China's total import and export trade is more than 500 billion US dollars, but there is only a surplus of 100 billion US dollars, because China's service trade deficit is very large, there is a deficit of 300 billion US dollars. Huang Qifan believes that the exploration and promotion of the pilot free trade zone will bring the spring of China's service trade in the next few years.
He had unique views on China's economy, turning an inland city into a "highland" for opening up, and was also known as the "mayor who knows the most about finance".
On the morning of December 8, the 2019 (18th) annual meeting of Chinese enterprise leaders hosted by China Entrepreneur magazine was held in Beijing. With the theme of "decisive 2020", hundreds of business leaders, such as Dong Mingzhu, Liu Yonghao, Chen Dongsheng, Wang Shi, song Zhiping and Zong Qinghou, gathered at the annual meeting, and thousands of industry leaders were present. Mr. Huang Qifan, vice president of China International Economic Exchange Center and former mayor of Chongqing, delivered a keynote speech entitled "the exploration and promotion of free trade zone will bring new height, depth and breadth to China's financial industry and service trade".
In his speech, Huang Qifan said that there are two shortcomings in China's economic opening up, namely, the opening up of the financial industry and the opening up of service trade.
Huang Qifan is familiar with economic data. He gives a figure: of China's nearly 200 trillion financial assets, only 1.8% are foreign financial institutions. In contrast, foreign enterprises account for 30% of the same nearly 200 trillion industrial and commercial assets. In terms of trade, service trade and goods trade add up. China's import and export trade totaled more than 500 million US dollars, but there was only a surplus of 100 billion US dollars. Because China's service trade deficit was very large, there was a deficit of 300 billion US dollars.
Looking at the essence of the problem, Huang Qifan believes that better institutional reform can further deepen China's reform and opening up. For the opening up of the financial industry, from April last year to October this year, under the overall leadership of the financial stability and Development Commission of the State Council, the people's Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission successively issued 64 specific measures for opening up the financial industry; and in terms of service trade, the pilot free trade zone is an important exploration to promote change.
At the end of the speech, Huang Qifan said, "China's reform and opening up will have a new height, depth and breadth, in the process of financial opening up and service trade opening up, in the exploration of the free trade pilot area."
The following is the full text of Huang Qifan's speech at the 2019 (18th) annual meeting of Chinese business leaders sponsored by China Entrepreneur Magazine:
It's a great pleasure to attend the 18th annual meeting of China's business leaders. The title of my speech today is "the exploration and promotion of the pilot free trade zone will bring new height, depth and breadth to China's financial industry and service trade".
Two short boards in development
After 40 years of reform and opening up, our country has made great achievements in all aspects. The economic scale has been equivalent to 4% of the U.S. GDP in that year, and now it is equivalent to 64%; from 1% of the global GDP to 16% of the global GDP. We have become the world's second largest economy and the world's largest import and export trading country.
However, we still have two short boards: first, there are still bottlenecks in the opening up of our financial industry; second, the opening up of our country's service trade still belongs to the short board in the economic opening up.
1. "Limit" of financial industry
In terms of financial industry, when Pudong was developed in 1990, the state announced that foreign capital was allowed to run banks, insurance companies, securities companies and other financial institutions; after the WTO in 2000, the whole China was also open to foreign financial institutions in general. However, up to now, foreign financial institutions account for only 1.8% of China's nearly 200 trillion financial assets, which is very low.
It is also open to the outside world. Of China's nearly 200 trillion industrial, commercial and industrial assets, foreign-funded enterprises account for 30%. This data shows that the openness of China's industrial and commercial industries is relatively thorough, while the openness of the financial industry is limited.
This kind of "limit" is shown in three aspects:
(1) in many financial fields, there are different treatment before foreign capital access;
(2) in some access areas, foreign capital can run banks, securities and insurance, but the proportion of equity is limited, for example, the proportion of equity can not exceed 25%, 49%, can not hold shares, sole proprietorship and so on;
(3) for the legal person license and business scope allowed to be registered, if there are 50 business terms, only 18 or 20 terms may be allowed for foreign investment. In this way, foreign capital can not enjoy the same national treatment as domestic financial institutions.
In a word, the overall opening-up, but there are many specific constraints, making the development of foreign financial institutions not in place.
2. Bottleneck of service trade
The second short board is our country's service trade.
