China's "Going Out" Policy: Inception, Evolution, Implication

By Shen, Raphael; Mantzopoulos, Victoria | Journal of Business and Behavior Sciences, Fall 2013 | Go to article overview

China's "Going Out" Policy: Inception, Evolution, Implication


Shen, Raphael, Mantzopoulos, Victoria, Journal of Business and Behavior Sciences


Abstract: China began its systemic transformation in 1979. In the external sector, the two primary engines that have helped propel China's economy on to the world's stage are foreign investment and foreign trade. Mao Zedong's "closedoor" policy (1949-1977) gave way to Deng Xiaoping's controlled "open-door" policy in 1979. Controlled open-door policy invited capital and technology inflows while actively promoting export. Growing capital inflows since the early 1980s have helped transform China's export industries. Liberalizing foreign investment and foreign trade has enabled China's economy to grow at a rate that is historically unprecedented. By 2010, China replaced Japan as the world's second largest economy. China's foreign trade sector kept scoring mountain surpluses. Its foreign reserve correspondingly kept soaring. Instead of being focused primarily on inducing capital inflows, China also began looking outward for overseas foreign direct investment opportunities by the turn of the century. Its "going-out" policy was premised on four principle considerations: resource seeking, asset seeking, market seeking, and political gains. China's systemic transformation that began three decades ago has radically transformed the "sleeping giant" into a world economic power. Its "going out" policy initiated a decade ago will likely impact world economic and political relations as well for the foreseeable decades to come.

(ProQuest: ... denotes non-USASCII text omitted.)

A BACKGROUND NOTE

Deng Xiaoping, thrice purged by Mao from his post in the 1960's and 1970's, became China's paramount leader. Directed by Deng, the 2nd session of the 5th Peoples' Congress approved the new government policy of reform within and opening up to the outside in late 1978. Economic reform began in earnest by early 1980. By 2010, China replaced Japan as the world's second largest economy.

The two major engines of China's rapid rise as a major player in world economy and global affairs are its reform policies in foreign trade and foreign investment. That China became the largest recipient of foreign capital in recent decades has been extensively analyzed and well documented.

A dozen years ago, however, China's economy had evolved to the point that it began openly promoting its "going out" policy. That is, aside from the policy of continuing to attract capital inflow from abroad, China began actively searching for investment opportunities abroad with its immense and rapidly accumulating foreign reserves. The effect of China's new "going out" policy will significantly influence the fabrics of global economic and a political relationship in the foreseeable future is nearly inevitable.

FROM "CLOSED-DOOR" TO CONTROLLED "OPEN-DOOR" POLICY

Mao's genius resided in his ability to cultivate a personal cult and to liquidate his perceived or imaginary political foes. Upon the founding of the PRC, he relied almost exclusively on the former Soviet Union for financial and technical assistance. After his open quarrel with Nikita Khrushchev in 1960, Mao advocated self-reliance. China adopted a close-door policy in international economic relations. Ravaged by Mao's "Great Leap Forward" policy in 1959 and the ruinous "Cultural Revolution" movement of 1966, China's economy mired in built-in inefficiency and institutionalized wastefulness by the time of Mao's demise in 1976. By then, the economy of the Four Asian Tigers (Singapore, S .Korea, Taiwan, and Hong Kong) had been on a steady and rapid ascent for years, leaving that of China's farther and farther behind in all productive endeavors. Reform was imperative.

A communiqué from the 3(TM) Session of the 11th Central Committee meeting of the Chinese Community Party (December 18, 1978 - December 22, 1978) stated: "(There is the need to) implement the four-modernization policy.. .

. .A major flaw of our economic system now resides in over centralization of power. There should be controlled but bold decentralization of authority. …

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