No. 24No. 24 December December 2014 2014 China’s ‘Going Out’ Policy: Sub-National Economic Trajectories Aravind Yelery Visiting Associate Fellow, Institute of Chinese Studies, Delhi [email protected] got further elevated after China’s accession The China Council for the Promotion of to the WTO in 2001. Post-WTO accession, International Trade (CCPIT), a statutory organisation under China’s Ministry of China introduced the zou chuqu (走出去) or Commerce (MOFCOM), is the largest and the ‘going out’ strategy to facilitate its the most important institution for the global rise along with evolving mechanisms promotion of foreign trade in China. which would help in coping with various Established in 1952 to promote Chinese economic risks such as the 1997 Asian industries and trade, it remained ineffective financial crisis, Since then the CCPIT has until 1978, when the economy was finally become a key player monitoring the exposed to market forces and competition initiatives under this strategy. after the introduction of economic reforms. The establishment of two Courts of As export trade and economic collaboration Arbitration in 2014 – China International picked up pace after 1978, the role of the Economic and Trade Arbitration CCPIT changed considerably. China’s trade Commission (CIETAC) and China Maritime engagement with the outside world widened Arbitration Commission (CMAC) - to its scope of duties from nation-wide to address a variety of business and legal risks, international trade promotion, and as well as trade frictions which Chinese information and education of Chinese enterprises may face while pursuing their businesses to legal services, patenting, ‘going out’ policies (Beijing Time 2014), trademark, e-commerce guidance and underlined the significance of zou chuqu and handling international trade disputes. Its role the crucial role the CCPIT plays, as a result, the Party’s policy directive, the zou chuqu in China’s trading future. strategy emerged as a prominent force to drive local industries into new markets. The Making of the zou chuqu Before the policies of ‘going out’ were Strategy formalised, minjian xianxing (民间先行) or Towards the end of the 20th century, the ‘non-government (private) first’, was the Chinese political and economic institutions core value which guided the business were facing the challenge of reinventing involvement of Chinese enterprises outside themselves in order to keep the economy China (Peng 2011: 77). A number of airborne. Historically, since its opening up, entrepreneurs, particularly from Wenzhou the economy built its premises based on and Zhejiang, as a result, began venturing inherited experiences and difficulties. This into trade with international markets, re-invention aimed to make the economy including Africa, Middle East and Russia. capable of absorbing sudden market shocks, like the one caused by the 1997 Asian financial crisis, which had exposed the The CCPIT Councils follow vulnerabilities of Chinese export-led growth. localised trade and investment preferences based on industry- In order to secure its export-led growth rate, type and its international trade the Chinese state implemented a strategy to composition. This economic encourage its enterprises to pursue overseas sector-wise prioritisation is also investments and extend manufacturing factored into the region- beyond their safe-bases in China. Under this specific initiatives of these call for expansion, the enterprises were councils. encouraged to develop overseas processing and assembly operations. The Chinese state decided to shift its focus from welcoming Internal macroeconomic reasons provided foreign investments into China to the foundation for framing the strategy, diversifying Chinese investments abroad, by further including, one, the state’s concerns employing measures to internationalise their over economic uncertainties due to trade presence. This move – represented by the dependence on the manufacturing sector and zou chuqu or the ‘going out’ slogan – has two, the entrepreneurs’ need to rediscover a gathered momentum in recent years, with sustainable model of business expansion. Yi the emergence of India too, as a major xiang xitong gongcheng (一项系统工程), market for Chinese manufacturing units and translated as ‘engineering the (economic) investments. This has accelerated the sub- system’, is how the CCPIT Chairman, Jiang national engagements between India and Zengwei, has highlighted the core function China, as reflected in the growing number of of the ‘going out’ strategy (CTN 2014). This delegations from the Chinese provinces fundamental shift from ‘please come in’ (请 delegation visiting India. 