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

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.