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China's International Trade: Policy and Organizational Change and their Place in the ‘Economic Readjustment‘

Published online by Cambridge University Press:  17 February 2009

Y. Y. Kueh  and
Christopher Howe
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Extract

There are three aspects of China's foreign economic relations which are important to our efforts to understand the Readjustment of 1979–84. These are: (a) the government's general orientation towards foreign economic relations; (b) quantitative trends in investment and trade flows; and, (c) the nature of trade organization and international economic links. The general orientation to trade is critical in a planned economy where central preferences (essentially political) are easily reflected throughout the system. Stalin's policy of autarchy transformed the international role of the Soviet economy, while in China, Mao Zedong's willingness to trade with the Soviet Union and the Eastern Bloc profoundly changed the character of the Chinese economy between 1953 and 1959. Large-scale plant imports created new industries and enlarged heavy industries established – particularly in the north-east – before 1949. This phase of policy had exhausted itself in China towards the end of the 1950s, although import data for 1959 reflect prior commitments and give little sign of this. However, the reality was that China's capacity to absorb imported capital goods, and the agricultural capacity to sustain foreign exchange earnings at the necessary level, were both weakening even before the dislocations of the Great Leap radically changed the role of foreign trade by converting China from a net food exporter to a net importer.

Type
The Readjustment in the Chinese Economy
Information
The China Quarterly , Volume 100 , December 1984 , pp. 813 - 848
Copyright
Copyright © The China Quarterly 1984

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References

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40. Ibid. 9 April 1983 and 18 May 1983, 4 January 1984, p. 3; and 24 February 1984, p. 3. The concessions stipulated will indeed help reduce effective income tax rate for the joint ventures from the original level of 33% down to 18·91% for the first five years, see especially Ta Kung Pao, 22 February 1984, p. 3. Besides, provisions for accelerated depreciations are also available.

41. Ibid. 9 April 1983.

42. These were lately announced by Gu Mu, see ibid. 8 June 1984, p. 3.

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47. The value figure is originally given in Ta Kung Pao, 1 December 1983, p. 3, in Hong Kong dollars in the amount of $1,334 million. We used an exchange rate of US$1.00 = HK$5.1 (prevailing in 1980/81) to convert it to US$ equivalent for purpose of comparison with the pledged investment value of US$1,500 cited earlier for 1980–81.

48. The subsidy involved in exporting is known in the European context as Preisausgleich and is discussed in, Wiles, P. J. D., Communist International Economics (Oxford: Basil Blackwell, 1968)Google Scholar; Chs 6 and 7, and in, Pryor, Frederic L., The Communist Foreign Trade System (London: George Allen and Unwin, 1963)Google Scholar; Ch. IV.

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55. For a more general policy discussion about how to make use of market regulations without challenging the integrated core of planning in the export sector see, Shiwei, Xu “On the foreign trade system of our country,” Guoji maoyi wenti, No. 2 (1983), pp. 8–13Google Scholar; Actually the partial marketization process in the export sector and the ensuing price competition has already met with very strong criticism from responsible cadres of the Ministry of Foreign Trade, see, e.g. Cheng Jixian, “Some opinions on the reform of foreign trade system,” ibid. No. 1 (1980), pp. 19 and 20–21.

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58. Chinese shoes, for example, fetch one-tenth of Italian prices, ibid. pp. 11–13, and porcelain prices are of a similar order of magnitude by comparison with West German and Japanese prices.