Evaluation of the Degree of Opening to the Outside World in Guizhou Province

Kaifeng YU

Institute of Industrial Economics, Guizhou Academy of Social Sciences, Guiyang 550002, China

Abstract The goal of economic opening to the outside world is an important basis for formulating and implementing the policy of opening. Different economic development strategies have different requirements for the degree of economic opening to the outside world. Guizhou should implement the open economy and adopt the export-oriented development strategy, which objectively requires Guizhou to gradually improve the degree of opening to the outside world.

Key words Degree of opening to the outside world, Foreign trade, Utilization of foreign capital, Guizhou

1 Introduction

Opening to the outside world is conducive to making full use of both international and domestic markets and resources, giving full play to the comparative advantages and making up for the shortcomings. It is an indispensable condition for the reform and development of a country or region[1]. Guizhou, located in the southwest Yunnan-Guizhou Plateau, is an inland province. Objectively, Guizhou is required to seize the opportunity, constantly optimize and adjust the strategic pattern of all-round opening to the outside world, and speed up the development of Guizhou’s open economy.

2 Characteristics of Guizhou’s economic openness

2.1 Guizhou’s opening to the outside world has gradually increased, but fluctuated greatlyThe degree of opening to the outside world refers to the degree of economic and social opening of a country or region to the outside world, which is embodied in the degree of openness of the market. It is an important index to measure the scale of a country’s economic opening to the outside world and an important basis for implementing the policy of opening to the outside world. In the international community, the sum of the degree of dependence on foreign trade and foreign investment is generally chosen as the evaluation and measurement index of the degree of openness. The degree of dependence on foreign trade is the ratio of the total amount of imports and exports or the value of exports or imports to GNP or GDP, and the degree of dependence on foreign investment is the ratio of the amount of foreign capital utilized to GNP or GDP[2].

From the index of opening to the outside world, Guizhou’s degree of opening to the outside world fluctuated, rising from 4.54% in 2006 to 8.72% in 2015. From 2016 to 2018, the total volume of foreign trade imports and exports fell, and the degree of opening to the outside world dropped to 5.44%. Overall, the current openness of Guizhou Province is still relatively low, far below the national average (Table 1).

Table 1 Changes in the degree of opening to the outside world in Guizhou during 2006-2018

YearTotal importand export volume108 yuanForeign capitalutilized108 yuanGDP108 yuanDegreeof openness%2006100.285.822 338.984.542007140.927.872 884.115.162008208.969.243 561.566.132009143.058.313 912.683.872010195.1018.344 602.164.642011303.0341.765 701.846.052012411.1664.856 852.206.952013514.0094.628 086.867.532014670.50128.049 266.398.622015761.22154.6310 502.568.722016377.16197.2311 734.434.892017537.83257.4713 540.835.872018500.77304.0714 806.455.44

Data sources:GuizhouStatisticalYearbook.

Compared with Yunnan, Guangxi and Chongqing, it can be seen that the openness of Guizhou is lower than that of the three neighboring provinces and cities, and the weakness of Guizhou lies in the small amount of foreign trade. In terms of the total value of imports and exports, the total volume of imports and exports of Guizhou in 2018 ranked 27th in the country. Over the past five years, the total import and export volume of Yunnan, Guangxi and Chongqing has been 3 times, 6 times and 8.56 times that of Guizhou, respectively. On the one hand, Guizhou is an inland province, and lacks the convenience conditions of inter-market trade and small border trade in Yunnan and Guangxi. On the other hand, this shows that the level of foreign trade in Guizhou Province needs to be improved (Table 2).

Table 2 Comparison of the total import and export volume of four provinces and cities during 2014-2018108yuan

YearGuizhouYunnanGuangxiChongqing2014670.501 958.502 774.005 863.002015761.221 621.603 190.304 643.692016377.161 323.203 153.604 140.392017537.831 578.663 866.344 506.002018500.771 973.024 106.705 222.60Total 2 847.488 454.9817 090.9424 375.68

Data source: Provincial and municipal statistical yearbooks.

2.2 Rapid growth in the use of foreign investmentFrom 2006 to 2018, Guizhou introduced a total of 20.2 billion USD in foreign investment. In 2018, Guizhou’s foreign direct investment (FDI) was 4.486 billion USD, an increase of 15.3% over the same period last year, 50 times that of 2006. The proportion of FDI inflow in Guizhou increased from 0.134% in 2006 to 3.324% in 2018. In terms of industrial composition, 298 foreign investment projects were approved, an increase of 27.9%. The amount of foreign capital actually utilized in the primary industry, the secondary industry and the tertiary industry was 300 000 USD, 1.189 and 3.296 billion USD respectively, accounting for 0.01%, 26.51% and 73.48% of the total amount of foreign capital actually utilized in the province, respectively.

