CHINA IN THE 21ST CENTURY HAS become a watchword for emerging potency and economic opportunity. Now the second-largest economy in the world and one of the few major powers to maintain the pace of economic growth throughout the financial and economic crises, China’s modern power and wealth has been underpinned by its ongoing trade with the rest of the world.
When Deng Xiaoping took over as head of the Communist Party in 1978, his government began a series of reforms that opened up the country’s borders to foreign investment and trade, bringing in machinery and expertise from Europe, the US and Japan and allowing international companies to take advantage of its large, low-cost labour force. Four special economic zones were created in southern China, with tax incentives given to foreign companies.
The new “Open Door” policy had mutual benefits, lowering the cost of many day-to-day items in the West and fuelling their consumer markets, while simultaneously creating jobs and transferring skills to China.
The country has consistently moved up the value chain in manufacturing for export, beginning with simple assembly and textiles and graduating to electrical items, automobiles and, today, high technology items, many of which are designed entirely in China.
When the new policy began in earnest in the 1980s, the country’s exports represented just over 1% of the global total. China is now the world’s largest exporter of merchandise, representing more than 10% of the global total.
China joined the World Trade Organisation (WTO) in December 2001, cementing its position of influence in global trade policy. The success of the country’s export-driven growth has been deeper than just its foreign exchange earnings. A slowdown in the developed world after the financial crisis of 2007/8 meant that the country’s exports slowed as its customers credit-fuelled consumption faltered. However, the manufacturing base that had been created during the boom years in the earlier part of the century had brought with it domestic prosperity, and Chinese consumers themselves were able to pick up the slack to a certain extent.