History of trade of the People's Republic of China facts for kids

China's trade is a very important part of its economy. After 1949, China's trade system slowly grew but wasn't always very efficient. In 1978, China started to make big changes to its economy. These changes aimed to speed up the movement of goods and make business much more efficient.

The government decided to create a "socialist market economy". This means it mixed central planning (where the government decides everything) with market mechanisms (where supply and demand play a role). These changes led to more freedom in both local and international trade. Free markets became much more important for selling goods. Also, foreign trade and investments played a huge role in China's economic growth.

In 2013, China became the world's biggest trading nation, even bigger than the United States. It's now a key player in global trade. China joined the World Trade Organization (WTO) in 2001. It also has special trade agreements with many countries, like Australia, South Korea, Switzerland, Pakistan, and the ASEAN group of nations.

Trade Inside China

Farming and Food Trade

Most people in China used to live in rural areas and worked in farming. In 1981, a new "responsibility system" started. Instead of large groups, families became the main farming units. Families would agree to farm a piece of land. They had to give a certain amount of crops and taxes to the government. After that, they could keep or sell any extra food they grew in free markets. This made farmers much more productive.

The government used to buy most farm goods through taxes or state companies. But over time, they bought less. By 1985, the government stopped setting strict buying rules for many farm products. Farmers could sell their grain and cotton to the state at a set price. Any extra could be sold in the market at changing prices. If market prices dropped too low, the state would buy all the grain to help farmers.

Rules on private businesses were also relaxed. This allowed farmers and groups to transport their goods to markets in both the countryside and cities. The number of free markets, called "commodity fairs," grew very quickly. By 1986, there were 61,000 of them across the country. These markets helped get food to people and eased the pressure on the government's distribution system.

In cities, food was sold in state-owned stores and restaurants. But in the mid-1980s, free markets and private restaurants also became common. Prices for some items like vegetables and meat were set by local officials. Other prices changed based on what people wanted to buy. Most food items were easy to find, except for a few things like grain and cooking oil, which still needed special coupons.

Farmers also bought industrial goods for their work. Local groups or state offices sold things like chemical fertilizer and insecticides at set prices. The government even offered lower prices for these items to farmers who grew grain. Farmers could also buy machines and vehicles to transport their goods.

Industry and Production

After 1982, China's economy became a "mixed system." This meant it used a mix of government planning and free market ideas. By late 1984, the government reduced how much it controlled industries in cities. Businesses got more freedom, and managers had more power. Price controls were loosened, and government help to businesses was cut.

This created a "socialist planned commodity economy." It was like two systems in one. The government still planned some things, but market trading with changing prices also became very important.

For industrial goods, some products were still strictly controlled by the government, like coal, oil, and steel. Businesses that made these goods had to meet government plans first. After that, they could sell any extra products to other companies or commercial departments. The prices for these extra goods could change within limits set by the state. Big cities also started wholesale markets for industrial goods to help businesses get what they needed.

For other products, the government gave "guidance." Businesses tried to meet the government's goals but made their own choices about production and sales. They looked at what the market needed and what materials were available. Prices for these goods could be set by the state or agreed upon by buyers and sellers. Products not included in government plans were simply sold based on market demand.

Working Together Across Regions

China also encouraged "lateral economic ties." This means different regions and organizations started working together. Before the 1970s, China's planned economy made it hard for businesses in one area to work with those in another. This led to a lot of waste and inefficiency.

Lateral economic cooperation helped break down these barriers. It allowed people, resources, money, and skills to be shared more easily. It also helped businesses buy and sell goods more efficiently. For example, factories that made raw materials could work with those that processed them. Research centers could work with production companies.

China also created different zones for economic cooperation. The country was divided into eastern, central, and western regions, each with its own development plans. Then, three levels of cooperation zones were set up. The first level included large zones that crossed several provinces, like the Shanghai Economic Zone. The second level linked provincial capitals with important ports and cities. The third level focused on areas around provincial capitals. Even smaller areas like counties and cities formed their own partnerships.

Shopping and Selling

Shopping in China changed a lot in the late 1970s and early 1980s. Economic reforms meant there was more food and consumer goods available. State-owned stores got more freedom to buy goods. Also, individuals and groups were allowed to open their own shops, restaurants, and service businesses in both cities and rural areas.

Retail sales grew by 300% from 1977 to 1985. Sales in rural areas grew even faster than in cities, showing that people in the countryside were earning more money. By 1984, rural sales made up almost 60% of all retail sales. Most of what was sold (about 88%) were consumer goods, like clothes and electronics.