Compared with the surrounding Yunnan, Guangxi and Chongqing, the amount of foreign capital utilized in Guizhou in 2007 was only 25% and 20% of that of Yunnan and Guangxi. In 2018, the amount of foreign capital attracted by Guizhou reached 3 times that of Yunnan and 10 times that of Guangxi, indicating that good results have been achieved in the utilization of foreign capital. However, the gap between Guizhou and Chongqing was still large, and the amount of foreign capital utilized in 2018 was less than 50% of that of Chongqing (Table 3).

Table 3 Comparison of the utilization of foreign capital between Guizhou and its surrounding provinces and cities during 2016-2018

2.3 Remarkable results in attracting investmentIn recent years, with the continuous improvement of the three-dimensional traffic network in Guizhou, and the help of the three "national brand" experimental areas (China’s national ecological civilization experimental area, the national big data comprehensive experimental area, and the inland open economic experimental area), Guizhou has gradually become an active area of economic investment. In 2018, the province introduced 7 317 projects outside the province, with more than 1 000 excellent and strong enterprises with high technical content and good growth. The actual funds in place from outside the province broke through the trillion yuan mark for the first time, reaching 1.012 8 trillion yuan, an increase of 15% over the same period last year. In the whole year, 5 531 major industrial projects were introduced, accounting for 75.6% of the province’s total, an increase of 22.6 percentage points over 2017.

Compared with neighboring provinces and cities, Guizhou has been increasing its efforts to attract investment in recent years. It has made many breakthroughs in effectiveness, precision investment, platform construction, force integration, promoting investment "going out" and so on. In terms of amount of investment attracted, it overtook Yunnan in 2011, Guangxi in 2014 and Chongqing in 2018. The field of investment in Guizhou is getting wider and wider. With the optimization of Guizhou’s development conditions, advanced manufacturing industry, big data electronic information industry, health care industry, modern mountain characteristic and efficient agriculture, mountain tourism and other emerging industries in Guizhou Province are becoming new investment hotspots. At present, 215 top 500 enterprises including Qualcomm, Hewlett-Packard, Dell, IBM, Huawei, Lenovo, Foxconn and Alibaba, have settled in Guizhou, which has injected strong vitality into the high-quality development of Guizhou economy.

2.4 Continuous optimization of trade structure

2.4.1A surplus maintained in foreign trade. From 2006 to 2018, Guizhou had a foreign trade surplus, with exports more than three times the value of imports, and a cumulative foreign trade surplus of 35.76 billion USD, indicating increased competitiveness in the global market. In 2015, the trade surplus reached a peak of 7.98 billion USD, and the trade surplus narrowed in the past two years, mainly affected by fluctuations in export volume. With the technological progress and industrial upgrading of Guizhou, automobile and information and communication products are gradually put into production, and Guizhou’s foreign exports are expected to improve in the next few years. But there is still pressure for a sharp increase in surplus growth in the face of strong domestic demand (Table 4).

Table 4 Guizhou’s foreign trade surplus during 2006-2018100 million USD

2.4.2Rapid growth of processing trade. The foreign trade data from 2006 to 2018 show that Guizhou trade shows a diversified trend. Guizhou’s general trade import and export volume totaled 26.7 billion yuan in 2018, accounting for 53.3% of the total foreign trade value of the whole province. Imports and exports of processing trade totaled 21.066 billion yuan, an increase of 9.6%, accounting for 42.1% of the province’s total foreign trade value. Imports and exports by bonded logistics totaled 1.223 billion yuan, an increase of 33.5%, accounting for 2.4% of the province’s total foreign trade value. Before 2016, general trade was dominant, with processing trade accounting for less than 20%, and processing trade volume accounted for 46.6% of total imports and exports in 2018. General trade fell from 80.7% in 2006 to 54% in 2018. The rapid growth of processing trade shows that Guizhou is actively integrating into the division of labor and cooperation between domestic and foreign industrial chains.

From the point of view of the commodity structure of processing trade, upstream industrial products such as mechanical and electrical machinery and high and new technology account for a relatively high proportion. Guizhou is realizing the transformation from traditional processing trade to modern processing trade, realizing the deep processing and finishing in processing trade, prolonging the processing chain of processing trade, and improving the added value of processing trade products. Processing trade plays an important role in introducing foreign high and new technologies and the latest management methods, training high-tech talents and promoting the technological renewal of relevant enterprises, and improving the scientific and technological level and competitiveness of Guizhou’s export products (Table 5).

