The China Trade: Recent Developments and Future Prospects

T HE SIZE AND GROWTH pattern of China's foreign trade are determined by two sets of forces, one economic and the other political. It is a well established fact that a country's foreign trade tends to be positively related to income per capita and negatively related to the size of the economy, measured either by Gross National Product or by population. Therefore it is not surprising that, given its huge population, extensive internal markets, and low per capita income, China is not a major trading nation. Currently, imports and exports together amount to only about 4-5 per cent of China's GNP, and in terms of world commerce its two-way trade is only around one per cent of the world total. China's foreign trade has also fluctuated with the changing fortune of its economy, rising in periods of steady economic expansion and falling in periods of economic setbacks. Because, in China, foreign trade is a state monopoly and ideology is important, politics-domestic and international-play a much larger role in determining foreign trade than in market economies. International politics clearly had a role in the sudden and sharp decline in Sino-Soviet trade in the early 1960s and in the fluctuation of Sino-Japanese commercial relationships before Japan's formal recognition in 1972 of the People's Republic as the sole legal government of China. China's foreign trade has also been influenced by domestic politics. Since the 1950s, internal politics in China have centered around the two-line struggle. In brief, Chinese leaders are split between and moderates, having very different views of economic development. The moderates take a relatively pragmatic approach to economic problems, while the radicals take a more ideological approach, placing greater emphasis on self-reliance, non-material in-