Foreign Trade Stokes China's Economy

Of course, in focusing on domestic demand China should not overlook international markets. The country's 2012 government work report also stressed China should endeavor to promote the quality and level of its opening up to maintain steady development in its foreign trade.

Foreign trade creates a win-win situation that benefits China and its trading partners. This comes from two aspects: firstly, China continues to meet its foreign partners' demands for China-made products; and secondly, free trade will bring Chinese enterprises many valuable opportunities to enjoy advanced technologies brought in from overseas.

Statistics from the General Administration of Customs indicated China's 2011 foreign trade volume topped US $3.642 trillion, up 22.5 percent year on year, setting a new record. From this total, exports amounted to US $1.899 trillion, seeing a year-on-year increase of 20.3 percent, and imports were valued at US $1.743 trillion, an increase of 24.9 percent. The country's trade surplus dropped by US $26.37 billion to US $155.14 billion, falling 14.5 percent year- on-year.

"The main cause leading to the drastic drop in China's trade surplus is the current unfavorable environment for foreign trade. The impact of the global financial crisis is still being felt around the world and in some places the situation is even worsening. The European debt crisis, for example, has greatly dampened European consumption. In China, various factors are driving up domestic production costs," said Minister of Commerce Chen Deming.

"We hope European countries are able to encourage employment and promote economic growth while cutting budgets," Chen said. Recently, China's trade with European countries and Chinese enterprises' investment, mergers and acquisitions in those countries have seen sharp uptick. These activities all directly create jobs in Europe. "The EU is China's largest trading partner, and also the biggest technology exporter to China. Prosperity and growth for European countries is closely related to China's development. To help European countries out of their current predicament is to help ourselves," Chen added.

CPPCC members and NPC delegates said that although world markets are grim, China has no desire to adopt trade protectionist measures. "Trade protectionism only worsens global trade imbalances and hampers recovery," said Ma Xiuhong, a CPPCC member and former vice minister of the Ministry of Commerce.

Opening up While Zooming in

The Chinese government has taken the improvement of the local investment environment as a key to absorbing foreign investment. Since Deng Xiaoping's tour of southern China in 1992, during which he made famous remarks on accelerating the nation's opening-up and reform, China's environment for foreign investment has been constantly improving. Last year the value of received foreign direct investment (FDI) increased by 9.7 percent to US $116 billion, making China the top FDI recipient among developing countries.

A better environment was created for foreign investment in modern agriculture, strategic emerging industries, modern services and high-end manufacturing. Sectoral distribution of FDI has become more rational as FDI in services increased significantly faster than the average rate across all sectors. The absolute value of FDI in services is now bigger than FDI in manufacturing. FDI also became more widely dispersed geographically. A number of provincial-level development zones in China's central and western regions, such as the Korla Zone in Xinjiang Uygur Autonomous Region, were elevated to national development zones.

Stronger support was also channeled into infrastructure construction in national development zones and border cooperation zones last year.

Significantly for sustainable development, FDI was to be found across a broader range of business activities. Cooperation in eco industries accelerated as the China-Germany Eco-park in Qingdao was opened and the number of joint projects with other countries, including Japan, Switzerland and Austria, saw steady growth.

"In the coming five years, China's industrialization and modernization will continue to gain pace. Energy saving technologies, emission reduction schemes and green development will bring more development opportunities to China's economy. The development of civil causes and culture industries will also instill new blood into the economy. All of this will create more opportunities for investors, including foreign ones," Ma said.

Meanwhile, thanks to improved government planning and policy support, "going global" efforts by domestic businesses have gained new impetus. Construction is moving ahead on 16 overseas trade and economic cooperation zones. These have already become the preferred locations for Chinese companies investing abroad. In 2011, China's non-financial outward FDI amounted to US $60.1 billion, and this total is set to increase significantly in years to come.

"The nation is right now quickening the steps it has taken in making outbound investments," Premier Wen said at the 2011 session of the NPC. "The government will guide companies in making expedient investments, largely through mergers and acquisitions, in energy, raw materials, agriculture, service and infrastructure industries."

This year marked the first occasion on which the Premier elaborated on industries that are to be targets for Chinese outbound direct investment. Global investments by Chinese businesses not only create new growth opportunities for their shareholders and China but also create jobs and revenues in host countries.

"Expanding domestic demand and opening-up are closely connected and part of an integral whole," said Zhang Xiaoji, director of the Foreign Economy Research Department of the Development Research Center of the State Council. "The strategy of expanding domestic consumption and tapping the domestic market doesn't negate China's opening-up. On the contrary, the new policy heralds a new era in opening-up. In the last 30 years, China has cultivated a massive domestic market with huge potential. This market appeals to foreign capital, which can help alleviate China's dependence on exports for growth. Expansion of domestic demand is also an effective way to move domestic production away from low value-added industries and enable China to begin exporting higher quality goods to the world," Zhang said.

He stressed that expanding domestic demand is not a denial of expansion into overseas markets. On the contrary, China still needs to expand further into overseas markets, the key enabler of which is to cultivate a high quality global sales network. In recent years, more people have become aware of the fact that certain multinational corporations purchase Chinese products at low prices and sell them in overseas market at incredible mark-ups. Chinese manufacturers receive a comparative pittance. The reason behind this skewed distribution of profits actually lies in China's lack of a global marketing network. Contemporary global production and business operations rely on such a sales network to enhance countries' global presence. The key to expanding and upgrading China's "opening-up" imperative lies in the establishment of an international production and operation network, which will ensure China's advantages in manufacturing are transformed into China's profits on exports," Zhang said.

No country can prosper by shutting itself off from the world, but nor can a country make good by ignoring its own people. In short, expanding domestic demand will be crucial to ensuring prosperous economic lives for the Chinese people. In the years to come, "opening up while looking in" is set to be a new paradigm.