Our country's trade in goods increased more than 200 times from $20 billion in 1979 to $4.3 trillion last year. But there are many problems in service trade. Our export of service trade last year was 200 billion US dollars; our import was more than 500 billion US dollars, with a deficit of 300 billion US dollars. In fact, the total deficit of service trade among all countries in the world is 700 billion US dollars. We account for 300 billion US dollars, 40% of the world's deficit.
Americans always say that they have suffered losses in trade. In fact, our country's trade in goods has made more than 400 billion US dollars, with a surplus of 400 billion US dollars, but our trade in services has a deficit of 300 billion US dollars.
Service trade and goods trade add up. China's import and export trade totaled more than $500 billion, of which only a surplus of $100 billion. So, on the whole, our service trade deficit is very large, which is the largest in the world.
At the same time, China's service trade is labor-intensive. Of the 200 billion US dollars of service trade exports, a considerable part of them are tourism and labor-intensive service trade. They are foreign tourists traveling to China. We have made service trade income. Most of the more than 500 billion US dollar service trade imports are capital intensive, resource intensive, knowledge intensive and high value-added. So in this sense, our service trade has its own shortcomings.
Therefore, further opening up of our country requires a new height, depth and breadth. Where is it? It is to eliminate the short board of opening up of the financial industry and solve the problems of service trade deficit and low added value. We are very pleased to see that 2019 is a start year for China to resolve these two shortcomings. In the next five to 10 years, I believe that these two shortcomings will be solved in China's new opening-up measures.
Measures for opening up of financial industry
First of all, general secretary Xi Jinping announced the need for further opening of China's financial industry at the Boao conference last year. Specifically, he talked about the equity ratio of banks and insurance companies, as well as the requirements for broadening the scope of business.
Subsequently, from April last year to October this year and a half, under the overall leadership of the financial commission of the State Council, the people's Bank of China, the China Banking Regulatory Commission and the CSRC successively issued 64 very specific measures for opening up the financial industry. Among them, the financial committee of the State Council has issued 11 measures, the people's Bank of China has issued 15 measures, the CBRC has issued 18 measures, and the CSRC has issued 20 measures.
These 64 articles are generally divided into three categories:
The first category is pre access national treatment. This kind of business can be opened and foreign-funded financial institutions can be set up. Like domestic financial institutions, foreign-funded financial institutions can enjoy the same national treatment before access, which is a measure to relax market access. There are 24 such measures;
The second is that after access, the share proportion of various types of financial institutions will be liberalized. For example, 25% of the shareholding ratio can be increased to 50% and 60%, and even can be controlled, wholly owned and so on. There are 11 measures to liberalize the equity ratio of Sino foreign joint ventures;
The third category is the deregulation measures for the business scope and business varieties of foreign-funded financial institutions, with 29 items.
There are 29 terms of business scope, 11 terms of market equity ratio and 24 terms of market access. If you know something about it, many large financial institutions, whether in the United States or Europe, are making plans one by one, starting to apply for registration of financial institutions in our country, adjusting the equity ratio and so on.
I believe that in the next five to 10 years, when these measures are gradually put into practice, the proportion of foreign financial institutions in assets may increase from 1.8% now to 10% or even 18%. This has three benefits for China's financial system:
First, it will bring in tens of billions, hundreds of billions of dollars of registered capital or operating capital, which is the new driving force of China's economy;
Second, dancing with wolves, foreign financial institutions will not only bring capital, but also technology, management and international experience. Our domestic financial institutions will dance with wolves, but also force their own business level openness and transnational management ability;
Third, in the face of Sino-U.S. trade frictions, possible international trade wars against China, especially in the face of financial wars, when foreign financial institutions conduct more business in China, this is actually a very good preventive measure of "you have me, I have you".
In general, of the 64 measures involving three aspects, we can see the direction of overcoming the short board in terms of the weak links of foreign investment in financial institutions.
Why is there a bottleneck in China's service trade?
Next, it is the short board of our service trade.
China's service trade is relatively poor, and our goods trade is one sky, one underground, not the same day. However, it is not the lack of capacity of tens of millions of trading companies, nor the problem of enterprises. It is our limited openness in service trade, which makes many of our service trade impossible to do, and can only be done by foreign enterprises.
For example, China has $4.3 trillion in imports and exports. Goods import and export are bound to have clearing and settlement, logistics and warehousing around the world, credit insurance and goods safety insurance, all of which belong to transnational service trade. This is our own $4.3 trillion import and export goods. Why are 70% and 80% of the transnational service trade businesses conducted by foreign enterprises, rather than our Chinese financial institutions, logistics enterprises and trading companies? There are many specific and institutional reasons.