The number of shops also grew quickly. In 1985, there were 10.7 million retail, restaurant, and service businesses. This was a huge increase from 1976. What was most amazing was the fast growth of shops owned by groups and individuals. The number of people running their own businesses grew more than 40 times! Because of this, the share of state-owned shops in total sales dropped from over 90% to just over 40%.

In cities, most shops were in main downtown areas or smaller neighborhood shopping spots. These neighborhood areas were very convenient, usually within walking distance of homes. They had almost everything people needed daily. A typical neighborhood might have a department store, bookstore, bike repair shop, restaurant, and barbershop. Bigger cities had larger versions of these stores and special shops for things like musical instruments or cameras.

Free markets also became popular again. Private sellers and groups offered services, sold goods, and served food and drinks. Farmers from nearby areas sold their extra produce there. In the 1980s, "night markets" also came back in cities. These markets operated in the evening, offering longer service hours than regular stores.

In rural areas, special cooperatives ran general stores and small shopping centers near villages. These were supported by private and group-owned businesses and the free markets that appeared everywhere in the countryside. Generally, cities had a wider variety of goods than rural areas. However, some farmers could travel to cities to buy things and sell their farm products.

For a long time, some important goods like grain, cotton cloth, meat, and cooking oil were "rationed." This meant people needed special coupons from their workplaces to buy them. By the mid-1980s, rationing for over 70 items was stopped. There were more consumer goods available, and most things were easy to find. Only a few items like grain and cooking oil still needed coupons. In 1985, pork rationing was brought back in some cities because supplies were low. But you could still buy pork at higher prices in supermarkets and free markets.

China's Global Trade

In 2010, China became the world's biggest exporter, meaning it sold more goods to other countries than anyone else. It has stayed the top exporter ever since.

A Look Back at China's Foreign Trade

China's foreign trade started a very long time ago, even during the Western Han dynasty (206 BCE-9 CE). This was when the famous "Silk Road" was first used, connecting China to Central Asia. Later, Chinese ships traded all over Asia and even reached the coast of Africa. Caravans also traded across Central Asia and into the Middle East. However, foreign trade was never a huge part of China's economy. Chinese emperors often thought the country could provide everything it needed. During parts of the Ming (1368–1644) and Qing (1644–1911) dynasties, the government actually tried to limit trade. In the 1700s, sea trade was restricted to just one port, Canton.

In the 1800s, European countries used military force to make China trade with them. After the Opium War (1839–42), Western countries and later Japan forced China to sign "unequal treaties." These treaties allowed foreigners to set up their own business areas and have special rights in China. These special foreign rights ended when the People's Republic of China was founded in 1949.

For the first 30 years of the People's Republic, foreign trade was not a big part of China's economy. Like other large countries, China traded little with other nations compared to its own internal business. In the 1950s and 1960s, foreign trade was only about 2% of China's total economic output (GNP). By 1979, it was still only about 6% of GNP.

However, foreign trade was still very important. Imports helped China get food, cotton, and other farm products when there were shortages. They also provided important raw materials like chrome and manufactured goods like chemical fertilizer. Buying foreign factories and equipment helped China use more advanced technology from developed countries to grow its own technology and economy faster.

In the 1950s, China imported factories and equipment from the Soviet Union for its first Five-Year Plan (1953–57). China exported farm products to pay back these loans. Trade reached its highest point in 1959. But then, farm production dropped sharply from 1959-61. China had to stop buying machinery and instead buy foreign grain. Under a policy of "self-reliance" (relying on itself), trade dropped in 1962. As the economy recovered in the mid-1960s, China started ordering foreign equipment again. But in the late 1960s, the Cultural Revolution caused trade to decline once more.

In the early 1970s, leaders like Zhou Enlai and Deng Xiaoping pushed for "modernization." China also started having more contact with Western countries. This led to a big increase in trade. Imports of modern factories and equipment were especially important. After 1973, oil became a very important export for China. Trade more than doubled between 1970 and 1975.

Starting in the late 1970s, China completely changed its economic plan. By the early 1980s, it decided to be more open to the world and increase foreign trade. This "opening up" policy led to many changes:

• Foreign trade organizations were reorganized and given more freedom.
• New laws were made to help foreign trade and business.
• Foreign companies were allowed to invest directly in China.
• Special economic zones were created.
• Foreign trade grew very quickly.
• China imported foreign technology and management ideas.
• China started to be involved in international money markets.
• China joined international economic groups.

These changes helped China's economy and connected China more deeply with the rest of the world. In 1979, China's trade was $27.7 billion. By 1985, it had jumped to $70.8 billion. This meant trade was 20% of China's GNP and 2% of all world trade. China became the 16th largest trading nation.

