Essay Sample on China's Foreign Economic Policy

Published: 2022-05-31
Essay Sample on China's Foreign Economic Policy
Type of paper:  Research paper
Categories:  Economics Foreign policy
Pages: 7
Wordcount: 1847 words
16 min read

China was the only country that managed to develop its own economic policy after the formation of the People's Republic. Initially, its foreign policies were dictated by foreign governments and merchants. According to Udden (2009), no human being can exist on its own without relying on others for business, help or interaction. Similarly, no country or state can live and satisfy all the needs of the citizens without relating directly or indirectly to people or government from other countries. China was one of the countries that tried to go against this rule by engaging in a closed command economy where there were very minimal imports and exports and where most of the country's produce was consumed by the citizens and most of the citizens' needs were fulfilled by products from the country itself. It was later discovered that the mode of the economy was not good since it limited the magnitude and speed of economic growth and this grossly attributed to being the reason as to why they later abandoned the mode and adopted the global, modern and competitive economy. This paper will try to explore China's foreign policies basing the text on the historical evolution and recent modifications.

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During Maoist period (1949-1976), the economy of China was not a completely closed economy for there were some, but very few economic links with the rest of the countries globally. During post- Maoist era where the country was under the presidency of Deng Xiaoping between 1979 and 1980, China made the first steps towards a gradual trade liberation and economic relations where four Spatial Economic Zones were created on the cost region of Hong Kong. This gave foreign investors a percentage of access to imported products which were duty-free. Here, foreign investors were encouraged to install ventures with the state-owned organizations to form a joint ownership, private-state ownership, with an intention of modernizing the state-owned firms. In 1984, more zones were established in fourteen coastal cities and more followed in 1990 which were installed in provincial and non-costal cities to equalize benefits across the regions (Naude, Szirmai, & Haraguchi, 2015).

Between 1949-1979, exports were less than 5% of GDP in all the years where after 1979, the export rose to 12% of total GDP. In the 1990s the export continually grew up to more than 20% in 2001 before WTO accession of China. The trend continued after 2001 whereby 2008, t was estimated to be around 37%. The major export is manufactured products which more of the manufacturing companies are from foreign investors. It is believed that the policy of foreign investors to set up ventures jointly with local partners to allow a technology transfer and exchange to the locals, creation of special trading zones which had standard infrastructure, duty free to imported raw materials and much flexible labour legislation are some of the major reason for the tremendous growth of the exports. Exports that came from national firms and were formally subjected to license controlled were allowed to free trade without licensing after most of the policies that insisted on the need of licensing were removed. The national exporters were given the permission to retain a percentage of their foreign exchange revenue to allow and give them chance to fund their imports there is no need to ask for an official approval and they could get import tariff refunds for the imported raw materials that could be used in export (Naude, Szirmai, & Haraguchi, 2015).

Between 1993-2005, many conservative elders were forced by the government to go for a retirement so as to give room for major and radical reforms to be done. Deng died in 1997, but with the help of Jiang Zemin and Zhu Rongji, the reforms continued where major and large-scale privatization took place between 1997 and 1998. Many state-owned firms were liquidated and sold to private investors to develop them leaving just a few monopoly firms such as petroleum and banking to the government. The tariffs, regulations, and trade barriers were reduced, the banking system was reformed and most of Mao-era systems and policies were abolished. Inflation was reduced and later China joined the World Trade Organization. Around 2005, the private domestic sector rose above 50% of GDP for the first time and around the same year, China surpassed Japan as the biggest economy in Asia (Yifu, 2008).

Hu-Wen Administration who was a conservative, between 2005 and 2012 began the reversing some of Deng's reforms. The government started controlling healthcare sector, blocked privatization and accepted the loose monetary policy that resulted in the formation of the U.S.- style property bubble that leads to property tripling their prices. After 2012 to present, Xi Jinping has been running the administration where the Communist Party of China tried to improve the control that it has over the state and private firms. Many firms have tried to reverse their corporate charters in order to allow and give the Communist Party of China much influence in the corporate management and to show the poverty line (Li, 2016).

After looking at the economic changes that China has undergone in Maoist era and post Maoist era that had a great impact on the foreign investors and the general foreign policies, the paper will try to explain how and why China has made the transition from a closed command economy, which was directly controlled and often restrained by the state to a more modern but still reforming economic and trading system.