China has the largest industrial manufacturing industry in the world, and there are various production-oriented service industries between the industrial chains of industrial manufacturing industry. But now more than half of the commodity manufacturing industry adopts transnational industry chain services, which belong to service trade, including R & D, logistics, clearing and settlement. Among them, about 80% of all industrial chain financial services occur in Hong Kong, Singapore, Dubai, Ireland or Seoul, China. Although people do manufacturing and supply chain services in China, companies are registered in these cities.
This is to ask a question, why are these companies not registered in China?
If foreign enterprises are registered in Shenzhen and Shanghai, the service trade of these foreign enterprises is also the export of China's service trade.
The potential and six freedoms of the pilot Free Trade Zone
Now, the central government has launched a pilot free trade zone. In just four years, the pilot free trade zone has been extended from Shanghai to 18 provinces across the country. Now there are 18 pilot free trade zones. The pilot free trade zone will be the most open area in China.
There is a logic in China's opening-up. The latter covers the former. In the mid-1980s, China had 27 economic and technological development zones, and later five special zones. There are policies in the development zones, but not in the development zones. After the Pudong New Area, the policies of the development zone and the special zone are all available in the Pudong New Area. At the same time, the Pudong New Area has some policies that the special zone does not have, such as foreign banks, insurance, trust, department stores, stock exchanges, land leasing and bonded areas.
It can be said that in the past, there were general opening policies in new areas, special zones and economic development zones. Of course, the free trade zone covers all of them. However, the free trade zone has six unique freedoms - freedom of trade, freedom of investment, freedom of money and finance, freedom of various logistics and warehousing flows, freedom of employment for international people, freedom of digital economy and trade. These six freedoms are focused on the free trade zone. The theme of FTA exploration is "six freedoms".
The goal of free trade area is to compare with WTO and FTA, regional free trade agreements between countries and countries. If two countries have signed six free agreements, they are called bilateral FTA. There is a plot of land in a country to realize these six kinds of freedom, that is, free trade pilot area. The goal of free trade zone transplantation and promotion is to launch free trade agreements between China and other countries. The business environment to be created by free trade zone is not the efficient approval required by China's development zone for decades, the series and parallel connection of 100 stamps, etc., but the business environment to be consistent with that required by WTO and FTA. This is the eight business environments mentioned by the general secretary in his report: national treatment before entry, negative list management, intellectual property protection, ecological environment protection, labor rights protection, various ownership systems, digital trade, and non-standard government financial subsidies.
The contents of the business environment in these eight aspects should meet the standards of internationalization, legalization and marketization, the business environment requirements of the standard WTO, and the business environment requirements of the free trade agreements between the standard countries and countries. And the task of the pilot free trade zone to explore and test is focused on service trade.
In the past, many of our development zones, including our cities, have generally been able to do solid trade in goods, but not in services, offshore trade and cross-border e-commerce. The reason is that there are no free trade measures.
Hong Kong has 700 billion US dollars of trade with the mainland in a year. It is very important that about 500 billion US dollars of goods are re export trade and offshore trade. The business between the United States and Japan and the mainland is re export signed in Hong Kong. The list is for Hong Kong. But many of our bonded areas and many of our development zones are engaged in solid trade in goods, and entrepot and offshore trade cannot be done. Shanghai Waigaoqiao Free Trade Zone has a cargo trade of 160 billion US dollars a year, of which 100 billion US dollars are offshore and entrepot trade. Therefore, we must broaden the scope of service trade.
Our cross-border e-commerce has been explored for five years, with little thunder and little rain. Last year, cross-border e-commerce achieved 150 billion yuan, about 25 billion US dollars, but China's trade in goods is more than 400 million US dollars. Why is cross-border e-commerce not doing much? This is due to the lack of institutional arrangements for free trade in tax forms, logistics signing and financial services.
In this sense, service trade will be broken under the promotion of free trade pilot area. I believe that the exploration and promotion of our pilot free trade zone will bring the spring of China's service trade in the next few years.
China's reform and opening-up will have a new height, depth and breadth, just in the process of financial opening and service trade opening-up, as well as in the exploration of the pilot free trade zone. I believe that these two opening systems, which our country has implemented on a large scale this year, will surely help China's reform and opening up to achieve greater achievements. Thank you!

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