The Next Phase of China’s Reform and Opening Up
Over the last four decades, China has made major progress on integrating into global networks. But it has a lot more work to do – and must do it while confronting an increasingly hostile external environment.
HONG KONG – Over the last four decades, China has integrated into global networks in trade, finance, data, and culture (encompassing social values, religion, and political beliefs). But, as the United States embraces protectionism, continued progress on global integration will require China to adjust its approach.
Since the 1980s, China’s approach to development has centered on experimentation and phased implementation. Thanks to this “pilot and expand” strategy, in 2013 – 12 years after acceding to the World Trade Organization – China became the world’s largest trading economy (for goods). In 2018, its trade-to-GDP ratio stood at 38%, substantially higher than that of the US (27% in 2017).
As for financial markets, China’s leaders have been adamant about ensuring that liberalization will occur only when domestic exchanges and the regulatory framework are robust and credible enough to manage the relevant risks. So policymakers have pursued a two-tier, phased strategy that capitalizes on Hong Kong’s unique position in the Chinese and international markets.