China's Trade and FDI policy: Comparative Analysis

Essay by jumathieUniversity, Master'sB, April 2006

download word file, 17 pages 3.9

Period 1991-1996

1. Gradualism vs. Shock therapy

Despite the bias of analysis caused by the different transition periods between China and Former Soviet Sates, and by different countries' characteristics, we believe that the rapid growth observed in China from 1978 and in Eastern Europe from 1991 is a concern of convergence process. This process makes up think that the steady state for Chinese and Eastern European economies could be achieved by providing solutions in rules and institutions in line with: Western Europe for Former Soviet States and Japan, South Korea for China.

To develop, the Chinese way could be described as "crossing the river by touching the stones", while Eastern European transformation should be described as a shock therapy. Still, in terms of trade liberalization and trade policies, China and Post Soviet Economies experienced some similarities.

Big bang policy can be described as:

1. rapid and comprehensive trade and price liberalization

2. macroeconomic stablization

3. alignment of the official exchange rate to the market rate

4. ending legal discrimination towards all types of non-state enterprises

5. early commintment of mass privatization of SOEs

Policy of gradualism should be described as follows:

1. Gradualism strategy is transferable to other transition economies

2. China's experiments in non-capitalism intsituations are providing to be usefull in: agriculture, TVE, SOEs

3. China is evolving into a unique set of instituatinal organizations, as a result in experimentlizm in policy design

In the beginning gradualism was a good solution, especially with social protection. Now China is lacking large scale reforms.

Newspapers news.

Critics of this approach say that gradualism comes because of lack of consensus over the proper course with power divided equally between old-time thinkers and modernizers, there is a risk of loosing control over vital areas of political and economic activities.


Centralized and inward-looking...