IV. Seeking Mutual Benefit and Common Development with Other Countries
China cannot develop independently without the rest of the world. Likewise, the world needs China if it is to attain prosperity. Following the trend of economic globalization, China is participating in international economic and technological cooperation on an ever larger scale, in wider areas and at higher levels in an effort to push economic globalization towards the direction of common prosperity for all countries. Today, the mainstream of international trade is to share successes, with all as winners. China adheres to its opening-up strategy for mutual benefit. For this, it has made conforming to China's own interests while promoting common development a basic principle guiding its foreign economic and trade work, develops its economic and trade relations with other countries on the basis of equality, mutual benefit and reciprocity, and makes constant contributions to the sustained growth of global trade.
China has exerted itself to push forward multilateral economic and trade relations and regional economic cooperation, actively participated in the formulation and execution of international economic and trade rules, and joined various other countries in settling disputes and problems emerging in their cooperation, so as to promote the balanced and orderly development of the world economy.
China has been an active supporter of and participant in multilateral trade system. Since its accession to the WTO in December 2001, China has strictly kept its commitments to create more favorable conditions for international economic and technological cooperation. China has sorted out and revised some 3,000 laws, regulations and department rules, continually improved its foreign-related economic legal system, and enhanced the transparency of its trade policies. China has cut its customs tariffs step by step, as promised, and by 2005 its average tariffs had been reduced to 9.9 percent, and most non-tariff measures had been cancelled. Banking, insurance, securities, distribution and other service trade sectors have opened wider to the outside world. Of the 160-odd service trade sectors listed by the WTO, China has opened more than 100, or 62.5 percent, a level close to that of the developed countries. China has actively pushed ahead with a new round of multilateral trade negotiations, participated in talks on various topics, especially on agriculture, market access of non-farm products and the service trades, and played a constructive role in helping developing and developed members reduce disputes through talks. China, together with other WTO members, has done a lot of work to spur substantial progress to reach early agreement among the negotiators.
China has continuously stepped up participation in regional economic cooperation. The building of the China-ASEAN Free Trade Area is going full steam ahead. Following the practice of zero tariffs on farm products under the "Early Harvest Program," the Agreements on Trade in Goods and the Dispute Settlement Mechanism Agreement were formally signed in November 2004, and in July 2005 the free trade area launched its tariff concession program, clearing the way for realizing its goals. At present, the building of the Shanghai Cooperation Organization is proceeding with comprehensive and pragmatic cooperation, and its process to facilitate trade investment has been launched in an all-round way. China has also initiated negotiations on such free trade areas as the China-Southern African Development Community, China-Gulf Cooperation Council, and China-New Zealand, China-Chile, China-Australia and China-Pakistan, and signed relevant agreements with its partners. China is also an active and pragmatic participant in the activities of the Asia-Pacific Economic Cooperation, Forum on China-Africa Cooperation, Sino-Arab Cooperation Forum, Asia-Europe Meeting and Greater Mekong Subregion Economic Cooperation Program. China advocates the liberalization and facilitation of investment in bilateral trade, and has signed bilateral trade agreements or protocols with more than 150 countries and regions, bilateral investment protection agreements with more than 110 countries, and agreements with over 80 countries on the avoidance of double tariffs.
China sticks to the principle of mutual benefit and win-win cooperation, tries to find proper settlement of trade conflicts and promotes common development with other countries. Trade conflicts are quite natural in international economic exchanges. Following international practice and WTO rules, China has tried to resolve such conflicts through dialogue on an equal footing and through the WTO dispute settlement mechanism. When promulgating and implementing domestic economic policies, it tries to take international factors and influences into account as well as the impacts its own economic growth imposes on the outside world. Based on its reform and development, China is serious in judging the effects its exchange rate reform may bring to surrounding countries and regions, and the global economy and finance. It has thus advanced the reform in a steady way, adopted a managed floating exchange rate regime based on market supply and demand, and linked and adjusted it according to a basket of currencies, so that the Renminbi exchange rate will remain stable at a reasonable and balanced level. China has intensified its protection of intellectual property rights, improved the relevant legal system, and tightened up law enforcement to crack down on all kinds of violations.
Growing China is active in international economic and technological cooperation, and provides good opportunities and a huge market for the rest of the world. All countries, the developed countries in particular, have reaped lucrative benefits from investment in and service trade with China.
China's active involvement in the international division of labor and cooperation is conducive to the reasonable and effective distribution of global resources. As the largest developing country in the world, China boasts an abundant labor force, the quality of which has been constantly improving. It is a natural advantage of China in developing labor-intensive industries and some technology-intensive ones. Along with economic and social progress, as well as the improvement of the living standards of its people, China's demand for capital-, technology- and knowledge-intensive products keeps increasing, offering great opportunities for foreign products, technologies and services, as the country has now evolved into an internationally acknowledged big market. China's foreign trade is mutually supplementary with many countries. About 70 percent of China's exports to the US, Japan and the Europe Union (EU) are labor-intensive, while 80 percent of its imports from the three are capital-, technology- and knowledge-intensive. In the new structure of international labor division, the country has become a key link in the global industrial chain.
By importing cheap but good-quality products made in China, the importing countries can reduce their expenditure and pressure caused by inflation while satisfying the demands and enhancing the welfare of their consumers. China's labor-intensive products enjoy unique comparative advantages in the global market. Since 1997, US consumers have saved billions of dollars every year by buying Chinese commodities - US$600 billion in the past decade and nearly US$100 billion in 2004 alone.
The expansion of China's reciprocal economic and trade relations with other countries has benefited both in a tremendous way. China's imports have kept growing by a yearly 16 percent since 1978, and the country imported commodities worth US$1,270 billion in the three transitional years following its WTO accession. In 2004, China became the world's third largest importer, next only to the US and Germany, with US$148.47 billion of increased imports or 9 percent of the world's total growth of imports. Also in 2004, China's trade volume with the EU, the US and Japan totaled US$177.3 billion, US$169.6 billion and US$167.8 billion, respectively, making them China's top three trade partners and main sources of foreign investment. In the same year, China's trade volume with Asian countries and regions amounted to US$664.9 billion, 34.2 percent up over that of the previous year. This figure accounted for 57.6 percent of China's total foreign trade value. In addition, China has become the fourth largest trading partner of and a fast-growing market for ASEAN.
The huge market of China offers such great opportunities for international capital that investors around the world have benefited from China's rapid economic growth. From 1990 to 2004, foreign investors repatriated US$250.6 billion in profits from China. In 2004, US-funded enterprises in China generated US$75 billion in sales revenue in China, and their products earned another US$75 billion elsewhere. A 2005 survey by the American Chamber of Commerce-People's Republic of China shows that 70 percent of American firms are making profits in China, and about 42 percent report a higher profit rate than their global average.
China's growing investment abroad has also fueled the economies of the destination countries. At the end of 2004, China's net non-banking direct investment abroad amounted to US$44.8 billion, spreading to 149 countries and regions. Among which, US$33.4 billion, or 75 percent, went to Asia.
China's foreign economic and trade cooperation has tremendous potential and boosts bright prospects. In the post-WTO era, China imported US$500 billion worth of commodities annually during the period from December 2001 to September 2005, which meant 10 million jobs for the countries and regions concerned. In the next few years, it will import US$600 billion worth of goods annually, and the amount will exceed US$1,000 billion by 2010. By 2020, the scale and total demand of the Chinese market will quadruple that in 2000. During the process, the rest of the world will find development and business opportunities in their reciprocal cooperation with China, which will greatly accelerate the growth of the global economy.