The "Huainanzi Sima Qian's Theorem" and the logic of China's opening up to the outside world

Zhang Yuyan

　　Director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences, member of the Faculty and Researcher

　　Research Interests: International Political Economy, World Economy

　　Representative Works: Economic Development and Institutional Choice, International Economic Politics, China's Path of Peaceful Development

　　In the past 43 years of reform and opening up, China's economy has made remarkable achievements, and the most fundamental reason for its success is reform and opening up. So, what kind of theoretical logic does China's opening up to the outside world follow?

　　As early as 1978, Deng Xiaoping proposed that if China wanted to develop, it was impossible to carry out construction behind closed doors. In recent years, General Secretary Xi Jinping has repeatedly stressed on different occasions that "openness brings progress, and closure leads to backwardness." These statements have actually proved that China's opening up to the outside world is one of the most important pillars of China's economic success. Looking back at China's development over the past 40 years, from an economic point of view, China's success is the success of long-term growth. Long-term growth, or economic growth, refers to the growth of per capita income. There is only one reason for the increase in per capita income, that is, the increase in labor productivity, because per capita income growth is an increase in output per unit of time, which refers to the increase in labor productivity.

　　So, what are the reasons for the increase in labor productivity? What is the source? There are two main fundamental and direct reasons, one is technological progress, which is clearly visible and needless to say. The second is division of labor, specialization and exchange. A and B produce their respective advantageous products and exchange them. In the production of products, although neither has achieved technological progress, since they both produce their own advantageous products and exchange them, this increases the overall level of output. Of course, there is a very crucial condition in it, namely exchange. For example, A grows only cotton, planting cotton is the advantage of A, B only grows grain, which is the advantage of B, they achieve division of labor and specialized production, but if there is no exchange, there will be problems: A has no clothes, B has no food. Therefore, exchange is very important, and exchange involves a series of rules and institutional guarantees.

　　So, what factors determine the division of labor, specialization and exchange? Adam Smith said in The Wealth of Nations, "It depends on the size of the market, the larger the market size, the more factors of production participate in the division of labor and specialization, the more detailed the division of labor, the more everyone can exchange through their respective advantages, comparative advantages or absolute advantages, and achieve greater benefits." Later generations called Smith's theory "Smith's theorem", that is, economic growth depends on the expansion of the scale of the market, and when the market scale is large, the income created by trade increases.

　　China's practice of opening up confirms the theory of long-term growth. The major achievements of China's opening up are inseparable from China's deep participation in the international division of labor and the continuous deepening of the docking of rules. Vigorously attracting foreign investment, establishing special economic zones, establishing export-oriented policies, and enterprises going out, all of this has expanded the scale of the market, and on the basis of the international division of labor, the benefits from trade have become larger and larger through exchange. Of course, this process must have been accompanied by technological progress.

　　The theory of long-term growth has been considered a Western theory. But these ideas are actually in line with the ideas that the ancient Chinese talked about more than 2,000 years ago, and the deep logic of China's practice of opening up contains the traditional wisdom of Chinese. Adam Smith's "The Wealth of Nations" was written more than 200 years ago, and as early as 2,000 years ago, Sima Qian wrote the "Chronicle of Cargo Colonization" in the "History". "Cargo farming" is actually what we now call growth. In the "Biography of Cargo Breeding", Sima Qian specifically talked about how to achieve cargo breeding, that is, "to change what is more than what is fresh", and to exchange what I have more for what I have less. In the book "Huainanzi", written by Liu An, who was almost the same era as Sima Qian, he also talked about how to achieve natural breeding: "To do everything that is easy to have; to work is easy to be clumsy", that is, to exchange what I have for what I do not have, and to exchange what I am good at production for what I am not good at production. It can be seen that the basic ideas and logical frameworks in international trade theory have been expressed by our ancestors more than 2,000 years ago. "With all the easy things that are not", "with all the easy things that are fresh", "with all the work that is easy to be clumsy", to a considerable extent, summarizes the entire content of today's international trade theory. I call this Chinese theory "Huainanzi Sima Qian's theorem."

　　Smith and Ricardo are mainly talking about "changing what is easy to do with what is done", but they have not talked in detail about "changing what is easy to be fresh". Later, Sweden's Eli F. Heckscher and Bertil Gotthard Ohlin added. They emphasized natural endowments, which are questions of quantity and existence. One of the two logical bases of long-term growth theory, namely the division of labor and trade gains, can find a clear correspondence in traditional Chinese culture, and at the same time we can clearly see the cognitive isomorphism of the East and the West and the process of continuous theorization of sage wisdom.

　　Of course, it should be emphasized that since participation in the division of labor for exchange, there must be rules for exchange, so reform and opening up are unified. Reform plays a very important role here. In the discussion of this forum, Professor Zheng Yongnian also talked about the issue of property rights, and the exchange must be based on property rights contracts. China has joined the World Trade Organization (WTO), signed the Regional Comprehensive Economic Partnership (RCEP), promoted the implementation of the China-EU Comprehensive Investment Agreement (CAI), and applied for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). All of this is ultimately about joining a system of rules in which people can secure rights, form stable expectations, and reduce transaction costs, so that huge and potential trade gains can be realized. This is the logic of China's opening up to the outside world. Opening up is an important fulcrum of China's modernization process, and through opening up, China has gained huge benefits from trade.

Source: China Social Science Network - China Social Science Daily Author: Zhang Yuyan