Case study: China's Open Door Policy

• China's 1978 Open Door Policy

  • Under Chairman Mao Zedong, communist China was 'switched off' from the global economy. Most people lived in poverty in rural areas. 
• China's 1978 Open Door Policy

  • In 1978, Deng Xiaoping introduced the 'Open Door Policy', slowly introducing economic liberalisation and opening up to FDI while maintaining a strict one party political system. 
  • SEZs were created on the coast, such as the Pearl River Delta Zone, the Shanghai Economic Zone, attracting a rapid inflow of FDI. 
• China's 1978 Open Door Policy

  • In 1980 it created the Shenzhen Special Economic Zone. 
  • Exports soared from $2 billion in 1980 to $200 billion in 2000. 
  • China joined the WTO in 2001, guaranteeing other countries would lower tariffs on exports from China. 
• China's 1978 Open Door Policy

  • By 2006, China was receiving $60 billion in FDI per year. 
  • China experienced rapid economic growth, reaching 10% p.a. in the 1990s. 400 million people were lifted from poverty. 
  • Legal restrictions were relaxed on FDI in some sector's of China's domestic economy, e.g. rail freight and chemicals.
  • China agreed to remove export restrictions on 'rare earth' minerals, following a WTO ruling.
  • The Chinese government's sovereign wealth fund and Chinese TNCs are now a major source of FDI in other countries. 
• China's 1978 Open Door Policy

  • Information flows are controlled. Google and Facebook access is limited. The Chinese Youku is the social media provider. 
  • Cultural erosion is limited - a quota of 34 foreign films per annum in Chinese cinemas. 
  • FDI restrictions in some sectors. Coca-Cola's attempted acquisition of Huiyan Juice was blocked in 2008.
  • In many Chinese SEZs wages are now high by global standards and countries like Vietnam are more competitive. 
• These have contributed to 'made in China', with FDI pouring in over the last 30 years. Western consumers benefit from low-cost goods, but there are question marks about pay and working conditions in SEZs. Apple was subject to negative publicity in 2010 when working conditions in its supplier factories (owned by Foxconn) making iPhones and iPads, came under scrutiny.