Opening up is the only way for a country to achieve prosperity and development, a key step in its solution to contemporary problems, and also the fundamental driving force for the progress of human civilizations. This is the core message of the World Openness Report 2021, compiled by the Institute of World Economics and Politics under the Chinese Academy of Social Sciences and the Research Center for Hongqiao International Economic Forum. It was released during the Fourth China International Import Expo (CIIE) in Shanghai in November.

China's basic national policy of opening up has remained one of the main focuses of the annual Central Economic Work Conference. According to this year's meeting, taking place in Beijing from December 8 to 10, the country will expand high-quality and institutional opening up, ensure equal treatment of domestic and foreign-funded enterprises, attract more investment from multinational companies, and facilitate the early implementation of major foreign-invested projects.

"After more than four decades, China has made remarkable achievements in opening up, becoming the world's largest trader in goods and a top cross-border investor," Luo Yuze, Deputy Director of the Department of Foreign Economic Research of the Development Research Center of the State Council, told China Economic Times. "In particular, in the past two years, its effective COVID-19 response has acted as a ballast for the world economy and global trade," he added.

Modification and adaption

The Central Economic Work Conference first proposed in 2018 that 2019 would see the country shift its priorities from promoting opening up based on flow of goods and factors of production to place greater emphasis on openness based on rules and related institutions.

"China has lived off its natural endowments, including labor, land and market strength, allowing for rapid industrialization and urbanization," a commentary published on the China Plus website, said. "To achieve a higher level of opening up, China needs to create the same rules and systems which allow for the exchange of differentiated economic resources between domestic and foreign markets," it added.

The 2019 conference concluded that the country's opening up should continue to expand; foreign investment should be facilitated and better protected; and the country should further reduce restrictions for foreign investment and lower its overall tariff levels.

Institutional openness will help reduce the cost of doing business, while also creating a more level playing field among domestic and international investors, according to the commentary.

On the first day of 2020, the Foreign Investment Law took effect to better protect foreign investors. Then in May last year, China unveiled measures to pursue a new development paradigm of dual circulation, which promotes the domestic and overseas markets to reinforce each other, with the domestic market as the mainstay.

China also signed the Regional Comprehensive Economic Partnership agreement with other 14 Asia-Pacific economies in November 2020, which will take effect next year in 10 signatories that have completed the approval procedures.

Last year's conference stressed that the country would aim for more open and inclusive growth to be shared all around the world.

Earlier this month, China further lowered market access thresholds for foreign investors.

"We can continue to promote high-level opening up and inject impetus and vitality into China's economic development across many areas," Luo said.

China can step up institutional opening up by learning from international economic and trade rules, according to Luo. As China has applied to join the Digital Economy Partnership Agreement and the Comprehensive and Progressive Trans-Pacific Partnership free trade deal, more efforts should be made to meet the requirements for high-standard negotiations on such agreements. "With a better business environment and favorable conditions, China can encourage more multinational companies to invest in its territory, and provide fast access to major foreign investment projects to speed up their implementation," Luo said.

On December 7, Mettler Toledo, a leading global manufacturer of precision instruments and services in Switzerland, announced that it will establish its Chinese headquarters in the Yangshan Special Comprehensive Bonded Area at Lin-gang Special Area in Shanghai.

Luo also proposed the boosting of high-quality Belt and Road cooperation. "By following the trend of low-carbon, green, digital and transparent development, China would improve the quality of Belt and Road projects, and ensure their steady and sustainable progress," he said.

A confidence boost

Though around 80 percent of economies saw their level of openness expand from 2008 to 2019, the overall worldwide situation declined by around 4 percent, according to the World Openness Index. The U.S., the most open economy in 2008, has slid down to 22nd position on the list that gauged the openness level of 129 major economies from 2008 to 2019 and was included in the report released at the CIIE.

According to the report, the U.S. accounts for approximately 25 percent of the world economy, and it has dragged down the regional and global pace of cross-border opening up. In contrast, the increasing openness of the Chinese market has raised the country's ranking from 62nd in 2008 to 40th place in 2019.

China has established a number of special economic zones and more than 20 pilot free trade zones across the country. It has been hosting a series of major trade events including the CIIE, the Canton Fair and the China International Fair for Trade in Services. These measures have effectively eased the momentum of shrinking global openness, the report read.

"China is committed to reform and opening up, continuously improving its business environment, opening its vast market to the world, and establishing greater economic interaction with other countries," Ronnie Lins, Director of the China-Brazil Center for Research and Business, told Xinhua News Agency, adding that the just-concluded fourth edition of the CIIE is a strong example.

"The global business community is reassured by China's willingness not only to promote global economic recovery and maintain the stability of industrial and supply chains, but also to embrace free trade and multilateralism as effective ways to maintain world peace," Philippe Monnier, an international business executive and former executive director of Greater Geneva Berne Area's Economic Development Agency, said.

"As China continues to lead the global recovery from the adverse economic effects of COVID-19 and the business environment for foreign firms in China continues to improve, foreign multinationals are doubling down on their investments in China, establishing thousands of new firms and expanding existing ones," Nicholas Lardy, a senior fellow at Washington, D.C.-based think tank the Peterson Institute for International Economics, said in a blog post in July.

Foreign capital inflow includes new non-financial investment, reinvested profits of existing non-financial foreign affiliates, as well as foreign investment and reinvestment in financial institutions in China. As the country has liberalized financial regulations to allow majority or sole foreign ownership of securities, asset management, insurance, and other types of financial firms, the latter types of foreign direct investment inflows are growing rapidly, according to Lardy.

"Last year, China's share of global foreign direct investment reached an all-time high of 25 percent, almost twice its share in 2019," Lardy said, adding that foreign direct investment in China continues to accelerate in 2021.

Portfolio inflows are also on the rise, while foreign holdings of Chinese government bonds are even larger, he concluded.

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