China’s interaction with the global economy

Abstract

A key element of Deng Xiaoping’s economic reform strategy was to abandon the Maoist ideal of national self-sufficiency and start reaping the gains available from participating in global trade. The result has been an expansion of China’s trade that has outpaced the growth of its domestic economy and far exceeded the growth of global trade for almost three decades. Since reforms were launched, imports and exports as a share of China’s economy have expanded greatly and China’s share of global trade has grown tenfold. In 2004, China surpassed Japan to become the world’s third largest trading economy, a remarkable achievement given that China’s economy is only two-fifths the size of Japan’s. This chapter analyses two issues: China’s bilateral trade with the United States and China’s exchange-rate policy.