Expert reviewed • 08 January 2025 • 11 minute read
China's drastic economic transformation over the last few decades demonstrates the profound impact of globalisation on increasing economic growth and development. Their rapid transformation into a global economic powerhouse illustrates the profound impact of globalisation.
Under Deng Xiaoping's leadership in the late 1970s, China's economic reforms saw increased integration into the global economy. These reforms, often referred to as China's "Open Door Policy," fundamentally shifted China's economic framework from a centrally planned system to a more market-oriented one. These reforms primarily included:
Under China's "Open Door Policy", China significantly reduced tariffs and other trade barriers, fostering an environment conducive to international trade. This move attracted foreign investment and boosted exports, making China a key player in global manufacturing and trade.
Furthermore, China's accession to the WTO in 2001 further integrated its economy into the global trading system. This membership facilitated greater market access for Chinese goods and services, enhanced the country's legal and regulatory frameworks, and increased foreign competition. In turn, this spurred domestic industries to become more competitive and efficient.
More specifically, China used direct policies to incite change in its economy. These mainly involved:
The establishment of SEZs was a key strategy to attract foreign investment and promote export-led growth. These zones contained benefits for transnational corporations such as favourable tax policies, modern infrastructure and regulatory environments. As a result, these zones became hubs for manufacturing and export activities, drawing massive FDI inflows. In turn, this provided a platform for farmers and other agriculture workers to gain access to new job opportunities. For example, Shenzhen, once a small fishing village, was transformed into a major global technology hub after the implementation of Deng Xiaoping's SEZs.
Additionally, the reforms of the late 1970s saw China undertake gradual but significant financial sector reforms to support economic growth. These reforms included the liberalisation of interest rates, the development of capital markets, and the opening of the banking sector to foreign competition. Such measures have enhanced the efficiency of capital allocation and provided more financing options for businesses and consumers. We can see the success of this initiative, with China's current boosted R&D expenditure being only second to the US in the global market.
A cornerstone of China's economic strategy since the late 1970s has been the massive investment in infrastructure. The government has funded extensive transportation networks, including highways, railways, and ports, which have improved domestic connectivity and facilitated international trade. In the current global economy, China contains the largest high-speed rail network. This is beneficial for their economic development, allowing the increased connectivity of people in the economy, while providing ease of access to all. Additionally, China has invested heavily in energy infrastructure to maintain their large industrial export sector, while improving their environmental sustainability.
Launched in 2013, China's BRI is an ambitious plan to enhance global connectivity. The initiative aimed to connect China to regions in Asia, Europe and Africa to increase trade and improve infrastructure. This has been a successful initiative, seen in China's boosted trade with BRI countries. In 2023, the value of Chinese exports to BRI countries reached approximately 10.73 trillion yuan (approximately $1.5 trillion USD).
Under the guidance of Deng Xiaoping's reforms, China over the past few decades has seen multiple economic successes. These include:
On the other hand, China's economic reforms have also resulted in nationwide challenges. Specifically, they are: