Economic globalization generates greater trade, investment facilitation, people flows and technological advancement.

The current risks and challenges facing the world's economy are not byproducts of economic globalization but the result of some countries' outdated mentality of a zero-sum game and winner-takes-all, which derails the world economy from the path of inclusiveness and win-win development.

Therefore, Chinese President Xi Jinping pointed out in the speech delivered at the opening ceremony of the Second Belt and Road Forum for International Cooperation in April that we should promote trade and investment liberalization and facilitation, say no to protectionism, and make economic globalization more open, inclusive, balanced and beneficial to all.

That's exactly what is required to build an open global economy. It is based on a deep understanding of the tide of the times, in line with the trend of the world's increasingly integrated and interdependent economy and politics, and contains profound economic logic.

Further opening up promotes greater specialization in division of labor, boosts technological advancement, attracts more human resources, speeds up institutional innovation and increases productivity, which together lead to sustained growth.

Opening up for greater specialization

Each country or company has its own absolute advantage through which it gets profits through division of labor, specialization and trading.

Over 2,000 years ago, in his Records of the Grand Historian, Sima Qian mentioned trading what you have in plenty for what you lack, which encapsulates the ancient understanding of division of labor. Another Chinese classic Journal of Master Huainan proposed that you should trade what you have for what you don't and trade what you're good at making for what you are not. From the perspective of modern economics, it means achieving profits and economic development on the basis of division of labor.

In The Wealth of Nations, Adam Smith called this kind of profit "benefits of free trade", that is, each country produces goods or services with its unique advantages and the wellbeing of all is improved. As long as more countries, companies and individuals keep entering the market, "benefits of free trade" can be realized through division of labor and trade. As a result, economic prosperity and greater employment come naturally from more specialized division of labor as the market expands.

In one sense, the 40 years of reform and opening-up of China is a successful example of maximizing absolute and comparative advantages by enlarging the market and enhancing division of labor. More specifically, China achieved fast development by boosting the flow of production factors, lowering transaction costs, creating a unified domestic market and engaging in international division of labor and exchanges. In the past four decades China's trade in goods hiked from $20.6 billion to $4 trillion and now ranks first in the world.

Despite some countries' moves towards unilateralism, trade protectionism and trade bullying, China continues with its commitment to greater openness with the aim of expanding markets through free trade and boosting trade through deepened division of labor. In this way countries will enjoy win-win development and work together towards a community with a shared future for mankind.

Opening up for technological advancement

As a direct driver of productivity, technological advancement has played a pivotal role in maintaining China's economic growth. From Karl Marx's point of view, the evolution of world history is a result of the development of productivity, which is represented by industrial and technological revolutions. In Germany, he observed that thanks to the application of machines, steam and division of labor, large industries were able to join the international market, trade and division of labor.

It could be said that progress of productivity is closely related to technological advancement, and the latter plays a fundamental role in deepening division of labor. Deng Xiaoping said that science and technology are the primary productive forces, which gives a clear picture of the positive contribution made by technological progress to enhanced productivity.

Modern economics theories often take technological advancement as an important variable in economic growth. In Joseph Schumpeter's Theory of Economic Development, he wrote that economic growth originates from innovations, in particular those closely related to technological development. As for the drivers of technological development, some come from market entities' innovation for greater profits, others emerge from advanced technologies and the way of organization they learn from others.

Openness promotes technological advancement because international competition stimulates independent R&D, and also because of learning from advanced technological achievements and management experience through opening up.

The role of technological advancement is becoming more salient in the current world, and inter-country competition is more about science and technology. Since science and technology have prominent global and contemporary features, one who wants to promote them must have a global perspective.

Therefore, independent innovation can never happen with doors closed, but in an open environment. So it is necessary for China to get a global viewpoint in planning for and promoting technological innovation, enhance international science and innovation cooperation across the board, actively participate in the global technological innovation network and in global governance system of science and technology.

Opening up for more human resources

In a speech delivered to Chinese academicians in May 2018, President Xi stressed that of all the things and beings in the world man is the most valuable, because man is the creator of all innovations.

Both hard power and soft power have their roots in man's strength. The history of science and technology has proven that those who have first-class talents and scientists will have the advantage in innovation. These judgments vividly depict the importance of man in economic growth and social progress.

There were several hundred million illiterate people in China when the reform and opening-up started. But now nine-year compulsory education has covered 93.8 percent of the total population, and the average education received by the labor force has reached 10.5 years. Through reform and opening up, the caliber of Chinese has been enhanced and talents are developed by means of introducing in technical and management expertise, conducting international exchanges and cooperation and sharing knowledge. As a result, Chinese improved their ability of creating wealth and maintained long-term rapid economic growth.

The world's economy has been facing sluggish growth driving force. To foster new growth engines, President Xi proposed new development concepts and the innovation-driven development strategy. The essence of innovation-driven growth lies in talents since they are the first and foremost resource for innovation. The lack of high-caliber talents, particularly in science and technology, is hindering high-quality development. Against the backdrop of economic globalization, the accumulation of talents more relies on international exchanges and cooperation. The goal of China's talents strategy is to cultivate large numbers of science, technology and young talents and innovation teams with global perspective and international standards.

Opening up for institutional innovation

The basic function of a system or an institution is to define property rights clearly, urge entities to abide by contracts and make sure the government and the market play their respective roles.

A well-functioning institution can stimulate people and lower transaction costs. Trade and technology can both boost economic growth, but they can only function within an effective institutional arrangement. In addition, institutional reform can expand the benefits of free trade and the technological advancement.

Governments play a vital role in institutional reform and innovation. They should define and protect property rights, safeguard contracts and make sure that the market plays the decisive role in resource allocation. Meanwhile, governments can promote the improvement of international institutions and rules as well.

In some sense, China has both reformed its own institutions and helped build international rules during reform and opening-up. It has joined virtually all international treaties and organizations, signed free trade agreements and trade protection agreements with many countries and regions, initiated the Asian Infrastructure Investment Bank and the New Development Bank, and proposed the Belt and Road Initiative.

All have lowered the cost of international economic cooperation. But if China wants to participate in and lead economic globalization and develop an open economy at a higher level, it must make adjustments and improvements to some of its own systems and institutions.

In short, openness brings socioeconomic development and national prosperity. No matter how the international landscape evolves, China will continue following the trends of history with greater openness, a more innovative mentality and more practical actions, and work towards new historic achievements in building an open global economy.

Zhang Yuyan is a member of the Chinese Academy of Social Sciences, and director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.