This research examines economic reform and the implications of that reform in the PRC. Relevant background information on the PRC and the country's economy is presented as a part of this introduction. Following the introductory material, the nature and consequences of economic reform in the PRC is reviewed.
As the official policy of the government of the PRC from its inception was to trade with all countries, whether or not diplomatic relations had been established, business entities from most countries, other than the United States, developed trading arrangements with China in the 1950s and 1960s. During the 1950s, Chinese foreign trade was heavily oriented toward the Soviet Union. By 1959, 48 percent of China's foreign trade was with the Soviets. Political disagreements between the two countries, caused Soviet trade to drop to only 7.5 percent of China's total foreign trade by 1966 (Manatoo, 1990, pp. 63-79).
With the decline in the significance of the China-Soviet trade, there was a dramatic rise in the significance of China-Japan trade. By the end of the 1970s, Japan was China's leading trade partner; a position it has maintained. By 1988, the PRC's leading trading partners were Japan, Hong Kong, and the United States, in that order. Japan is an important trading partner with respect to both imports and exports, while Hong Kong is more important to China as an outlet for its exports, and the United States is more important as a source of imported products, particularly technology (Manatoo, 1990, pp. 63-79).
When Chairman Mao died, and the last of the "Red Guard" influence was purged from the Chinese political environment, a government with more pragmatic economic views gained power. In 1978, this new government initiated a series of economic changes in the PRC, which were referred to as readjustments. These economic readjustments, which were continually expanded through early-1988, brought about both immediate an...