Integrating China into the World Economy

China’s economic reforms under Deng Xiaoping involved linking China’s economy to the
world economy. A step-by-step opening up policy was implemented by the Chinese leadership in
1978 which began with the establishment of Special Economic Zones (SEZs). Beginning 1980,
SEZs were commissioned in Shenzhen, Zhuhai, Shantou of Guangdong Province, Xiamen of
Fujian Province and Hainan Province. These SEZs “have acquired much experience for China’s
engagement in the international market in respect for foreign investments and outward trade”
(Hampton, 2006). After a short time, foreign direct investments and foreign trade promoted
China’s rapid economic development. With the success of the SEZs as market-based economic
areas, more regions were transformed to become economic areas that provide the needs of
international economic exchange. In the next few years following this success, China opened up
additional 14 coastal cities, established a massive coastal economic open belt, and opened up
frontier cities and inland provincial and autonomous region capitals. At the same time, China’s
leadership has also made significant steps to lower tariffs, eliminate import quotas and give
favorable treatment to foreign investment in the country. The opened regions that the Chinese
leadership established has become a “gateway for ideas and concepts” between the global economy
and China (Waibel, 2005).
China’s further integration in the world economy was reinforced by its membership in the
World Trade Organization (WTO). After 15 years of negotiation, China officially become a
member of WTO on December 11, 2001. Former Chinese President Hu Jintao has described
China’s accession to the WTO as a “milestone in China’s reform and opening up” and a strategic
decision “in order to push forward China’s socialist modernization drive.”
Due to the influx of foreign direct investment combined with a decreasing rate of tariffs,
under its commitments with the WTO, China has experienced a huge economic boost. China’s
trade ratio of 70 percent in 2004 is higher than that of Japan, India, Russia, Brazil or the United
States (Keller & Rawski, 2007). However, after years of high export rates and growth, there are
now current account imbalances between China and the rest of the world, especially with the
United States. Moreover, because of large amounts of trade surpluses due to exports, China and
other Asian countries have become capital exporters to developed countries. China has become a
country that earns more than it spends. In 2006, 9.5% of what China has produced was not
consumed nor invested in the country but exported in exchange for IOUs – promissory notes which
will supposedly paid sometime in the future. This trend is detrimental for China’s own
development because it still needs capital that will fuel its development and provide the basic needs
of its people.
When China tried to integrate its economy to the world economy, it has lost its autonomy
over its own. China has become dependent on foreign investments, foreign technology and its
export industry in order to maintain its high GDP growth. China’s self-reliant development was
lost when it started on its capitalist path. This is exemplified in its textile industry which has
become dependent on external finance, foreign investment and technology in order to produce
goods that can compete in the international market. Initially, the plan was to use these imported
technology to upgrade China’s own technology. Unfortunately, technological innovation within
China did not develop significantly.
Moreover, as China prioritized its growth of exports, its domestic resources are used for
producing goods for export that cater the needs of the international market rather than be used for
the necessities of its people.
In addition, when China started to accept foreign capital investments, many multinational
corporations took this opportunity to relocate their firms and manufacturing sites and take
advantage of China’s cheap labor and lax environmental regulations. With the onset of foreign
investments and corporations, many workers lost their jobs and started working under appalling
conditions. Although China experiences growth in its manufacturing sector, it is done so at the
expense of its people.

References:
Hampton, A. (2006). Local Government and Investment Promotion in China. Retrieved from
http://www2.ids.ac.uk/futurestate/pdfs/AndreaHamptonFDI-WPDec06final%20.pdf
Kreisel, W. & Waibel, M. (2005). The Pacific Challenge: Development Trends in the 21st Century.
Pacific Forum, 10. Retrieved from https://oapen.org/download?type=document&docid=353965
China in the WTO: Past, Present and Future. Retrieved from
https://www.wto.org/english/thewto_e/acc_e/s7lu_e.pdf
Keller, W. W. & Rawski, T. G. (2007). China’s Peaceful Rise: Roadmap or Fantasy? Retrieved
from https://www.ridgway.pitt.edu/Portals/1/pdfs/Publications/KellerRawskiCPRRF.pdf