Chapter 7: Growth of Foreign Trade and Investment
7. Growth of foreign trade and investment Many hypotheses have been advanced to explain the relatively slow progress of China compared to Japan during its transition to modern economic growth (MEG). One of the more popular explanations is that while foreign trade played a crucial role in early Japanese development, their role in China at the onset was modest at best, if not negative (Hou 1965; Dernberger 1975; Mah 1979; Rawski 1978). The purpose of this chapter is twofold: (1) to re-examine this hypothesis in the light of available evidence; (2) to assess the contribution of foreign capital to early Chinese MEG. FOREIGN TRADE The Growth of Foreign Trade Despite the Western countries’ attempt to force China to open to free trade, the late Qing government resisted these attempts because the country was largely self-sufficient and had a highly developed system of internal trade which assured sufficient supply of goods for traditional demand to most of China’s regions. Thus China’s foreign trade during this period grew only slowly (see Table 7.1), but its pace picked up with the steady weakening of the government. This was true especially after the Treaty of Shimonoseki, with China’s external trade volume doubling between 1891–95 and 1906–10. During the Republican period (from 1912 to 1949) the trade volume continued to surge and reached its peak in 1926–30 at almost $1400 million. However, in the 1930s China’s external trade was heavily impaired by external and internal political and economic factors, such as the...
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