China's opening policy 20 years on

By Chen Gengtao

Twenty years into China's policy of opening to the outside world, more and more Chinese hardly pass a day without using something that has its origins in a foreign land. Tens of thousands drive VW Jetta cars to work, millions make calls on Motorola cellular phones, hundreds of millions drink Coke, wash their hair with Rejoice shampoo or use Lux soap.

These products have two things in common: they are all foreign brand names and they are all made in China, most by joint ventures and a few by wholly foreign-owned manufacturers.

The open policy advocated by the late Chinese leader Deng Xiaoping and implemented vigorously by the Chinese government over the years, has benefited most Chinese as individuals, as well as improving the economic strength and international stature of their country. At present, 17.5 million people have found generally well-paid jobs in foreign-funded enterprises.

Store shelves in cities are now laden with a dazzling array of goods competing for customers. People with cash in hand used to chase goods. Nowadays, the reverse is true.

Thanks partly to the presence of foreign businesses, which have brought with them investment capital, technology and management expertise, the Chinese economy has been able to grow at an annual average rate of 9.8 percent since 1979, when the open policy began.

By the end of June, 1998, direct foreign investment had reached US$242.3 billion, making it the second biggest recipient of international investment money in the world after the Untied States.

At present, about a quarter of a million foreign-funded enterprises are operating in China. They are distributed all over the country and are active in most business spheres.

"In the past five years, we have expanded areas open to foreign investment," said Bao Kexin, an official of the State Developing Planning Commission. "Hot areas for foreign investment include crop cultivation, aquaculture, mining, energy, transportation, raw materials production, project contracting, shipping, retailing, foreign trade and insurance."

Last year, China's total imports and exports reached $325.1 billion, ranking it 10th in the world's top trading nations. China's dramatic rise as a trading nation is largely attributed to its open policy. Last year, foreign-funded enterprises were credited with 46.9 percent of the country's total foreign trade.

By the end of June, 1998, China had foreign exchange reserves of $140.5 billion, the second biggest in the world, after Japan.

The open policy is one of two legs with which China is to achieve modernization, according to Deng Xiaoping's vision. The other is economic reform, implemented concurrently.

Effective from Jan. 1 of this year, the government resumed preferential tariff policies for overseas businesses investing in China in favored sectors. This was in response to a cooling of foreign investment following the cancellation of such policies in April, 1996.

According to Shi Guangsheng, minister of foreign trade and economic cooperation, China is doing the following to keep up the momentum of foreign investment inflow: * Encouraging foreign investment in agriculture, high- and new-tech industries, basic industries, infrastructure, environmental defense and export-oriented industries. * Opening more sectors to foreign investment, either fully or on pilot basis, including petrochemicals, construction, mining, tourist resources development, retailing, foreign trade, travel agency business, legal services, civil aviation, financial services and telecom. * Encouraging foreign investment in central and western regions of the country. Projects in which foreign investment constitutes more than 25 percent of the equity will be regarded as foreign- funded and enjoy comprehensive preferences. * Encouraging investment by multinational corporations. Those willing to launch cooperative projects using advanced technologies will be allowed to increase their market share in China.

Said Minister Shi: "We will adhere to the principle of offering market shares in return for technologies."

These measures and others are beginning to take effect. In the first half of this year, actual foreign investment in the country reached $20.5 billion, down only 1.3 percent for the same period last year.

So far, the country's foreign trade appears to be weathering the Asian economic storm, thanks in part to efforts made by its foreign trade firms to diversify their export markets.

In the first half of this year, China's foreign trade totaled $151.4 billion in value, up 5.2 percent over the same previous period.

Open policy activities are bidirectional. While selling their goods, an increasing number of Chinese firms are beginning to invest overseas. Chinese construction firms have undertaken more projects abroad. In the first half of 1998, their newly signed contracts were worth $5.7 billion.

Even tourism is now bidirectional; an increasing number of wealthy Chinese have begun to take holidays overseas, a luxury no Chinese living on the Chinese mainland dared to dream about a decade ago.

When he initiated the open policy, Deng Xiaoping said: "Opening to the outside world is of important significance. It is impossible for a country to develop if it should isolate itself and shut itself up."

Twenty years down the road, the momentum of opening up shows no signs of slowing. On the contrary, the more prosperous China becomes, the more vigorously and conscientiously the national will implement the policy of opening up. For in the nation's collective memory, poverty and economic backwardness were connected with self-imposed isolation -- an all-too evident fact just two decades ago.