Ding Yifan, Deputy Director,Institute of world development, Beijing

Domestic debates on China’s opening to the world

Presentation at the CERIUM’s Summer SchoolChina Risen

How it changes and changes us

1.Origin of the opening policy Chinese leaders’ travels to Western countries, at the end

of and especially after the Cultural Revolution gave them some idea about the backwardness of Chinese economy.

Chinese delegation to the UN regular sessions in 1974 has been conducted by Deng Xiaoping. He presented for the first time Chinese theory of three worlds in an international arena. When he came back to Beijing via Paris, he was amazed by the change happened in this city he had known several decades ago.

After the culturel revolution, Deng visited Japan and the US in 1978. Once again, he has been shocked by the rapid economic development he was witnessing.

Purpose of the opening policy: Speeding up the development pace and catching up with developed world, reducing the gap between China and western world. He’s determined to relaunch the processes interrupted by the cultural revolution, namely China’s modernization.

Opening policy was carried out as follows: buying foreign modern equipments, borrowing on the

international market, development of tourisme in order to attract foreign

visitors, and sending students abroad to learn modern technologies and skills of

modern governance.No debates on the opening policy per

se.

2. Two types of debates over the opening policy in the 1980’s

On the political and ideological level, there was a debate over the function of opening policy. Some phenomena unhappy to some Chinese old generation, and unseen in China before have been attributed to the opening.

Then Deng Xiaoping intervened, saying that, “when the windows and

doors are open, flies and musquitous will come in with fresh air. We have to kill them and wipe

them away.” Hence the movement called “anti-

spiritual pollution” in 1984-85, ...

There was another debate over the effects of opening policy to China’s

economic development strategy.In the 1980’s: import of a lot of

manufacturing equipments of electronic devices, such as television sets, washing

machines, refrigerators, etc... led to a fiace competition on the Chinese market.

Just after the Cultural Revolution, raising the living standard is becoming Chinese people’s biggest hope. While Chinese industry was unable to provide Chinese consumers with household appliance which was considered as a symbol of modern life. Hence the strategy of substitution of foreign household appliance by made in China. Every province imported a manufacturing chain of household appliance, such as washing machine, television sets, etc.Fiace competition appeared on the Chinese market, decline of profits of SOEs.

Debate on the strategy of opening policy, the model of South Eastern Asian countries has been mentioned, so export driven stragtegy has been praised.

China has been encouraged to adopt this export driven model by some international institutions, such as World Bank. Chinese people depict this model by a vivid image as “huge flows of import and export”.

Deng Xiaoping’s trip to Singapore, reinforced his belief in an export driven growth model, accompanied by the attraction of FDI.

Processes interrupted by the Tian An Men event in 1989.

3. Opening policy in the 1990’sIncrease of big foreign firms’ investment in China

Historic background: after Tian An Men event, concerns about the external threat to the Chinese communist regime, so the opening policy, especially in the cultural sector has been called into question.

In his travel to the South of China, Deng expressed his view about China’s development. Once more, he stated that the opening policy of China is useful to China’s rapid economic development.

Change of foreign investors in Chine :

Chinese diaspora was the main source of FDI in China in the1980’s,

and big multinational companies became main foreign investors in the

1990’s.

Foreign investors are changing their strategies in China :

In the 1980’s, FDI focused on reducing labor cost and reexporting China manufactured

goods towards the investor country or a third develped market.

In the 1990’s, many FDI are aimed at exploiting China’s domestic market as well.

Current debate over China’s opening policy comes from several leveals.

Ideological and political debate : socialism with Chinese characteristics

means that the State should be the major actor in the economy. Opening policy sould be called into question, if

it leads to privatization, so to the weakness of the State.

Technical debate: concerns about the possibility of seeing foreign firms control some key sectors of Chinese economy, as many Chinese provincial goverments are selling Chinese firms to foriengers. Risks of monopoly ou oligopolistic behavior.

At the financial level: huge amount of money coming into China, causing big inflationist pressure, risk of external shock to Chinese financial institutions... Asset swap between some Chinese assets of good quality and some American assets of less good quality, even of dubious quality.

Current orientation Focus on domestic development, government tries to implement a scientific concept of development ( aimed at developing Chinese own technologies, reducing pollution, raising energy use efficiency, etc). All this doesn’t mean a rejection of opening policy, but a correction of opening policy’s extent, due to resurging protectionism in many developed countries, and increasing macro-economic pressure.

But, it depends on the subtle game between Beijing and these provinces.