Until now, it is clear that China will continue the Opening-up policy to the outside world . This April, at Boao Forum for Asia, Chairman Xi emphasized that the opening-upis the second reform for China. The Opening of China's economy adapted with the need of Chinese people for development, innovation and well-being. Xi said, 40 years of opening-up provided numerous valuable enlightenments, the most important one being one nation, one ethnic group must move forward according to history's logic and thrive in the tide of era's development. In the future, China will seek Reform and opening-up at a higher level.
Chairman Xi confirmed that China must continue opening-up, which means it's no doubt that the national authorities have recognized and acknowledged Opening-up policy and are determined to make further reform. In a recent article, Xinhua News commented that no matter how complicated the situation is, China has unswerving determination to carry out opening-up. Furthering the reforms and opening-up with greater strength is the key to build up confidence and stabilize our expectation.
With the determination in mind, public demands reform. In the current context, what exactly is reform? What is the next key agenda of reform? We cannot solve the obstacles to reforms if we do not elucidate these questions.
During the history of Reform and Opening-up, what factors contribute to China's development? Some people said China's economic factor is our comparative advantage. But economist Zhou Qiren states that cheap factor is not competitiveness. To be competitive, cheap labor must be transferred to products. To produce products, cheap factors must be organized. Organizations function in one system, which brings up the problem of the institution. Therefore, the secret of China's economic rise-up is not poverty. Instead, it is because we switch from seclusion to opening-up. In an open economy, there is organizational innovation and institutional reform. Mr. Zhou claims that the institutional reforms bring the emancipation of labor. The private companies became prosperous that emancipated labor needs to work. With increasing capacity and demand for the market, China has joined the WTO in 2001 and embraced the foreign market. After overcoming these difficulties, China was able to reach to the front line of globalization.
Thus, China's most fluctuant cost is not the cost of factors, but the cost of the institution. It is not accurate to attribute China's emergence to cheap labor since it cannot explain the emergence. For example, before the opening-up, labor was cheaper. Another example is that African countries have even cheaper labor than ours. Hence, China's advantage is that we decreased our cost of the institution through reformation. The reduction of institutional cost, cheap factor cost and learning curve are three powers of "China's Story".
However, China has encountered the problem of capitalized cost again. Factor cost is growing, which includes labor price, cost of land, cost of energy and environmental cost. More importantly, China's institutional cost is rising during high-speed economic development, which can be multifaceted. For example, China's tax collection has yet carried out strictly according to law. Many administrative offices have over-collected taxes or collected taxes with no documentational support. For instance, the incumbent government pushes forward decentralization of authorities, but sometimes it is the high-speed economic development that acquires bureaucratic documentation, rather than the planned economy. Consequently, it has hindered the economy's further development. The problem of expensive and difficult financing and the problem of the state-owned enterprises' monopoly are the aftermaths of institutional problem. These factors may be unnoticeable solely, they become a strong force of impediment when they come together. When the economy contracts and growth rate slows down, many problems become unneglectable.
Anbound Think Tank's chief researcher Chan Kung talked about his opinion of China's reform when he was interviewed by Anbound Macroeconomic Research Center. He said, the current reform and opening-up is different from the past one. The former opening-up, which can be explained from the word "opening-up", the former opening-up showed that we have nothing inside but to satisfy foreign businessmen. Foreign investment will bring money, technology, management, markets etc. The opening-up happening now is useless if we still focus on satisfying foreign businesses. Nowadays, foreign companies have many choices to make. For example, if China's cost is more expensive, they will choose countries from Africa or Southeast Asia with no doubt.
Therefore, how can we grasp the new opening-up? Mr. Chen states that China needs inward reform, which means the public must be satisfied. It reflects the true situation of China's politics. To please the people, we need to do it step by step. First, entrepreneurs and businessmen need to be satisfied, then, the general public. This is the real and useful reformation for China. It also adapts to the principle of 19th CPC National Congress, which is the satisfaction of the people.
Final Analysis Conclusion:
The experience of China's Reform and Opening-up shows that once the institutional cost is decreased, the economy will thrive accordingly. If the institutional cost increases, the whole nation's progress will be lagged. Reformation in the past mainly served foreign businesses. The future reformation will strengthen our inward structure and satisfy companies and public through the institutional reform.