Table 5 Import and export of Guizhou in recent years during 2006-2018

YearTotal importsand exportsGrowth%GeneraltradeGrowth%ProcessingtradeGrowth%200616.17-13.06-3.11-200722.7340.5719.5649.773.171.93200833.7048.2630.3154.963.396.94200923.07-31.5418.95-37.484.1221.53201031.3836.0227.4244.703.96-3.88201148.8455.6443.3057.915.5439.90201266.3235.7959.3036.957.0226.71201382.9025.0076.9729.805.93-15.532014108.1430.45100.4330.487.7130.022015110.762.4296.53-3.8814.2384.57201661.50-44.4750.31-47.8811.19-21.36201781.2832.1649.66-1.2931.62182.57201873.78-9.2339.40-20.6634.388.73

2.4.3Further optimization of export commodity structure. From the point of view of product structure, mobile phones, electrical appliances, electronic equipment and other high-tech goods as the representative, are replacing traditional commodities as the main commodity. In 2018, imports and exports of mechanical and electrical products totaled 29.086 billion yuan, accounting for 58.1% of the province’s total foreign trade value. Of this total, exports totaled 17.254 billion yuan, accounting for 51.1% of the province’s total exports, and imports totaled 11.832 billion yuan, accounting for 72.4% of the province’s total imports. Imports and exports of services totaled 2 billion USD in 2018, an increase of 15% over the same period last year. From the point of view of the types of import and export commodities, mechanical and electrical, high-tech products and characteristic agricultural products maintained growth trend; the export of transport vehicles, instruments and metal products increased dramatically; the energy import increased quickly; there was increase or decrease in the import of metal mineral products and raw materials; the rate of increase in imports of agricultural products and mechanical and electrical machinery was obvious. This shows that the structure of import and export commodities in Guizhou has been continuously optimized, and the proportion of exports of high value-added goods has increased.

2.5 Rapid growth in foreign economic and technological cooperationIt insists on synchronizing high-level "bringing in" with large-scale "going out" and accelerating its integration into the Belt and Road Initiative.

First, the scale of foreign investment is at an all-time high. In 2018, the turnover of Guizhou’s foreign economic and technological cooperation was 1.2 billion USD, an increase of 9.1% over the same period last year. During the 12th Five-Year Plan period, the province’s cumulative investment put on record was nearly 1 billion USD, an increase of 9 856.6% over the same period. Net OFDI amounted to 455.32 million USD. At the end of 2018, the cumulative stock of Chinese foreign direct investment in our province exceeded 470 million USD.

Second, "Belt and Road Initiative" investment cooperation has made steady progress. Guizhou enterprises "go out" along the direction of "Belt and Road Initiative" to focus on three major regions, namely, Southeast Asia and South Asia, Eastern Europe and Central and Eastern Europe, Central Asia and Africa. For Southeast Asia and South Asia, it carries out all-round cooperation in making infrastructure construction, tire rubber, cement, papermaking, chemical fertilizers, pesticides, big data and other industries "go out" and trade. Facing Central Asia and Africa, it has carried out all-round cooperation in infrastructure construction, energy and mineral resources development, and promoted Guizhou’s engineering, energy and mining and manufacturing enterprises to carry out infrastructure construction and make two-way investment in Central Asia and African countries. At present, there are 22 overseas investment enterprises in the province having "gone out" to do business and invest in the United States, Singapore, Tanzania, France, Australia, Malaysia, the British Virgin Islands and other nearly countries and regions.

Third, the development momentum of foreign contracted projects is good. In 2017, the turnover of Guizhou’s foreign contracted projects was 861 million USD, an increase of 26.5% over the same period last year. The project covers 47 countries and regions, and a cumulative turnover of 506 million USD was completed in "Belt and Road Initiative" countries, an increase of 13.4% over the same period last year. A total of 2 806 various types of workers were sent, of which 2 774 were sent for foreign contracted projects. By 2020, Guizhou will focus on overseas engineering contracting and manufacturing investment and make new achievements in economic and trade cooperation with countries along the Belt and Road. It will strive to increase the number of enterprises successfully "going out" to 40, and the turnover of foreign economic and technological cooperation will exceed 1.5 billion USD. It will promote the construction of one or two major foreign projects each year.

