On the brink of a new economic system

Country is striking a balance between widened doors for overseas investors and promoting free trade

The slowdown of the Chinese economy poses a higher requirement for China to make better use of external production factors. China is constructing a new type of open economic system that welcomes more foreign investors while heavily investing overseas.

China was the world's largest trader in 2013. The year-on-year increase in the first 10 months of last year was 3.4 percent. Although the growth was much lower than previous years, the country remains one of the fastest-growing traders in the world. While many other major traders have been implementing trade protectionism, the Chinese government still adheres to free trade, taking some pro-import measures. The country will attract more innovative, high added-value and good brand industries.

By November last year, the foreign capital used by the Chinese mainland had increased by 0.7 percent, compared with the 32 percent dip in the European Union in the first half of the year, and a 50 percent fall in Russia and 2 percent decrease in Brazil. About 55 percent of foreign capital used by the Chinese mainland went to the service sector. And foreign enterprises' profit conditions were better than the average level of domestic enterprises.

China will open more industries and markets to foreign investors, especially in education, finance, culture and public health. Meanwhile, it is drawing up a foreign investment law to strengthen supervision and regulation of foreign-funded enterprises, fight against monopolies and other forms of unfair competition from home and overseas, and protect the interests of investors as well as labor rights.

One noteworthy change is, thanks to the reform of lifting restrictions on overseas investment, the Chinese mainland's outbound investment increased by 17.8 percent year-on-year in the first 10 months of 2014. In contrast, the US' outbound investment decreased by 27 percent, and Japan's outbound investment fell 22.9 percent.

And 75 percent of Chinese enterprises' investment projects overseas are profitable, or at least breaking even.

China will also let its free trade zones in Shanghai and Tianjin as well as Guangdong and Fujian provinces play a bigger role in promoting international trade.

Half of the trade among the 160 World Trade Organization members is done through free trade areas, enjoying low tariffs, and more than 60 percent of the FTAs have been built by the 10 largest economies.

The FTAs between the Chinese mainland and the Hong Kong and Macao special administrative regions have been upgraded, and the Chinese mainland finished FTA negotiations with South Korea and Australia in 2014. Japan, New Zealand, India and ASEAN members will be key partners in FTA talks in 2015.

China is also promoting its two pro-trade initiatives, namely the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

Through China's efforts, a big breakthrough was a road map for promoting the construction of an Asia-Pacific FTA, with the support of the Asia-Pacific Economic Cooperation members at their meetings in Beijing in November 2014.

China will continue to abide by the rules of the WTO. The difficulty in finishing the Doha Round of negotiations does not mean the WTO is an outdated mechanism. It is understandably hard for the 160 members of the organization to reach an agreement because of their different development levels and interests.

The WTO has three main functions: negotiations, dispute settlements and trade policy delibera-tions. Some WTO members have not stopped negotiating with each other, and some bilateral talks based on WTO rules have witnessed fast progress.

During the APEC meetings in Beijing, President Xi Jinping and US President Barack Obama made a breakthrough for an information technology product agreement. IT technology and product trade is one of the most important areas of trade today, contributing $1.4 trillion to the total global trade value of $18 trillion in 2013.

China has joined the negotiations on a government procurement agreement for the WTO. Generally speaking, government procurement can account for about 10 percent of a country's gross domestic product. Beijing's active involvement in these negotiations is important for the recovery of global trade.

China has also joined the negotiations on environmental products within the WTO framework. The Chinese government attaches great significance to environmental protection. If the negotiations can cut the tariffs for environmental products, it will be beneficial to society, economy and the environment.

The author is China's assistant minister of commerce.

(China Daily Africa Weekly 01/09/2015 page10)