Reform and Opening in China:
“Sequencing” or “Parallel Partial Changing”

FAN Gang
National Economic Research Institute
China Reform Foundation
Beijing, China

November, 1999

Content

I. Introduction: Lessons of Asia Financial Crisis for Reform and Opening

¾ Benefits from Globalization
¾ Constrains to the developing countries
¾ The “unequal footing”
¾ A common cause of Asian crises: “incompatible opening”
¾ The Lessons from Asia crisis: Speed up the reform and Balance the globalization and domestic restructuring
¾ Case of China: Gradual liberalization

II. China: Opening process and benefits from the globalization II. 1 Trade.
II. 2 Foreign Investment II. 3 Service sectors

III. Potential negative impacts of further market liberalization

III. 1. Unemployment in general III. 2 Agriculture III. 3 SOEs and Manufacture industries
III. 4 Service sectors III. 5 Inter-region and inter-group income disparity

IV. Impacts of Asia crisis and corresponding policies

V. How to achieve further “Compatible opening”

¾ Will the quick market liberalization solve the problems?
¾ Reforms and opening
¾ “Compatible opening” vs. “sequencing”
¾ Timetable for opening?
¾ No universal solution

China has quickly opened its economy in the past 20 years. It is became the largest FDI recipient developing country since 1993 and the trade is already equivalent to about 40% of its GDP. It is not fully opened and is under the international pressures to open further. Nevertheless, it seems that a consensus has been building up among Chinese that China has to open further to catch up the path of globalization and become a constructive and equal partner in the world market; but at the same time, China has to think its path (strategies, game