Here's how China's foreign trade grew each year (in US dollars) during its reform period:

Trade Rules in the 1980s

Under the "opening up" policy, exports, imports, and foreign money all helped China's economy grow. Exports earned foreign money, which was used to fund projects and buy advanced technology. Imports of machines and industrial supplies, along with foreign loans, helped improve things like energy, transportation, and communication. They also helped modernize industries that made machines and electronics. To earn more foreign money, China also used foreign investments to make more goods for export, like textiles.

China took many steps to boost its foreign trade. Foreign trade groups were reorganized. Rules on imports and exports were changed depending on how much China was trading and how much foreign money it had. For example, after buying a lot of foreign factories, China limited imports from 1980 to 1983. But in the mid-1980s, exports grew, and China had a lot of foreign money. This led to a surge in imports.

However, too many uncontrolled purchases of consumer goods led to trade deficits (buying more than selling) in 1984 and 1985. So, China introduced a system of import and export licenses. It also controlled foreign money spending more strictly and lowered the value of its currency (the yuan). This was to reduce the trade deficit and make sure China imported machines and equipment, not just consumer goods. In 1985, China had $11.9 billion in foreign money reserves.

China joined many international economic groups, including the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank. It also became an observer of the General Agreement on Tariffs and Trade (GATT) in 1982 and applied to be a full member in 1986. China also changed its mind about foreign money. It started borrowing from international organizations, foreign governments, and banks. It also allowed foreign banks to open branches in China.

The Chinese government had a good reputation for paying back its loans. It didn't get into huge foreign debt like many other developing countries. Between 1979 and 1985, China signed loans totaling $20.3 billion. Most of these loans went into big projects like energy and transportation. The Bank of China, which handled most foreign money, opened branches overseas and participated in international money markets.

New laws were also created to encourage foreign investment and trade. Laws on taxes, joint ventures (businesses owned by both Chinese and foreign companies), and foreign investments were put in place. In 1979, China created four "special economic zones" in cities like Shenzhen and Xiamen. These zones were designed to attract foreign investment, increase exports, and bring in new technology. In 1984, 14 coastal cities were also named "open cities" to attract foreign funds. However, there were still some problems like too much paperwork and lack of basic facilities, which meant less foreign investment than hoped for.

From 1979 to 1985, China received $16.2 billion in foreign investment. By 1986, China had over 6,200 foreign-funded businesses. Most of these were in manufacturing, while some were in service industries like hotels. Hong Kong provided 80% of the partners for joint ventures, the United States 7%, and Japan 6%.

How Foreign Trade Was Organized

China's foreign trade system became more complex and spread out in the late 1970s and 1980s. In 1979, the nine foreign trade companies under the Ministry of Foreign Trade lost their complete control over imports and exports. Other government ministries were allowed to set up their own foreign trade businesses. Provincial branches of state foreign trade companies also got more freedom. Some provinces and cities were allowed to create their own import-export companies.

In 1982, several government bodies dealing with trade were combined to form the Ministry of Foreign Economic Relations and Trade (MOFERT). In 1984, the foreign trade system became even more decentralized. Foreign trade companies became independent and were responsible for their own profits and losses. A new system was also set up where specialized companies acted as agents, handling imports and exports for others on a commission basis.

Ministry of Foreign Economic Relations and Trade

The main jobs of MOFERT were to create and oversee foreign trade rules. It also worked with the State Planning Commission to set long-term trade plans and annual import/export goals. It controlled imports and exports using licenses and quotas. MOFERT also supervised foreign trade companies, coordinated trade relations with other governments, and directed the customs office.

Foreign Trade Companies

In the late 1980s, China had many specialized national companies that handled imports and exports. These included companies for arts and crafts, textiles, food, chemicals, metals, machinery, and even aerospace technology and weapons. Even though MOFERT supervised them, each company was responsible for its own profits and losses. For example, the Great Wall Industrial Corporation imported and exported vehicles, satellites, and other aerospace products. The China Northern Industrial Corporation, which was part of the Ministry of Ordnance Industry (weapons), used military factories to make civilian products for export, like heavy machinery and optical equipment. Other companies offered professional advice, like the China International Economic Consultants Corporation, which gave advice on investments.

Money and Investments

Foreign money and reserves were controlled by the State Administration of Exchange Control under the People's Bank of China (China's central bank). This administration had to approve all foreign money given to banks, ministries, and businesses. The Bank of China was the main bank for foreign money. It provided loans for trade, opened branches overseas, and researched international money trends. It also participated in international money markets by doing things like issuing foreign bonds.

