Elements of a Sustainable Trade Strategy for China

When China began introducing its trade reform strategy in the 1970s, it ranked 32nd among nations in global trade.

Today it is the world's largest exporter, with its total value of trade having increased over a hundred-fold since 1978—an annual average growth rate of 16.3 per cent. The open-door policy that has underlain much of this growth also has involved a torrent of foreign direct and portfolio investment, which rose from US$1.9 billion in 1986 to just under US$100 billion in 2005.

China's impressive export engine, driven by a strategy of actively absorbing foreign direct investment and encouraging the development of foreign trade, has played a key role in the unprecedented growth that lifted hundreds of millions of people out of poverty. China's exports of goods and services rose from just over 10 per cent of GDP in 1986 to over 40 per cent today.

As the volume of China's trade has expanded, its structure has changed dramatically as well. In 1978 over half of China's exports were primary commodities—a figure that has now fallen to 5 per cent. Exports of manufactured goods, just 46 per cent of the total in 1978, have more than doubled to 95 per cent, with over 30 per cent of that being new and high-tech products.

But the strategies that worked so well to get China where it is today may not be the strategies that will take China to a sustainable and prosperous future. Increasingly, China struggles with challenges engendered by a model of growth that has led to tensions and imbalances: between economic and social development, between urban and rural development, and between the economy and the environment, among others. These challenges can be framed as falling within the themes of the three pillars of sustainable development: economic, environmental and social.

In the area of trade policy what is needed is a sustainable trade strategy—a thorough revisiting of current policy in all its facets to better understand how trade and investment can contribute to economic, social and environmental well-being in China. Ultimately such a strategy addresses the critical hurdles China needs to overcome in advancing to its next stage of maturity. Done successfully, such a pioneering strategy will help China firmly establish hallmark leadership throughout the twenty-first century.

The purpose of the project that gave rise to this book was to explore what a sustainable trade strategy for China would look like. What does it mean, for example, for the strategy of moving up the value chain, for the services trade, for an approach to product and process standards? The six topics discussed in this book are not an exhaustive picture of a sustainable trade strategy for China, but they give particularly helpful substance to the idea by examining key areas of concern and they deliver a number of specific recommendations.