Sound management of our own affairs key to economic success
Note: The following is an edited translation of a commentary on the U.S.-initiated trade dispute from the Chinese-language "Commentaries on International Affairs (国际重评)."
China's government has voiced its protests against the irrational move by the United States to threaten a further 10 percent tariffs on 200 billion U.S. dollars of imports from China. It has called the move an escalation of the trade war, and emphasized that China will be forced to take necessary countermeasures, as it has done so before.
An aerial view of Beijing's Central Business District. [File Photo: VCG]
At the same time, China's government is continuing to promote and implement measures to open its markets to the world. The Securities Regulatory Commission announced that its A-shares market will be opened to foreign investors; Tesla signed an agreement with the Shanghai government to set up its largest overseas plant in China; and, Chicago signed a five-year plan with eight Chinese cities to promote cooperation.
China is fully aware and firmly convinced that managing its own affairs well is the most powerful weapon it has as it faces the epic trade war sparked by the United States.
The importance of careful management of its own affairs is a lesson China learned from its 40 years of reform and opening-up. From the early days of reform, which China's former leader Deng Xiaoping described as "crossing a river by feeling the way over the stones", to the strengthening of top-level planning and the reform of the economic system, through to the launch of the Belt and Road Initiative, China has always maintained its strategic focus as it moved along its journey of development.
In the short term, the trade war will have a negative impact on China, but in the long run, it will bring a positive impact. China will be able to manage its own affairs well and overcome the difficulties ahead.
China is the only country in the world with an economy that includes the full range of industrial capabilities. It can produce all kinds of goods, which can in turn be consumed through its domestic market. Unbalanced development across its regions, a problem that China is working out, also provides room to maneuver when it comes to domestic industrial transfers, personnel and capital flows, and technology innovation.
Domestic demand has become China's largest source of momentum when it comes to economic growth. Currently, 91 percent of China's economic growth derives from domestic demand, of which 60 percent is driven by consumption. And the demand is continuously expanding. Taking Shanghai as an example, the city's total export-import volume in the first five months of this year increased 7 percent compared to last year.
And China is continuing to innovate. At the core of the United States drive to launch a trade war against China is the desire to curb its development at a fundamental level by cracking down on the country's high-tech innovation capabilities. However, innovation-driven development has long been China's top-down strategy. According to the latest Global Innovation Index of the World Intellectual Property Organization, China has, for the first time, broken into the Top 20 list. Meanwhile, the current boom of China's modern service industry, as shown by its modern logistics, information services, and cultural tourism, along with its knowledge-intensive and high value-added high-tech industry and equipment manufacturing industry, will endow the Chinese economy with greater resilience.
By continuing to open up its economy, China is allowing its circle of friends to share in more of the fruits of its development. By contrast, the Trump administration has provoked trade wars against its major global trading partners. If it is expecting foreign capital to pull out of China and flow into the United States, it is facing disappointment.
Since President Xi Jinping announced a new round of opening-up measures in April, China has continued to provide further incentives to foreign investors. Examples of these incentives include extending the term of patent protection for foreign pharmaceutical products from 20 to 25 years, cancelling the import tariffs on anti-cancer drugs, unveiling a shortened negative list for foreign investment and pilot free trade zones, and reducing the import tariffs on automobiles and consumer goods.
Over the last three months, as China-U.S. trade frictions have worsened and the United States has moved to levy tariffs on its trading partners, China's policy of reform and opening-up is continuing to show dividends. The country can achieve an economic rebalancing and shift to a more sustainable model of development, according David Lipton, the senior figure at the International Monetary Fund. And the latest 2018 China Business Climate Survey released by the American Chamber of Commerce in China showed that 74 percent of member companies plan to expand investment in China this year.
The lessons that China has learned from its years of hard work and reforms is that eliminating barriers to trade, promoting peaceful development, and managing its own affairs have been at the core to its success.