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Published online by Cambridge University Press: 24 March 2016
China in 1978 embarked on a major economic transformation, seeking to alter the stance of the previous 30 years and engage economically with the rest of the world in several dimensions—trade, foreign direct investment by private firms, external borrowing by government from both private and public sources, and education. Each of these represented a major change in policy. The transformation in the intervening 22 years has been dramatic and palpable, as can be seen in the sky-lines of the major cities. On official figures, agricultural output has jumped more than two and a half times from 1978 to 1998, and industrial output increased more than nine-fold. The service sector, discouraged under central planning, increased eight-fold. Exports during this period grew from $10 billion to $184 billion, making China now the world's ninth largest trading country (just ahead of Belgium). The current account was roughly in balance over most of the last 20 years (although in surplus since the currency consolidation and anti-inflation program of 1994), but thanks to large inward foreign investment, foreign exchange reserves have grown to $160 billion, second largest in the world after Japan. China experienced various bouts of inflation, followed by policy constriction; prices during 1999 declined by 3 percent, exceptional for a developing country.
1 In exchange for all this, the United States agreed to extend ‘normal trade relations’ to China, that is, put most-favored-nation treatment on a permanent basis, rather than on an annual decision, a condition that was achieved in September 2000. With respect to Chinese access to the US market, China agreed to the US use of selective safeguards against surges of imports for up to 12 years, continued treatment of China as a non-market economy for purposes of evaluating dumping charges for up to 15 years, and extension of the 1997 US-China textile agreement through 2008, four years beyond the expiration of the Multi-Fiber Agreement agreed in the Uruguay Round.Google Scholar
2 One preliminary Chinese estimate suggests that 9.7 million jobs will be lost in agriculture as a result of the market opening, 580 thousand jobs in the machinery sectors, and 500 thousand jobs in the automobile sector. Against this must be set new job opportunities of 5.4 million in textiles and apparel, 2.7 million in services, 930 thousand jobs in construction, and 170 thousand jobs in food processing, for a net loss of 1.6 million jobs, mostly in agriculture. In percentage terms, the biggest gain (52 percent) is in garments, while the biggest loss (14.5 percent) is in autos (China Business Times, Nov. 18, 1999). Such estimates must be treated with considerable skepticism, but their existence indicates that Chinese politicians are sensitive, as American politicians are, to the employment implications of changes in trade policy.Google Scholar