In the immediate wake of the 19th National Chinese Communist Party Congress, China’s state media has said that a more open economy will be a key characteristic of the “new era of Socialism with Chinese Characteristics,” while invoking both Adam Smith and ancient Chinese philosophy in defence of free trade.
Given the economic importance of its huge manufacturing and export sectors, China has expressed increasing concern about the rising wave of protectionism amongst other major economies, with a recent People’s Daily editorial lambasting what it considers efforts by the West to stifle the free movement of goods and capital.
China is intent upon waging a polemical battle against globalprotectionist sentiment, with the publication of another editorial in support of free trade entitled “The New Era Calls for a High Level Implementation of Opening” (新时代呼吁更高水平的开放实践) by Xinhua’s Economic Information Daily,
Zhang Yuyan (张宇燕), head of the World Economic and Politics Faculty of the Chinese Academy of Social Sciences, points out in the editorial that an open economy lies at the core of the vision outlined by President Xi Jinping for the future of the Chinese economy.
In his report at the 19th National CCP Congress Xi said that “opening brings progress, closure by necessity means falling behind,” making an explicit link between economic openness and prosperity.
In his Xinhua article Zhang seeks to give intellectual imprimatur to China’s drive for economic openness, by invoking Marxism, Adam Smith, David Ricardo and ancient Chinese philosophy.
“Classical English economics is one of the there main sources of Marxism,” writes Zhang. “Adam Smith is the main representative of classical English economics, and in his landmark work ‘The Wealth of Nations, he engages in focused discussion of the logic behind the prosperity and development of a nation.”
Zhang makes reference to what the Chinese refer to as the “Smith Theorem” (斯密定理) as a reason for supporting free trade and economic openness.
“Smith points out that the division of labour and the level of specialisation increase as the size of a market expands. If we remove the middle link we obtain the the ‘Smith theorem:’ economic prosperity is derived from expansions in market scale.
“The policy implication of this is free trade and participation in the international division of labour.”
In addition to Adam Smith, Zhang also makes reference to David Ricardo’s theory of comparative advantage, as well as the works of ancient Chinese philosophy which he claims concur with the tenets of classic economics.
“Over two thousand years ago, Chinese philosophers and historians also provided precise descriptions of the link between free trade and economic prosperity,” writes Zhang.
According to Zhang the “Chronicles of the Grand Historian” by Sima Qian advocates the benefits of free trade, while the Taoist classic the “Huan Nan Zi” makes reference to labour specialisation and comparative advantage.
Zhang sites economic liberalisation and free trade at the core of the Xi administration’s ideology, as well as Socialism with Chinese characteristics.
“Since the 18th National CCP Congress, the central party system with Comrade Xi Jinping at its core has summarised the rules for the establishment of Socialism with Chinese Characteristics, and included openness amongst its five major development concepts.
“As Socialism with Chinese Characteristics enters a new era, comprehensively raising the level of the open economic model…has already become a necessary mission.”