The China International Trust and Investment Corporation (CITIC) was created in 1979 to help foreign investment in China. It also borrowed and lent money internationally and issued foreign bonds. In 1986, CITIC changed its focus to industries like power, metals, and raw materials, which had trouble attracting investments. The China Investment Bank was set up in 1981 to help get medium and long-term loans from international groups like the World Bank.

Other Trade Groups

The State Planning Commission and State Economic Commission helped plan the long-term development of foreign trade. They set national priorities for imports and exports. Other groups under the State Council were also involved, such as the Special Economic Zones Office and the General Administration of Customs. The China Council for the Promotion of International Trade (CCPIT) helped MOFERT with foreign trade relations. CCPIT organized trade visits, foreign trade exhibitions in China, and Chinese exhibitions in other countries. The People's Insurance Company of China also expanded its services in 1980 to encourage foreign trade. It offered new types of insurance to foreign companies, including coverage for things like satellite launches and offshore oil development.

What China Traded

After 1949, China usually imported industrial goods from developed countries. It paid for these by exporting food, raw materials, and light manufactured goods, especially textiles. This pattern changed when needed. For example, after the economic problems of the Great Leap Forward (1958–60), food imports jumped from almost nothing to 39% of all imports in 1962. At the same time, imports of machines and equipment dropped a lot. From then on, food and live animals remained a significant, though decreasing, part of imports.

The types of goods China exported also changed as its industries grew. Manufactured goods made up only 30% of exports in 1959, but this grew to 44.9% in 1985.

Important changes happened in specific trade categories in the 1970s and 1980s. Imports of textile fibers increased as China's textile industry grew faster than its cotton supply. Imports of unfinished textile products also rose. Iron and steel were a big part of imports in the 1970s. Imports of manufactured goods, machinery, and transportation equipment made up a large part of total imports.

On the export side, the share of foodstuffs fell. The fastest-growing export in the 1970s was petroleum, which China first exported in 1973. Petroleum quickly became a huge part of all exports. In the 1980s, textile exports grew very fast. By 1986, textiles replaced petroleum as China's largest single export item.

China's Trading Partners

In the 1950s, China's main trading partner was the Soviet Union. In 1959, trade with the Soviet Union made up almost half of China's total trade. But as relations between the two countries worsened in the early 1960s, trade dropped significantly. By 1966, it was only about 7% of China's trade. In the 1970s, trade with the Soviet Union averaged about 2% of China's total.

By the mid-1960s, Japan became China's top trading partner. Japan was a natural partner because it was close and had good transportation links. Japan's economy was very advanced in areas where China was weak, like heavy industry and modern technology. China, on the other hand, had natural resources that Japan lacked, like coal and oil. In the 1980s, Japan accounted for over 20% of China's foreign trade.

Since the 1960s, Hong Kong has always been the biggest market for China's exports and its second largest overall trading partner. Hong Kong was a major market for Chinese food and also served as a place to send Chinese goods to other countries.

The United States banned trade with China until the early 1970s. After that, trade grew quickly. After full diplomatic relations started in 1979, the United States became the second largest importer to China. By 1986, it was China's third largest overall trading partner. Most American goods imported by China were high-tech industrial products, like aircraft, or farm products, like grain and cotton.

Western Europe has also been important in China's foreign trade since the mid-1960s. Countries like Germany were second only to Japan in supplying industrial goods to China. China tried to buy industrial goods from many different West European nations. In 1986, Western Europe made up almost 18% of China's foreign trade.

Third World countries have long bought Chinese farm products and light industrial goods. In 1986, developing countries bought about 15% of Chinese exports and supplied about 8% of China's imports. China has increased trade and investment with many African countries, partly to get important natural resources like oil and minerals.

In 2018, the United States put 25% taxes (tariffs) on many Chinese imports. China responded by putting 25% tariffs on US imports. This China–United States trade war got more intense in August 2019. Chinese investments in US-based new companies also slowed down. While the US remained China’s largest trading partner, by 2023, China's exports to the US were among their lowest in almost 20 years. This was partly because US consumers bought less after the pandemic.

By 2020, China became the largest trading partner for more than 120 countries. In 2023, global exports dropped for the first time in seven years. The ASEAN group of nations became China’s largest regional trading partner, followed by the European Union. In 2023, trade with Russia grew very fast, with Chinese exports to Russia increasing by almost 47%. In early 2024, trade between China and Russia reached a record $240 billion.

See also

• Economy of China
• Tourism in China
• China–United States trade war
• Australia–China trade war