Fri. Oct 30th, 2020

FPI

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The People’s Republic of China is a unitary sovereign state in East Asia ruled by the
Communist Party of China with a one-party regime. It is the world’s most populous country
with approximately 1,400 billion and the second-largest country in terms of land area with 9.6
million km2. When we look at the structure of the country, we see twenty-two states, five
autonomous regions, four directly governed cities, and the special administrative regions of
Hong Kong and Macau. China also claims sovereignty over Taiwan. In this article, we will
talk about China’s place in the world economy.
Up to the Deng Xiaoping term, The People’s Republic of China did not have an open
economy. Considering the year 1977, although it brought a lot of restrictions to the Chinese
people, it became the 30th largest economy, and this situation brought limited freedom and
controlled liberalism with Deng Xiaoping, who came to power in 1978. This was the first step
of openness which can be seen as a critical tool in a strategy for getting development. China
got 2 percent growth after this, and before liberalization, China got just 0.7 percent growth.
Namely, openness provided adding double growth. So, how did openness reveal that
situation? Because openness has four important positive effects: domestic monopolies’ market
power can be limited, opportunities to seek rent are reduced, technologies and organizational
methods are learned, and production scales become large. (Of course, there are disadvantages
which are living destabilizing shocks and getting economic sanctions from trading partners;
but we do not see for China these so much clearly).
With the openness strategy that has been used, there have been changes in the commercial
field. The rate of export materials increased, and the export rate became 14 percent which was
resulted in increasing the income of the export firms in China. This situation was the first
since the 1920s. Also, China got more money, began to manufacture and export to
manufactured goods, such as clothes, toys, machines. In line with all these results, China has
shown very rapid development. Looking at China’s trade with the USA in 1998, while the
USA had a trade deficit, China had a surplus. In addition to all these, China became the 4th
the country in world trade in 2009.
The worldwide financial panic experienced in 1997-1998 did not affect China much due to
its closed economy yet; However, as the measures to be taken in the transition to an open
economy were not paid attention to, some problems arose later. Foreign investors
concentrated in the south of China have also preferred Taiwan, Hong Kong (the former

British colony can be seen as a financial center), and Singapore. While the people living in the
south earned the negative effect in the factories opened as a result of the investments, the
people living in the north made a living from agriculture, which led to in-country migration
after income inequality. There have been many developments in technology and business
management as a positive effect on foreign investment.
China joined the World Trade Organization, which was established in 1995, in 2001. With
this participation, foreign investors’ access to China’s market would be easier and more
secure, and China would make it easier for foreigners to find a business environment, and
reduce customs taxes. Although these things may seem like a burden for China, they actually
contributed to China’s income at first. Because with the formation of the free market, growth
and prosperity have been realized in the economy. The only problematic situation is the
increase in the unemployment rate after the privatization reforms were postponed. However,
these were easily overcome and China is now the second-largest economy in the world.
Today, China is very advanced in technological terms both in civilian and military are.
Because China provides a contribution to its engineers with opening institutes.
Consequently, when we look at the history of the state, which was named the People’s
The Republic of China in 1948, the increase in the country’s earnings with the open economy and
foreign investment can be seen quite clearly. In addition, we see with the example of Hong
Kong that there are certain criteria in the selection of the cities where investment is made.
This region, which was a financial center during the British colonization, was also chosen by
the People’s Republic of China. In addition to these, China, which joined the World Trade
Organization in 2001, has had a lot of duties (reducing customs tax, supporting foreign
investors, etc.) and as a result, it got very good results. Today, it is the second-largest
the economy in the world and is highly developed technologically.

This article is written by Buse Bakkaloğlu

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