China's Open Door Policy

Question 1

when did this occur?

Answer 1

1978

Question 2

how did this occur?

Answer 2

1. allowing foreign investment
2. buying US machinery
3. reforms in rural areas where farmers could gain profit
4. 300 million people moved to urban areas in 30 years, causing instant cities to appear
5. Hokou - the protection of rural areas so they didn’t get deserted
6. the establishment of SEZs

Question 3

what are SEZs?

Answer 3

special economic zones
- in 2015, 50% of global exports came from Chinese SEZs
- in the 1990s, 50% of China’s GDP was generated by SEZs
- due to financial and tax incentives many TNCs located there, also due to the attraction of cheap labour and cheap foreign imports
- TNCs formed relations with Chinese factories, many of which were low-waged

Question 4

how did it affect FDI flows?

Answer 4

FDI flows now from the BRICS (Brazil, Russia, China and India) to MINTS and largely invests in the US, EU, Africa and South America. China now is a big importer and exporter of FDI with flows directed at Asia since the global shift.

Question 5

affect on global shift?

Answer 5

it has shifted the economic centre of gravity towards Asia

Question 6

what was China like before?

Answer 6

politically isolated from the rest of the world due to differences in ideologies and very rural, with the majority of the population living on poverty wages

Question 7

what is China like now?

Answer 7

• English is taught in schools to raise a new elite who can speak the language of trade
• Chinese banks are some of the largest TNCs globally
• China’s economy relies not just on the value of its exports but domestic spending
• labour costs are high due to the production of high-tech goods
• they’ve used the business techniques and technology that TNCs brought over and developed them to make their own products like the Xanoi iPhone
• high wages increase disposable income, leading to increased tax revenues and government spending in education, healthcare and infrastructure. Also leads to the multiplier effect of economic growth as they have more money to spend on local businesses. Overall, a huge increase in quality of life.

Question 8

what is the future of China’s economy?

Answer 8

it’s growth is coming to a plateau and will either decline or boom again and this cycle will continue