'Made in China': The Growth of Chinese Trade

Abstract

This paper traces the growth of Chinese exports in the post-Mao era, and the implications for policy making within China. The first part of the paper provides a statistical overview of the growth in Chinese trade since 1978, and suggests that this growth was achieved through a combination of two key factors. First, by the retention of a relatively closed economic system, which protected Chinese producers from international competition and promoted and supported export industries. Second, through the attraction of export oriented foreign direct investment into China, particularly after 1993. While export-led growth has made a significant contribution to job creation in China, it has also complicated ongoing debates over the political wisdom and viability of further economic liberalisation. For example, external pressures to liberalise, particularly from the United States, have increased as China's trade surplus with the US has grown. Although many within the Chinese decision making elites resist this external pressure, concerns over structural problems within the domestic Chinese economy have led to key Chinese leaders, most notably Premier Zhu Rongji, accepting and promoting the liberalisation agenda. Declining export growth in the wake of the financial crises in East Asia has reinvigorated the debate over liberalisation, and also raised questions over the maintenance of social stability in urban China as the reform process continues.

JEL Classification: F14