Working toward a truly open economy
Updated: 2008-02-27 10:52
The point is to guarantee that China has leverage in trade pricing on the global market and a solid position when seeking economic cooperation.
In such a situation, domestic businesses might only be permitted to enter particular industries by purchasing stakes in monopoly players instead of becoming new market players themselves.
It is necessary to impose such limits on domestic businesses to protect the national interest now that the economy is also open to foreign players.
Looked at from another perspective, the measures used to make the economy more open to foreign investors become an obstacle to establishing a uniform domestic market.
Areas that enjoy favorable treatment in trade or policies aimed at attracting foreign investors - such as special economic zones, technology development zones and industrial parks - have played a significant role in boosting economic growth in recent decades.
But the favorable treatment and special tax, land-use and industrial development policies have also been abused on occasion, distorting the local market order. It is time to check such abuse to prevent it from disrupting the smooth functioning of the economy.
More importantly, opening the economy to foreign businesses in an unblanced manner could create gaps between different industries, different regions or different social strata. Those who benefit from trade ties would develop faster than others, worsening the disparities.
If the economy is truly open, the free flow of productive elements would bring more opportunities to the inland regions and non-trade industrial sectors, narrowing the gap with the coastal regions.
In the effort to establish a truly open economy, the authorities should offer more transparent and efficient public services and improve infrastructure so that domestic and foreign businesses both find it easy to seek further development.
Taxation authorities should improve their supervision of tax payments by foreign players. They could achieve such an improvement by working more closely with other countries, regions and offshore financial centers, especially to share information.
More input should be injected into public services and the tax rate should be lowered when it comes time to heighten the country's desirability as an investment destination and big market.
Discriminative measures should be eliminated to facilitate the flow of labor into and out of the country. Proper arrangements should be made to encourage talented people to move from the eastern part of the country to the relatively less developed central and the western parts, which would definitely boost local development in both the economic and social spheres.
[The author Mei Xinyu is a researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.]
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