[MUSIC]
I want to talk now about China as an export power and
the theme that I want to raise is really China as a trading state and
this draws largely on the work.
A professor named Richard Rosecrance who wrote a wonderful book and
in that book he argues that since World War II, few states have been able
to expand national power through territorial acquisition.
Instead they rely on trade, trade surpluses, foreign capital accumulation,
foreign direct investment, technology transfer from overseas,
their own capital accumulation, enhancing their human capital,
making sure that they have more talent through both their education and
through trying to have inbound migration of very talented people.
Now, the Chinese leadership early on in beginning around 78,
79 already began the kinds of policies that facilitated this trading state and
a good friend of mine, Dory Salinger, wrote a book many years ago,
where she referred to the shift from lathes to looms,
lathes being machine tools, to looms and the idea of textile and light industry.
We look at the investments by the state between 1979 and 1982 when a lot of
money shifted from heavy industry to light industry which really laid the groundwork,
right, for investing in exports and
at the same time, the state also moved to invest a lot of money in
its five year plans in harbors and roads in the coastal cities.
So, that these enterprises,
some of which were TVEs by the late 1980s and the early 1990s.
They were in a position to then ship their goods to the coast and
send that stuff overseas and in fact, no other country in the world
has benefited more from free trade as China since the 1970s,
largely because they were able to make this important adaptation
to export-led growth and the main place that they learned a lot of this from was
from the world bank and we have a study done on China's foreign trade,
the world bank published it I believe around 1983.
Trying to explain to the Chinese leadership how they could get rich and
how the country could get rich and
I guess more powerful by moving into the export sector.
One of the important things that they had to do was really to cut tariffs.
Now by tariffs, it means when you import the goods,
do you increase taxes on the good to make it more expensive?
If you do that, then that good often can't get in.
People won't want to import it but what China did was it cut the tariffs.
Himself, we have figures showing that almost every time he went overseas
in the 1990s, he would decrease tariffs as a way to smooth the road for
him to go visit Southeast Asia, things like that, countries like that,
regions like that and what it did was it made it much easier
to bring in unassembled product into China and
that there was much lower taxes on those goods coming into China.
And so, in the early transition period,
there was a great deal of assembly work that went on in China.
China would import the kinds of machinery that was necessary to assemble products
that were manufactured in Southeast Asia and the labor, came from agriculture.
We had this whole period of workers, rural peasants now,
in a position to not be needed so much in agriculture and
so they started to flow into the export economy, into the regions,
come from the inland areas into the coast areas through the township and village
enterprises, predominantly, but into other enterprises as well, other ownership.
Some of them private ownership.
A lot of this being set up,
again in the pro river delta or in the Yangtze River delta.