China's Export Strategy: What Can We Learn From It?

As much as by luck as by design, China stumbled onto an export and foreign investment strategy that has proved remarkably successful, helping the economy move quickly to a market-based system. But can the Chinese experience serve as a model for other countries? After three decades of inward-oriented trade and foreign investment policies, in 1979, China switched course and launched an "open-door" policy. During the 15 years that have elapsed since then, the country has persistently, albeit gradually, liberalized its trade and foreign investment regime. This has been accompanied by a spectacular growth in GDP and foreign trade. During 1980-90, GDP grew annually at an impressive rate of 9.5 percent. Over the same period, exports grew at an annual rate of 11 percent-more than twice as fast as world trade-and imports 9.8 percent. More recently, in 1992 and 1993, GDP has shown annual growth rates exceeding 13 percent. The annual growth in exports and imports during these two years has been 13 percent and 27 percent, respectively. What are the key trade and foreign investment policies that have led to this dramatic growth in China's foreign trade and GDP? And what lessons can we derive from China's experience for other economies in transition? (see box)? In the following, we examine the nature of reforms and why they worked well or poorly in particular cases. Though this study focuses on external economic policies, it is important to remember that the promotion of non-state enterprises has closely complemented China's outward-oriented