China High-Quality Opening and Socialist Market Economy

Since 1949, China has been developing a model of the Socialist Market Economy with Chinese Characteristics (SMECC). These efforts accelerated after the introduction of the 1978 reforms. President Xi’s rise to leadership of the CPC has added new dimensions and dynamics to the process of creating the SMECC model. President Xi believes that the Socialist Market Economy with Chinese Characteristics (SMECC) is an integral part of Socialism with Chinese Characteristics and a Community with a Shared Future.

The SMECC model promotes the market by acknowledging its role in allocating resources and driving market volatility. At the same time, the SMECC model gives due weight to the state’s role. Rather than placing the leading role on the market, it places it on the state and institutions to ensure fair markets, equal opportunities, and fair competition among market participants, so the market functions smoothly. In a nutshell, market forces drive volatility to unlock the full potential of resources and markets; the state protects people’s interests, especially those of marginalized segments of society, the state, and the private sector.

However, China believes it cannot build an SMECC model without establishing mutually beneficial economic linkages with other countries. To achieve this goal, China adopted opening up as a core objective of its reforms and has pursued it with sincere dedication since 1978. President Xi refined the concept and introduced the slogan of high-quality opening up, meaning that opening up must benefit people, not only businessmen or the state. He has made high-quality opening up an integral part of the Chinese economy in the New Era. Moreover, President Xi Jinping envisioned that China must open up to play a positive and leading role on the global stage.

China adopted a comprehensive policy and plan to ensure high-quality opening up. First, to strengthen opening up, China deemed it necessary to invite the global business community to invest in the Chinese market. Thus, China began engaging foreign investors by expanding the catalog of encouraged industries for foreign investment, including new areas. Over the last decade, the catalog has changed significantly. In 2017, the catalog had 987 items. Of those, 348 were national, and 639 were regional and area-specific. The list has seen a major turnaround since then, and the 2025 catalog has 1678 items. It includes 619 national-level items, and 1060 are region-specific. The major objectives of expanding the catalog are 1) to encourage investment in manufacturing and supply chains, 2) to encourage investment in the Western region, and 3) to integrate the development of services, manufacturing sectors, and investment in the untapped Northern region.

In the 2025 catalog, China focuses on: 10) Development and production of nucleic acid pharmaceuticals; 2) R&D and manufacturing of zero‑magnetic medical devices; 3)Smart testing and inspection instruments; 4) High-speed cameras and precision imaging equipment; 5) Intelligent energy management systems and related monitoring devices; 6) Design and production of deep-sea robots and specialized marine equipment; 7) Key technologies for gas-fired power equipment; and 8) R&D and production of core components for industrial robots.

Simultaneously, China offers incentives such as tax exemptions on imported equipment, preferential land access, and lower corporate income tax. For example, China has introduced special incentives for investment in the Western region, including a 15% corporate income tax rate if the investor meets certain criteria. The government will also offer a special tax exemption for reinvestment in the country. Industrial land will be provided on a priority basis, and the base price for land transfer has been reduced by up to 70% to support industry setup. Moreover, equipment for self-use will receive a customs duty exemption.

Second, President Xi has taken many innovative steps to accelerate and deepen opening up, with the China International Import Expo (CIIE) standing out above all. CIIE is a unique initiative in human history, as no other country has ever launched an import expo. This demonstrates the Chinese leadership’s determination to foster mutually beneficial economic linkages. It counters the liberal economic philosophy, which focuses on maximizing profit without giving due regard to others’ interests. CIIE is changing this traditional concept and trying to present a mutually beneficial model for global trade.

Third, the launch of island-wide independent customs operations in the Hainan Free Port is another initiative that demonstrates China’s willingness to create more opportunities for the world. It is a step ahead of previous initiatives and aligns with President Xi’s vision. President Xi believes that amid a wave of protectionism, restrictions, anti-globalization movements, trade wars, and a my-country-first mentality, China must act as a beacon of hope for global economic development and globalization. To do so, China must deepen reforms and create concrete opportunities, not just talk.

Therefore, the initiative is not only facilitating trade but also providing space for the global community to explore a new world of opportunities. How? It brings global businesses to Hainan FTP, where they interact to find opportunities not only in China but also in other countries. Data show that 9,600 foreign enterprises operate in Hainan, and investors from 170 countries and regions have invested.

Fourth, China is not only inviting investment but also working to bridge the global investment gap. This is another way to create linkages and further open the Chinese market and economy to build the SMECC model. Therefore, China launched the Belt and Road Initiative to create economic opportunities. China has invested almost US$ 1.5 trillion and mobilized more than US$ 3 trillion from other countries and sources. China has also enhanced trade with BRI countries. China also launched the Global Development Initiative to help the world pursue sustainable development. According to data, China has invested more than US$ 23 billion under GDI. Moreover, China established the Asian Infrastructure Investment Bank to meet countries’ investment needs and bridge the investment gap. In 2025, total investment disbursements exceeded US$ 38 billion.

China is also deepening economic openness through its modernization drive. President Xi believes that to achieve modernization objectives, China must be deeply engaged with other economies worldwide. The 15^th Five-Year Plan further reinforces this notion and underscores the Chinese leadership’s commitment to reform and openness.

In conclusion, we can draw three conclusions from the discussion above. First, the Socialist Market Economy with Chinese Characteristics will create more opportunities for win-win cooperation by deepening reforms and opening up of the Chinese economy. Second, the discussion above indicates that the vision of opening up is not a run-of-the-mill initiative or a knee-jerk reaction to global dynamics. It is a well-thought-out initiative.

Third, these initiatives follow the Chinese philosophy of shared prosperity, a cornerstone of Confucian international relations. Confucius advanced the idea that to build strong and sustainable international linkages, one must share prosperity with others. However, sharing prosperity does not mean charity; it means creating economic and development opportunities. Charity is short-lived and creates dependency, which is not sustainable in the long term. Economic and development opportunities create lasting impact and help countries live freely with dignity.