The China economic transition was planned and executed in a step-by-step manner contrary to some of the other countries who use radical and sudden or shock therapy method to make changes. This method showed that it was the key to the successful transition for it reduced the drastic effect of the reforms to an acceptable and less drastic extent thus avoiding social unrest. The reforms and transitions started in the rural areas then were spread to the cities steadily and gradually. In 1979, some residents in the provinces of Anhui and Sichuan accepted a pilot household, contract, responsibility form of a system where farmers' income was linked to their output instead of giving them equal salaries. This meant that those farmers who worked hard and had more output were to be paid more than those who worked less or had less produce. More and more places accepted the system and by the end of 1984, the system was working in more than 95% of all farmers (People's Daily Online, 2002).

The success in rural reforms had several effects such as increase of farmers' income and accumulation of huge and useful potential for reforming the cities. There was the policy that regulated the price of grains and other commodities. These policies were abolished and this created a market- based pricing system where even the foreign investors could identify good markets where they would sell their products at a market competitive rates (People's Daily Online, 2002).

Ome of the reasons that necessitated the reforms includes; slow economic growth since almost all business firms were state-owned thus some people did not see the need to work hard for the pay was the same to all people no matter the difference in hard work. There were a very few numbers of local and foreign investors who were coming in to establish business ventures thus there was slow cash flow between the people. There were some commodities and services that were needed by the locals but there was no one to provide them. With the economic policies transition, foreign investors had the permission to start ventures jointly with the locals and this helped in exchange for technology and new ideas. the reforms were started in small selected areas and they were greatly accepted and had a much positive impact than the adopted closed economy. This gave the policymakers the need to advance the changes to the whole country (People's Daily Online, 2002).

As seen above, the Chinese government had imposed policies that acted as a hindrance against trade interactions between the citizens and the neighbouring countries but after the realization of how the policies were negatively affecting the people, the leaders decided to abolish some policies to improve its' international relations and foreign policies with an aim of improving China. As seen earlier this was successful since the export rate increased and the economy improved all as a result of mainly improving the country's foreign policies.

Afer looking into the steps and reasons why China had to reform economically, the paper will discuss the effects of China's growing economic power on its foreign policy. Some of the key issues covered by the international affairs in China include; the vast rise of globalization, China's bilateral and multilateral approaches to global and international problem solving, engagement and interaction with various regional and international regimes, modern and everyday upcoming challenges such as terrorism and economic security, the puzzle of shifting American power and Beijing's evolving political, strategic and economic bonds with the developed and developing countries (Lanteigne, 2013).

Recently, as the economic power of the country appreciated, China's foreign policy has shown to be more and more visible to the people of the outside world. There are people who have tried to look fearfully at the country's future development. The political influence of China over other countries and events is relatively low and limited. Therefore, China can be considered a global actor but yet to be a true global power. It can be argued that there is no well known defined foreign policy in the country, but foreign policies closely link with domestic policies such as nationalism which has been a main driving force that has played a great part in shaping foreign policy (Shambaugh, 2013).

Deng Xiaoping in 1978 directed China into a low profile despite its economic power that has been able to fund a great military capacity which is still growing, China has not indulged in the projection of its' military power to the outside region of Asia. China has tried to avoid international conflicts through appropriate appeasing conflicts that may arise. China has remained passive in confronting international security challenges and global governance issues. This has reduced the international image to the outside world except for some regions in Asia and Africa. In recent years there have been some relations with African countries such as Kenya where the two countries join resources to better the welfare of their people (Shinn & Eisenman, 2012). On the other hand, China does not keep the low profile when it comes to issues pertaining to Taiwan, human rights, and maritime territorials.

For the past several years, China's foreign policies had become mere assertive only that it was towards a limited range of issues. The major drive for foreign relations remained to be the assertiveness on maritime border disputes and communism that help safeguard the sovereignty, territorial integrity, and ensuring economic development is maintained. Around 2010, foreign policies in China happened to be more forceful in regard to relations with countries in the Asian region the U.S. This forced a strong reaction in the region and the conflict that China has with Japan on the disputed Senkaku Island has increased the tension but because both countries have increased their economic importance in the region, the tension is expected to be resolved (Blaauw, 2013).

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