financial constraints. The
COVID-19 pandemic and flood
crisis in China have reached the critical
stage where there are less monetary resources available for relief. More
troubling, China is transforming from a production-based society to one that is
a consumption-oriented. With such transformation,
there will be a lot of excess capacities and debts that will inevitably drag
down its finances and strain it in the long run. Therefore, it is crucial for
China now to strengthen its market construction and not to rely on the
government. Only when markets and capital markets are booming, then the
strained fiscal and debt pressure can be relieved. Of course, the future of
market construction depends on the determination of the central government. Such
is the bigger picture of the situation, and that means China would not achieve
anything if no proper action is taken.
Third, the industrial layout in China must
be adjusted. The economic take-off of China's southeastern coast has relied on
the world market, and later relied on real estate. Now, changes in geopolitics
and real estate policies will inevitably lead to structural adjustments in the
economy. The external market has been shaken, and the real estate market is nearing
its peak, even if it still can develop. Therefore, in the future, more
attention should be paid to promoting the transfer of industries to the central
and western regions and seeking to expand China's internal market, as the
global geopolitical situation now poses far greater threats to the provinces
and cities along China's southeastern coast than the central and western
regions. The central and western regions are a matter of development and
expansion, while the southeastern coast is a matter of resisting risks and
reducing losses. When the southeast coaster and the central-western regions
achieve integrated development, then China's economy, especially its
industries, can be stabilized.
Fourth, stability has become a
competition. The current world situation and the Chinese economy are competing
to see who can maintain stability. The stability here refers to structural
stability and the overall stability, which can no longer be taken to extremes,
and the policy must be aimed at seeking equilibrium. Under certain risk
conditions, those who go fast will also fail fast, which is the meaning of
stability. Japan was very impulsive throughout the 20th century, going through
several ups and downs that eventually cost it dearly. To sum up Japan's
experience in the 20th century, what it gets is a "pacifist
constitution". Thus, stability is still the best policy.
to pursue overall development, China must think about the bottom-line. The situation is now so fluid that everything that used to be
impossible to believe has happened. There are much to learn here, but the most
important thing is to have the bottom-line thinking, to figure out what's the
worst that could happen, and it is very dangerous to ignore the worst-case
scenario. Therefore, given the current situation and the pandemic situation,
the current 14thFive-Year Plan of China is overly optimistic, and
it is likely that there will be unachievable areas in this Five-Year Plan.
Of course, there's a
lot more to the situation than that. Now everything is a fait accompli, and conceived development can only be
considered based on fait accompli.
At a meeting of the Standing Committee of
the Political Bureau of the CPC Central Committee on May 14, 2020, it was first
proposed to give full play to China's advantage in its super-large market and
the potential of domestic demand, and build a new pattern of development in
which both domestic and international cycles reinforce each other. During the
NPC and CPPCC sessions in May this year, President Xi Jinping called for
"a new pattern of development in which the major domestic cycles play a
dominant role and both domestic and international cycles reinforce each
other". This is a clear strategic response in the general direction.
The question for the future is how to
proceed on the premise of a clear direction. This can be summed-up as being "independent
and fully open".
Independence refers to the "inner
circulation" or "internal cycle" of China's economy; it means to do well
in its "domestic affairs", and this should be done independently.
Those systemically important industrial sectors, financial sectors, economic
regions, urban economies, as well as key resource combinations that are crucial
to China's economy, should rely more on their strength to grow bigger, become more
stable, stronger, and better. As long as this is achieved, at least economic
independence can be achieved. China's market space then can be expanded, and its
consumption can become the pillar role and value in economic growth. On the
other hand, if the country is highly dependent on foreign markets and foreign
capital, it will be greatly affected. If there is even a slight disturbance, it
will be greatly affected and cause fluctuations, not to mention drastic changes
in the world market. In this regard, the experience and lessons of Latin
American countries should be paid special attention to. Whether
China will fall into the "Latin American trap" depends on this.
The difficulty of achieving even basic food security and energy security also demonstrates the seriousness of the problem.
Full opening needs to be maintained in
China to cope with the overall situation of the world. In fact, although the
trend of global situation is obvious, the world is certainly not a monolithic
whole; there are obvious contradictions among countries all over the world.
Europe and the United States do not agree on many issues, so do Japan and the
United States. Even Australia, which seems to be following the United States
closely, has obvious problems of interest division and coordination with the
United States. This requires China to keep an eye on the overall situation of
the world and further expand its opening-up. What's more, such an opening is a
"balanced opening" rather than an opening that focuses on bilateral
relations. In that case, even if there is a deal between China and the U.S.,
Europe will come to the door and demand the same terms and interests. China's
interests have been squeezed and receded step by step under the entanglement of
other countries. It is better to maintain a level playing field and open the
market to the end. China should welcome world capital to share development
opportunities in the Chinese market. As long as the world capital believes that
China is indeed doing so, China will be considered as a safe haven and such
capital would want to seek a share of the Chinese market. If manufacturing
capital goes away, financial capital will come, so China still has the
opportunity to integrate with the world market.
Therefore, the dual "internal
cycle" and the "external cycle" can indeed be integrated and developed in parallel. The key again, is "independent and
fully open". As for comprehensive reform, there is, of course, no way to avoid
it. Without reform, all-round opening-up would be impossible to achieve. As
long as "independence and fully open" is achieved, the world
situation will be eased, at least creating better conditions for the easing of
As for the development of the overall
situation, there are only two most important initiatives: one is the Yangtze
River Economic Belt and the Yangtze River golden waterway; the other is the
construction of a "hydrogen society". The
construction of the Yangtze River Economic Belt and the Yangtze River golden
waterway is not only a problem of industrial transfer, but also the
construction of the consumer market and cities in the
central and western regions along the Yangtze River. China still needs to build
infrastructure, but where to focus is a macro-strategic issue. Given the
shortage of financial resources, I think it is of great practical significance
to revive the construction of the Yangtze River Economic Belt and the Golden
Waterway. As for the construction of the "hydrogen society", the
fundamental purpose is to solve the problem of China's energy security, and it
should not be regarded as a minor problem of electric vehicles. In fact, from
the perspective of existing technological conditions, the goal of building a
"hydrogen society" is the only realistic solution, which is of great
significance to the stability and development of China.
The author believes that China's 14thFive-Year Plan should focus on these two
points. Developments in technology and telecommunications, while important, are
not immediate events, and there may even be a case for greater reliance on
external markets rather than independence. Instead, China should focus its
future development on "independent and fully open".
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