As the World Watches

　　The Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee，as expected， attracted much domestic and global attentionupon its conclusion on November 12. On therelease of the official communique， one of the majorquestions being asked by media and analysts is whatthe session means to the world economy.

　　A year after the 18th CPC National Congress， China’stop leadership has upheld the principle of makingsteady progress and solving problems while seekingdevelopment. As the communique reports， “Chinamust build on the paramount reality that it remains inthe primary stage of socialism and will long remain sowhile pursuing comprehensive， deeper reform. Chinamust stick to the strategic judgment that developmentis still the key to solving all problems in China.”In today’s world， where the future of the globaleconomy is uncertain and emerging economies arefacing increasing risks， confirmation that the world’ssecond largest economy is maintaining the samepath is good news to ensure stable growth of theglobal economy.

　　The session outcome demonstrates that China’score leadership is committed to and capable ofexecuting reforms. It also has the ability to overcomeimpediments from interest groups to push forward reformsthat conform to long-term interests of the stateand people. The communique says the leadership willplay the leading role of economic reform to promotesustainable and sound development of the economyand society. It also mentions the establishment of acentral leading team， which will be in charge of designing，coordinating and supervising implementationof reforms.

　　Good news for foreign investors isthat the plenum again is committed tosupporting development of an openeconomy. According to the communique，to adapt to the new situation of economicglobalization， China must advance openingup by facilitating a better combination of“bringing in” investment as well as “goingout” with investment， and promotean orderly and free flow of internationaland domestic factors of production andan efficient allocation of resources and deep marketintegration.

　　The communique reports that China is to relax investmentrestrictions and accelerate construction offree trade zones， with opening up further expandedin inland and border areas.

　　Since China is the world’s largest exporter， secondlargest importer and a fast-growing foreign direct investor，its attitude toward an open economy decides，to a great extent， the openness of the world economy.While many countries are regressing to trade protectionism，the plenum’s commitment to developingan open economy and expanding opening up will bepowerful support to the global free trade system.

　　Expanding the opening up of inland and border areasis important for China to promote balanced developmentbetween regions. China’s easternregion has already been highly developed，with levels of economic prosperityand people’s living standards reachingthose in moderately developed countries.Therefore the inland areas deserve moreattention from foreign investors. In fact，during the past decade， China’s central，western and northeastern regions haverecorded higher growth rates than theeastern region in fixed-asset investment，GDP， industrial output and foreign trade.In China， foreign investors can have alonger industrial life cycle， because Chinahas a vast territory and the regional developmentis imbalanced. Such a long lifecycle is unlikely in mostsmall and medium-sizedcountries. Regional developmentpolicies andguidance of industrialtransfers by the ChineseGovernment will fullyexpand this advantage inan orderly way.Also of good news toforeign investors is thatthe plenum pledged toaccelerate transformationof governmentfunctions and reducedirect intervention in themicro-economy.

　　According to thecommunique， Chinamust accelerate theestablishment of amodern market systemunder which businessesare allowed to operateindependently andcompete fairly， consumersare free to choose and spend， and merchandiseand factors of production can be traded freely andequally. The CPC has pledged to clear barriers inthe market and improve the efficiency and fairnessin the allocation of resources. It will also create fair，open and transparent market rules and improve themarket pricing mechanism. Land in cities and thecountryside， which can be used for construction， willbe pooled in one market， the financial market systemwill be improved， and reform of the science andtechnology system will be deepened. These aspectsmean that China’s soft environment for investmentwill be further improved， and its public services willremain efficient and continue to be improved.

　　Many innovative practices China created in attractingforeign investment have become examplesfor other countries to follow. To end some extremepractices， such as providing “super-national treatment”to foreign companies， does not mean Chinawill completely reject previous practices. On thecontrary， China will continue to abolish unnecessaryadministrative approval， expand market access，provide national treatment to foreign investors andimprove public services. With the completion of industrialization，industrial upgrades and urbanizationwill offer broad space for both domestic and foreigninvestors.

　　That China expands market access to foreign investorsdoes not mean it guarantees profits， but onlyoffers more opportunities for free competition. It isthe investors’ competitiveness that decides whetherthey will make profits or lose money and be washedout of the market.

　　In China’s process of rapidly improving people’swellbeing， the welfare crisis in Europe will not berepeated.

　　As an inevitable outcome of reform， China’s wagelevels keep rising. The Chinese Government is committedto ensuring that all its people share in thecountry’s development， and with the ongoing risein wage levels， the country will not use low-incomeworkers who reduce manufacturing costs， as anadvantage in international competitionThe goal of reform is to share the country’sachievements with all people， although this goal hasto be realized step by step. Against a bigger backdrop，one of the essential features of socialism iscommon prosperity， while social welfare and socialsecurity are among the means to share achievementsof reform and development and realize commonprosperity.

　　In a poll taken by Global Times before the plenum，79.1 percent of responders said they expected“reform of social welfare and social security system，”and 54.7 percent expected “reform of income distributionsystem.” The result indicates that emphasizingthe goal of common prosperity is in line with publicopinion.

　　However， every coin has two sides， as does China’sgrowth of resident income and improvement ofwelfare. On the one hand， it helps to expand effectivedemand and the scale of China’s domestic marketand then enhance the attraction of that market； onthe other hand， excessively high incomes will damageinternational competitiveness of a country. Fromthe heavily indebted countries in Europe we canlearn this lesson. Therefore we should not have overlyhigh expectations about the level of social welfareand social security.

　　The communique says that there will be an improvementin the system and mechanism promotingemployment and entrepreneurship， formation of anincome distribution structure that is reasonable andorderly and establishment of a social security systemthat is fairer and more sustainable. This indicates thatthe top leadership is aware of the above-mentionedrisks and committed to realizing sustainable development.

　　In the decade under Hu Jintao， the ChineseGovernment had already begun the reform processof income distribution and adopted some of thesemeasures. The measures adopted in the last decadecentered on getting rid of poverty and remarkableprogress has been made. In the coming decade，government measures will focus on expandingthe middle-income group. What is more importantshould be creating job opportunities with reasonableincomes， not just raising social welfare and securitybenefits.

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