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With a degree of caution
2021-12-15 16:52:00

China Daily Global 2021-12-15

With a degree of caution

ZHANG Yuyan

Countries need to strike a balance with their national conditions when opening up

Opening-up means carrying out exchanges at the economic, social and cultural fields to facilitate the flow of goods, services, personnel, capital, information, knowledge and technology.

Economy spearheads global opening-up practices, which can later extend to social and cultural sectors. And economic opening-up has long been dominated by cross-border trade.

Using cross-border trade as the basis, a theoretical model of opening-up to the world can be established, which involves the policies and the performance of two-way opening-up in the fields of the economy, society and culture. In this way, weighted indicators are employed to construct the World Openness Index in order to measure the openness of each economy and the world as a whole.

The openness of the global market has been shrinking over the past decade. The World Openness Index declined by 4 percent from 2008 to 2019, which peaked in 2008 while declining to the lowest point in 2018.

The decline can be attributed to the shrinking openness of countries in North America. Only two of the seven regions across the globe saw declining openness. The openness index of North America has declined by 16.3 percent, and that of Latin American and Caribbean States dropped by 0.7 percent. The openness index of the United States dropped by 17.8 percent, with its ranking on the list of openness declining from first place to third, seventh, 10th, 19th and 22nd successively in the period from 2008 to 2014.

Among the 129 economies listed, 27 economies saw shrinking openness while the other 102 experienced expanding opening-up. Nepal saw the fastest growth in its openness. The Republic of Korea ranked the fifth for the expansion of its openness and China ranked eighth.

China participates in global affairs in various fields, and it has continued to expand its opening-up since 2008, especially after the 18th National Congress of the Communist Party of China in 2012. After 2008, China's openness index has risen year by year. Its ranking on the global openness list rose from the 62nd in 2008 to the 40th in 2019.

China's steady expanding of its opening-up has stabilized global openness, making it a major contributor to the openness of the world.

The degree of openness of most economies, particularly large economies, undergoes a U-shaped evolution following their improving economic development level, while that of small economies is usually a rising line of increasing openness, or a horizontal line without a significant upward or downward trend.

Admittedly, the size of an economy and its economic development process contribute partially to the level of its opening-up. In reality, a more complicated scenario is that many countries and regions have experienced a bumpy and on-off economic development process, without a unified and clear track.

Therefore, a country needs to keep the level of its openness under control. Appropriate openness means balanced openness. It is not that the greater and faster an economy opens up, the better it will be for its economic development. Its level of openness should meet with the needs of its actual internal and external situations.

Both history and reality have shown that economies have had different experiences in opening-up, whether in terms of fields, levels, processes or outcomes. Opening-up practices vary for different economies or for the same economy in different development stages. Understanding these similarities and differences in opening-up is essential for a thorough understanding of the opening-up process.

Based on the analyses of the conditions of 129 economies in 2019, research findings show the complicated relations between openness, economic growth and the scale of an economy.

The world still has great openness potential. In 2019, Singapore had the highest level of openness among our sample economies, but its openness index is still significantly lower than the theoretical upper limit and even lower than the highest value during the sample period from 2008 to 2019. In addition, as far as the openness in cross-border personnel, knowledge and technology is concerned, it still has great potential to tap.

An economy's economic growth is positively correlated with its openness, although such positive correlation will become stronger or weaker, or become looser or closer, due to the heterogeneity of the economy. But the more open one economy is, the more developed it becomes an indisputable fact. Expanding openness is in the common interest of mankind, so we should be full of confidence in the prospects for the world's openness in the future.

An economy should follow the principle of seeking truth from facts as it opens up. Its opening-up should be based on its need to promote reform and development, take into consideration the special characteristics of its national conditions and its need to improve its capabilities so that policymakers can properly manage the extension, level and speed of opening-up.