On Aug 26, Minister of Commerce Wang Wentao elucidated in Hong Kong the spirit of the third plenary session of the Communist Party of China Central Committee. He urged Hong Kong to play a more significant role in the country’s opening-up process.
He pointed out that Hong Kong’s strategic position and role will become increasingly prominent as the country faces “gargantuan changes unseen in a century”. It must be a superconnector and super value-adder to connect the world and perform an increasingly important role in the motherland’s efforts to form a new opening-up configuration. For example, he said that as a bridge for the country’s international trade, Hong Kong is a separate customs zone, a free port, and the Chinese mainland’s fourth-largest trading partner. At the same time, Hong Kong has long been the mainland’s largest source of investment. As of May last year, Hong Kong and Macao had invested $1.7 trillion in the mainland, accounting for nearly 60 percent of the external investments entering the mainland. Accordingly, Hong Kong has manifest competitive advantages in finance and trade.
One of the central goals of the “one country, two systems” policy is that Hong Kong can serve the country’s reform and opening-up by leveraging its unique advantages. The resolution of the 20th CPC Central Committee comprehensively outlines China’s strategy for deepening reform and expanding opening-up in the new era. Hong Kong should naturally enhance its unique advantages and cultivate new unique advantages to complement and support the country’s opening-up strategy effectively and actively respond to the expectations of the central government.
The notion of gargantuan changes unseen in a century covers many areas. As far as the country’s opening up to the outside world is concerned, they mainly allude to several phenomena: China’s miraculous rise, the US-led West’s all-around containment of China, especially in the fields of science and technology, deglobalization, the surge of protectionism, unilateralism, populism and isolationism, the “weaponization” of the US dollar, the breakdown of the international political and economic order, the decline of Western hegemony, the confrontational stance of political and economic coalitions forged by the US and the West, the incessant pursuit of strategic autonomy by some regional powers, the fracturing and reorganization of industrial and supply chains, the emergence of new international groupings and networks for economic and strategic cooperation, the constant changes in global economic, trade and financial games and rules, etc.
The central government has reshaped its opening-up strategy in response to these gargantuan changes unseen in a century. This strategy was gradually conceived and implemented over 20 years ago and was presented in detail in the resolution.
First of all, even though the US-led West has maneuvered flagrantly to contain China’s economy, including “decoupling” in trade, imposing heavy tariffs on Chinese exports, inciting Western funds to withdraw from China, restricting Chinese companies’ investment in the West, imposing controls on exports to China, and doing their best to suppress China’s high-end science and technology sectors, nevertheless, since they still need to import a large number of goods from China, the Chinese market is still of the utmost importance to American and Western companies. The trade and investment between China and the West will remain sizeable in the foreseeable future. Meanwhile, China will still attach great importance to the markets of the US and its allies in its opening-up strategy because, at least in the short term, it will still be difficult for the markets of emerging economies and developing countries to replace those of the US and its allies. For this reason, China will still do its best to maintain economic and trade ties with the US and its allies but will also assiduously use the World Trade Organization and other international institutions to counter their unfair treatment of China, and actively participate in the reform of the global economic governance system.
Second, in the long run, China must open up a vast new economic and trade space in the non-Western world. The ultimate strategic goal is to create an enormous regional economy in Eurasia, with China in a leading position. The Belt and Road Initiative, BRICS, the Shanghai Cooperation Organization, and Regional Comprehensive Economic Partnership, among others, are crucial in this strategy. Among them, the BRI is critical, so the resolution calls for improving and promoting high-quality joint construction of the BRI cooperation mechanism. After establishing this Eurasian regional economy, the attempts of the US and its allies at strategic encirclement, blockade, and containment of China will collapse on their own.
Third, China will improve high-level opening-up systems and mechanisms to expand foreign trade, investment, and attraction of foreign capital. Specific policies include building a unified national market, improving the basic market economy system, steadily expanding institutional opening-up, deepening the reform of the foreign trade system, and deepening the reform of foreign investment and investment management systems. The overall goal is to create a fair, reasonable, dynamic and opportunity-filled business environment and a large-scale market for foreign-invested enterprises, and to support Chinese enterprises and the service industry to “go global”.
Fourth, in Beijing’s eyes, the “weaponization” of the US dollar is the most destructive tool the US can use to harm China. After the outbreak of the Russia-Ukraine conflict, the US and its allies imposed extremely severe financial sanctions on Russia. The principal means was to expel Russia from the US-dollar payment system, making it difficult for Russia to engage in international trade. The US has turned the US dollar, which was initially considered a “public good”, into a weapon to sustain US global hegemony and cripple rivals. This cannot avoid making China and other countries feel threatened, worried, and angry. China has perforce to gradually eliminate its dependence on the US dollar to safeguard national security, and the renminbi internationalization strategy has been devised. The resolution vows to “promote high-standard opening-up of the financial sector, steadily and prudently advance the internationalization of the RMB, and develop offshore RMB markets”, as well as to “make steady progress in the research and development, and application of digital RMB”.
