Opening-up Policy

• C> Background of the Opening-up Policy

  • After the founding of the PRC, for a relatively long period, China was developing on the principle of being self-sufficient.
  • It had very few connections with other countries in the economic and technological aspects.
• C> Background of the Opening-up Policy

  • Deng believed that being closed off from the rest of the world was one of the major reasons for China's prolonged backwardness and economic stagnation.
  • To accelerate modernization, China had to bring in foreign investments, technology and management skills.
  • Hence, the Opening-up Policy was mapped out by the government.
• 1.1 Special Economic Zones (SEZs)

  • In 1980, the government set up SEZs in Shenzhen, Zhuhai, Shantou of the Guangdong Province, and Xiamen of the Fujian Province.
  • Foreign investors were given preferential treatment for doing business in the SEZs.
  • For instance, they could enjoy a reduced corporate income tax rate of 15%.
  • They could also set up wholly foreign-owned enterprises or joint ventures with Chinese enterprises at favourable tax rates, as well as low labour and land costs.
• 1.1 Special Economic Zones (SEZs)

  • In 1988, the entire Hainan Province became a SEZ.
  • These SEZs served as China's window to the outside world, which brought in foreign capital, technology and ideas.
  • The successful experiences of the SEZs benefitted other regions of the country.
• 1.2 Coastal cities

  • In 1984, 14 coastal cities including Tianjin, Qingdao and Shanghai were opened up. 
  • The coastal cities were similar to the SEZs and implemented part of the SEZ’s preferential policies. 
• 1.2 Coastal cities

  • However, foreign investors could only invest in one particular city. 
  • Furthermore, the special privileges were behind those of the SEZs. 
  • Since these cities had been China’s industrial centres for a long time and they were located in the coastal regions which had convenient transportation, they could still attract foreign investors to invest. 
• 1.3 Economic Open Zones (EOZs)

  • In 1985, the government declared the Pearl River Delta, the Xiazhangquan Delta, the Changjiang Delta and the regions surrounding Bohai to be EOZs. 
  • The EOZs were mainly based on export trade, the processing industry and the production of raw materials. 
  • Therefore, they offered huge incentives to foreign firms that produced export goods and re-processing goods. 
  • Yet, the government offered the least degree of incentives to the EOZs compared with the other two economic zones. 
• 2. Opening up inland areas

  • Since the implementation of the Reform and Opening-up Policies, the government learnt that it was difficult for the interior regions to keep pace with the development in the coastal regions. 
  • Thus, the government focused first on accelerating the economic development in the coastal regions, which then motivated the development in the interior regions.
• 2.1 Implementing the strategy of developing coastal regions

  • After conducting an inspection in the southeastern coastal areas, Zhao Ziyang, then CPC General Secretary, proposed the strategy of developing the coastal regions in 1988.
  • According to this strategy, the coastal regions would import raw materials and export products to earn foreign currencies.
• 2.1 Implementing the strategy of developing coastal regions

  • The profits earned would be used to import machinery and technology which would benefit the growth of heavy industries in China.
  • The profits would also be used to help develop the interior regions, which would supply raw materials to the coastal regions, in return for the capital needed for their development.
  • This strategy let the coastal regions prosper before the others, but with the ultimate aim of achieving common prosperity with the interior regions.
• 2.1 Implementing the strategy of developing coastal regions

  • However, in reality, it would made the country rely heavily on the economic return the in coastal regions.
  • With the increase in investment, the economy of coastal regions grew rapidly.
  • This gradually intensified the polarization between the coastal and interior regions.
• 2.2 Accelerating the development of the interior regions

  • As the economy of coastal regions developed rapidly in the early 1990s, the government opened inland cities such as Changsha to foreign investment to achieve common prosperity.
  • The economic development of the interior regions was speeded up, but the pace of development was still relatively slow when compared with the coastal regions.
• 3. Developing foreign-owned enterprises

  • The government sought to bring in foreign investments.
  • Foreign businessmen could invest in China through enterprises like Sino-foreign joint ventures and enterprises based solely on foreign capital.
  • The government would offer incentives to them.
  • Many multinational enterprises such as Panasonic soon invested in China.
• 4. Participating in international economic and trade organizations

  • To strengthen trade with countries all over the world, China actively participated in different international economic and trade organizations.
  • For instance, China had its legitimate seat in the World Bank and the IMF reinstated in 1980.
  • In 1986, it joined the Asian Development Bank.
• 4. Participating in international economic and trade organizations

  • Through participating in these organizations, China could borrow money and express its opinions.
  • China was willing to follow the international trading rules and able to meet the standards of the world.
  • This helped China build fair trading relationships with other countries.