Assess the impact of Chinas opening up to the global economy on the

success of its market reforms.

After Chinas opening up in 1978, China has been able to gain access to
large amount of foreign investments, resources, energy, know-how,
markets, expertise and many other benefits which all had contributed
significantly to success of its market reform. While openness to trade may
have exacerbated certain socio-political situations, failed to reform some
market problems or has been inadequate at transiting the economy,
opening up to the global economy indubitably is the key reason for
Chinas economic miracle. Hence, this essay seeks to argue that Chinas
opening up to the global economy has largely contributed to the success
of Chinas market reforms as because in spite of its limitations, the
benefits of opening up far outweigh the cost.
Chinas opening up made Chinese economy increasingly market oriented
and less state-controlled over time by first exposing the China to the
strength of capitalism and thereby spearheading subsequent reforms,
leading to Chinas economic success. To benefit from the trade and FDI
which the economy was exposed to after Chinas opening up, monetary
economy is established with the abolishment of coupons by the 1980s and
Renminbi became the nations legal tender. More people set up their own
businesses to provide goods and services that are in domestic and foreign
demand. Salaries are determined by job performances and most
occupational benefits reminiscence of the old socialist system has been
withdrawn. Private retail and service sector began to flourish throughout
China. Trade volume and flow of investments between China and other
countries expanded rapidly after the 1980s. As such, opening up has been
beneficial in transiting the economy to a more market-oriented and less
state-controlled to rake in high economic growth.
Moreover, opening up of China has contributed to the success of Chinas
market reforms by first welcoming the market to investment which would
be crucial for economic development is also critical for Chinas economic
succcess. Under industrial modernisation, Dengs socialism with Chinese
characteristic justified the establishment of capitalism within communist
China. Beginning with the establishment of SEZ in Southeastern Chinese
coastal provinces, more trading cities subsequently flourished along the
Banks of the Yangtze River to facilitate international commerce into
mainland China. Chinese leaders toured the more developed countries to
invite foreign capitalist firms to invest and set up businesses in China.
Industrial parks and preferential treatments are in place to attract foreign
capital and know-how. As such, opening up of China is the very cradle that
brought China the economic prosperity it enjoys today.
Furthermore, opening up established the base for Chinas manufacturing
sector which is critical for market reorientation toward a market-driven
economy that is more integrated with the global economy, leading to its
economic success. Before Chinas opening up, attempts at progressing

toward a market-driven economy have been fraught with obstacles such

as low social spending. By exposing China to markets with both demand
and purchasing power, opening up provided China with the impetus to tap
on the natural advantages it has in export-oriented manufacturing given
its low labour costs, strong governmental support, adaptable and
innovative enterprising businesses. As opening up of Chinas market to
the developed western countries occurred during a period when their
economy was thriving and booming, growth of China picked up very
quickly. As such, opening up has been beneficial in the reorientation of
Chinas economy toward a market-driven economy.
However, new socio-political challenges brought in when China opened up
as well as the worsening of old ones limit its extent of its contribution to
Chinas economic success as they inhibit Chinas economic growth. China
has been plagued by social ills that are by-products of its opening up.
Rapid modernisation of the industry has resulted in serious environmental
degradation detrimental to the health and social stability of China.
Economic modernisation coupled with unequal development has
exacerbated socioeconomic inequalities. Economic reforms have also
accentuated dissents against CCP regime as more political challenges
began to surface. The prevalence and rampancy of corruption that have
arisen out of Chinas economic modernisation are rooted in Chinas
partially reformed economy and absence of genuine political reforms. For
many years, Beijing, for fear of undermining the supremacy ruling party
has lacked the political will to act against top level party officials and this
has encouraged rampant level of corruption in a patron-client structural
relationship. The recent Bo Xilai saga is a good example of how the
credibility of governing institutions was critically undermined, public
resentment was fuelled, massive economic distortions were resulted, and
needlessly, CCPs legitimacy was challenged. As such, challenges brought
in by Chinas four modernisations as well as the worsening of old ones
limit its extent of success.
Despite opening up, certain old challenges to the economy that have been
hindering Chinas market reforms continue to exist, thereby limiting the
impact on Chinas economic success. Even after 1978, China is still
plagued by the mammoth and often inefficient SOEs. SOEs today are still
receiving bulk of the governmental attention, support and resources for
their development. Chinas financial system remained centrally-planned
and underdeveloped. Held back by old socialist attitudes, the four major
state banks remained under strong state control and are inflexible to the
needs of the market. Chinese banking system continues to discriminate
against private households, local small and medium enterprises, thus
irresponsive to market needs. Financial resources are concentrated in the
state-owned enterprises traditionally affiliated with the state banks.
Worse, the unprofitable SOEs are not transparent in their commercial
operations and are also responsible for the accumulation of bad debts
held by the state banks. Private enterprises are often excluded from more

large-scale industries such as energy, steel and telecommunications. As

such, the impact of Chinas opening up is limited.
Moreover, even with opening up, Chinas market reforms would not have
succeeded without other economic strategies to raise the productivity and
efficacy of Chinese industries, thereby limiting its impact of Chinas
economic success. In the agriculture sector, the Household Responsibility
System was introduced to encourage greater productivity as peasants
could now sell their surplus crops on the open market. Town Village
Enterprises, before it was changed into privately-run cottage industries,
were also established so that surplus labour in the countryside could earn
extra income through employment in low-skilled manufacturing industries.
Monetary incentives were also introduced to improve the processes and
productivity of the SOEs. To make SOEs internationally competitive, they
were restructured and reformed along the managerial model of foreignowned multinational corporations. Leaders of the SOEs were better
tutored in the capitalist ways. They were given greater autonomy by the
government at making business decisions. As such, the significance of
Chinas opening up on the success of market reforms is limited as it took
other economic strategies to contribute to Chinas success in reforming.
In conclusion, although Chinas opening has worsened some socio-political
situations, failed to reform some market problems and is inadequate at
transiting the economy, it kick-started the reform process, attracted large
amount of FDIs and exposed foreign markets to China such that China can
successfully transit to the market economy. Given that many of the
positive impact of Chinas opening up are what caused the economy to be
strong today, and trade-offs are worth it, Chinas opening up to the global
economy has largely contributed to the success of Chinas market
reforms.