3 The overall evaluation of Guizhou’s opening to the outside world

The relevant research results show that the comprehensive openness of Guizhou ranks last in China. In December 2018, the2018ReportonIndexofChina’sRegionalOpeningtotheOutsideWorld(Ten-yearProcess) issued by the International Cooperation Center of the National Development and Reform Commission showed that Guizhou’s degree of opening to the outside world has been relatively backward, lower than Tibet, Gansu, Ningxia, Qinghai, Xinjiang and other provinces and regions, ranked at the bottom[6].This highlights the low degree of dependence on foreign trade and the weak competitiveness of foreign trade in Guizhou Province compared with the national level.

The contribution of foreign trade to economic growth is negative. Consumption, investment and net export are the three major factors driving the economy, and they contributed to different degrees to economic growth. In 2018, the province’s fixed asset investment increased by 15.8% over the previous year, a growth rate of 9.9 percentage points higher than the national level (5.9%). In terms of consumption, total retail sales of consumer goods in Guizhou Province totaled 397.121 billion yuan in 2018, an increase of 8.2% over the previous year. Relevant data show that from the proportion of investment, consumption, and net exports in Guizhou Province contributing to the development of the national economy, the contribution rate of final consumer expenditure to GDP growth in Guizhou in 2018 was 44.1%, the contribution rate of total capital formation was 66.8%, and the contribution rate of net export of goods and services was -10.9%. It shows a state of (investment contribution rate+consumption contribution rate)>1, the contribution rate of investment to economic growth continues to increase, and the role of total investment in driving economic growth is still very obvious. This shows that the economic development model of Guizhou has not yet got rid of the characteristics of factor input, industrial pull, government leading and rapid growth. As far as the consumption-driven economy is concerned, the consumption rate is basically stable, the growth rate is not very obvious, and the contribution of consumption to economic growth is always within a certain range, so it is difficult to break through. As far as the economy driven by net exports is concerned, net exports have been pulling the economy in a negative direction, and net exports have soared in the negative direction at a rate several times higher than GDP growth rate, indicating that this trend is becoming more and more serious. The imbalance between the three factors makes the capacity formed by investment lose the power of demand, which means that the potential supply exceeds demand. This also means that it is becoming more and more difficult to rely solely on increasing investment to drive economic growth, and it is also more prone to cyclical fluctuations in economic growth.

According to the current economic, technological and social opening situation of Guizhou Province, we can judge that the degree of economic and social opening up of Guizhou Province is still at a low level. It still has a large gap with the whole country in foreign and regional economic cooperation, personnel exchanges and information flow, and the process of opening up to the outside world is far from complete. However, in the rapid development, both the breadth, depth and quality of opening are rapidly improving, and the position in the whole China is constantly moving forward. It is necessary to further strengthen the intensity of reform and opening up and continue to provide a new source of power for the transformation and development of Guizhou’s economy.

4 Recommendations: making every effort to build the upgraded version of Guizhou inland open economic experimental area

As an important node of "Belt and Road Initiative" and the middle zone of the Yangtze River economic belt and the Pearl River-Xi River economic belt, Guizhou is full of potential for growth. It is necessary to deepen reform in an all-round way, expand opening up in all directions, make every effort to promote innovation, continue to enhance the dynamic vitality to catch up later, build a good inland open economic experimental area; strive to achieve connectivity, and strengthen the construction of a platform; expand cultural influence, grasp key industries, focus on key areas, guide the direction of attracting investment, optimize the open environment, deepen regional cooperation, and strengthen the driving force for development[3].

We will vigorously develop foreign trade. Guizhou, as an underdeveloped inland area, has achieved remarkable results in attracting investment, but the deficiency lies in the need for vigorous development of foreign trade. It is necessary to support general trading enterprises to enrich import channels through the combination of "bringing in" and "going out." There is a need to give key support to the import of goods and trade in technology and equipment, energy, raw materials, consumer goods and agricultural products, key projects, goods related to the national economy and the people’s livelihood, and trade in technical services that are urgently needed. We will attach equal importance to imports and exports and enhance the value-added rate of processing trade[4].

We will reduce the cost of foreign trade logistics; encourage enterprises to organize combined transport by road, railway, and sea, so as to reduce the costs of intermediate links and reduce the costs of enterprises; integrate logistics channels and return sources to drive the expansion from one-way shipments to two-way shipments; promote the construction of a demonstration park for multimodal transport and study and open up a special line for freight chartered flights from Guiyang to Hong Kong.

We will open and innovate. In the face of the trend of the innovation of international economic, trade and investment rules, Guizhou is not ready to fully participate in dealing with the new global trade rules and the new order of economic governance, the integration with the international community is still not deep enough, and the level is not high. It is still limited to the use of some government preferential policies to attract foreign investment, lacking in top-level design and overall planning, and internal low-end repeated construction, homogeneous competition and other problems are still serious[5-6].