For Hong Kong to better serve the country’s opening-up strategy, as Wang said, “Under this situation, Hong Kong needs to integrate into the national reform trend, consolidate and enhance Hong Kong’s unique status and advantages, and at the same time actively connect with the upcoming 15th Five-Year Plan (2026-30) and the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, and fully seize the opportunities brought by the country’s development. Especially in the face of major changes unseen in a century, Hong Kong’s strategic position and role will become increasingly prominent, and it must be a superconnector and super value-adder, connecting the motherland with the world under the steadfast support of the nation.”
Regarding the main parts of the country’s new opening-up strategy, Hong Kong can connect with the national strategy in four aspects.
First, despite the US-led West’s continuous suppression and smearing of Hong Kong, the city must still do its best to maintain economic, trade and financial relations. Even though they endure substantial political pressure and legal restrictions, many American and Western companies are still willing to invest in Hong Kong. They still believe that the city is a valuable bridge between the mainland and the wider world, and that this role will be increasingly important as the Chinese market continues to expand and open up. In addition, the trade between Hong Kong, the US, and the West benefits them. The US enjoys a considerable trade surplus with Hong Kong. Hong Kong is instrumental in maintaining US dollar hegemony as an international financial center operating a linked exchange rate system pegged to the US dollar. Therefore, even if Hong Kong’s economic ties with the US and the West weaken in the future, Hong Kong will never significantly “decouple” from the US and the West, and Hong Kong will still be the economic bridge between them and the mainland. At the same time, Hong Kong should use its international status and influence to work in tandem with the central government to promote globalization and reform global trade and financial institutions.
Second, Hong Kong must vigorously explore new international economic space, gradually reducing its dependence on the US and the West. With the support and assistance of the central government, Hong Kong should actively expand economic and trade relations with BRI-participating countries, particularly those of ASEAN and in the Middle East. From a long-term strategic perspective, Hong Kong must become an essential hub for finance and trade for the Eurasian regional economy. As a hub, Hong Kong can play a role in closely connecting China and other countries through the BRI. At the same time, Hong Kong can also play a role in connecting countries along the Belt and Road with the Western world.
Third, since the country’s reform and opening-up process started, Hong Kong has always played a role in attracting investment to the country. As the country’s economy thrives, Hong Kong has become an essential channel for mainland capital and enterprises to “go global”. As the country further deepens reform and expands opening-up, Hong Kong’s role in the country’s “bringing in” and “going global” strategies will only increase. Hong Kong’s finance, law, services, institutions and rules, which align with international standards, talent familiar with overseas situations, and extensive and close international connections, will enable Hong Kong to fulfill this function. The current urgent task is for Hong Kong to participate more actively in constructing the Greater Bay Area.
Fourth, as an international financial center and the biggest handler of offshore RMB, Hong Kong is able to support and cooperate with the country’s RMB internationalization strategy in many aspects. It is estimated that when risks are controllable, the central government will significantly expand the RMB capital pool in Hong Kong, allowing overseas markets, institutions and individuals to have more channels to obtain RMB for trade, investment, settlement, and reserve purposes. For example, China partnered with the Bank for International Settlements (BIS) to establish a renminbi liquidity facility to support central bank funding in emergencies. The Hong Kong Monetary Authority and the central banks of Chile, Indonesia, Malaysia and Singapore have each pledged $2 billion to the reserve pool in Basel, Switzerland, where the BIS is based. Hong Kong can also actively bolster China’s cross-border interbank payment system and promote digital renminbi. In addition, if the payment system of the BRICS countries is successfully launched, Hong Kong can also play a helpful role.
However, to better support and cooperate with the national opening-up strategy, Hong Kong must plan its development strategy scientifically and comprehensively and integrate it with the national development strategy. More importantly, Hong Kong needs to continuously strengthen its inherent unique advantages under “one country, two systems” and cultivate new unique advantages to support and complement the country’s opening-up strategy. This will inevitably involve talent cultivation and imports, reforms of Hong Kong’s institutions, laws and administrative regulations, strengthening government leadership and coordination, construction of advanced transportation and information hardware and software, concerted efforts from all walks of life in Hong Kong, improvement of Hong Kong’s business environment, multiplication and diversification of Hong Kong’s international linkages, among others.
The author is a professor emeritus of sociology, the Chinese University of Hong Kong, and a consultant for the Chinese Association of Hong Kong and Macao Studies.
The views do not necessarily reflect those of China Daily.