进来 qing jinlai) to ‘going out’ was ground- The ‘going out’ strategy has been widely breaking for a country like China which had used across the Communist Party of China hitherto been a manufacturing hub based on and Chinese central government platforms FDI (CIRI 2014). since it first appeared in 2001. As a part of 2 INSTITUTE OF CHINESE STUDIES, DELHI ● DEC 2014 Apart from these macroeconomic reasons, Zou chuqu and Provincial Chinese provinces had adopted the ‘going out’ strategy to rationalise the local China industries’ need for international trade The provincial industries and their strategies as part of the national drive to financiers play a key role in devising and integrate the internationalisation of Chinese lobbying their respective interests through enterprises with the national interest of provincial governments. The provincial- justifying China’s global rise (FIE- level strategies clearly reflect the aspirations MOFCOM 2006; CMIN 2011; Wang 2014). of local industries; although the broad policy The ‘going out’ guidelines were made a part directives came from the Central Committee of government documents following its via MOFCOM, the local bodies comprising appearance in the 3rd Plenum of the 9th local business elites decided the final shape National People’s Congress (NPC) held in of these decisions. To enable the smooth March 2000 (Peng 2011: 77). implementation of these policies at the sub- national level, CCPIT Councils have been In October 2000, the 5th Plenum of the 15th set up at the municipal and provincial levels. NPC brought about further clarity in this These local councils follow their own strategy. For the first time, the ‘going out’ suborbital trajectories while keeping their strategy was regarded as one of the four new policies in line with the larger ‘going out’ strategies that would shape China’s plan for principles mentioned in the policy global economic integration and also documents issued by the Central Committee provide momentum to China’s pursuit of and the MOFCOM. The CCPIT Councils WTO accession (OCAO 2011). The other follow localised trade and investment three strategies which China forwarded preferences based on industry-type and its alongside ‘going out’ were the Western international trade composition. This Development Strategy aimed at addressing economic sector-wise prioritisation is also regional disparities, the urbanisation strategy factored into the region-specific initiatives 城 1 ( 镇化战略 chengzhen hua zhanlüe) and of these councils. This is particularly evident the talent strategy (人才战略 rencai in their policies towards Africa, Latin 2 zhanlüe) (CCPIT-EIC 2007; Li 2008; CPC America and the Caribbean (LAC) and India. 2008). Thus, the foreign trade and the ‘going out’ policy of Jiangsu and Anhui provinces, for 1 The urbanisation strategy was a new attempt to instance, may differ significantly from each accelerate the reform of urban development. Under other and the CCPIT councils from Zhejiang this strategy, the development of small towns was and Guangzhou may compete with each seen as crucial in promoting economic and social other while pursuing their respective India development in rural areas. Moreover, at the macro level, the drive to urbanise was deemed essential to policies. optimise the structure of agriculture and the rural economy and to increase farmers’ incomes to help alleviate the shortage of domestic demand, cater to pool of personnel assisting the overall economic agricultural surplus and pursue long-term growth. The 10th Five-Year Plan (2001-2005), which development of the entire industry and services by was unveiled during the same period, had a special developing a new market space. For more details, see chapter titled ‘Talent Strategy, Strengthen Personnel’, CPC 2000. emphasising human resource management.’ This was 2 The ‘Talent strategy’ aimed to develop and build the first time that China formulated a national soft infrastructure in the form of human resources. strategy to address its concerns over human resources This policy invested in training, attracting and using and to incorporate these into overall planning and talent as a major strategic task to build a high-quality layout of economic and social development. INSTITUTE OF CHINESE STUDIES, DELHI ● DEC 2014 3 The ‘going out’ strategy is interpreted approval by the NDRC. Chinese companies differently by every provincial government, planning to invest less than US$1 billion based on China’s uneven industrialisation overseas ‘will only need to register with pattern. This explains the varied responses authorities rather than get approvals from of the provinces in terms of investment, the NDRC’. These reforms are likely to apart from implying the limited further increase the potential of Chinese preparedness of these provinces to embark investments in India. upon a ‘going out’ plan. For instance,