Emergence as a Global Economic Power } 681
Trade and Foreign Investment
China’s re-emergence as a global trading power was one dimension of its
post-1978 rise. It is useful to remember that China was historically one of the
world’s leading trading countries. It was really the thirty-year-long Mao era
that was the exception to this historic norm. Prior to the revolution in oce-
anic maritime technology in the fifteenth century, the caravan trade between
China and the lands to its west, often called “the Silk Road,” was a key axis
of the world economy.^9 The expensive luxury produce of China—silks, bro-
cades, lacquer, and ceramic ware—were in high demand among the wealthy
in Europe, Arabia, Turkey, and Persia. Large-scale factory and cottage pro-
duction emerged in China to supply that demand.^10 In ancient times, the
Roman demand for Chinese silk was so great that the outflow of silver to pay
for those imports injured the Roman economy.^11 With the revolution in mari-
time technology and the rise of the oceans as highways of global commerce,
craving for access to China’s valued products remained strong. A dynamic
maritime trading system evolved in early modern East Asia involving Dutch,
Spanish, Japanese, Indian, Arab, and Chinese merchants. Revolutionary
new European maritime technology combined with traditional East Asian
trade patterns to produce a powerful symbiosis. Acquiring and marketing
abroad the produce of China was a core element of this commercial system.^12
Indeed, it was the strong Western demand for China’s products that led to
the clash between China and the West in the 1840s and 1850s. By the early
nineteenth century, a major trade imbalance had emerged: foreign demand
for China’s products was strong, but China’s demand for foreign goods was
weak. Resolution of this imbalance in Britain’s advantage was a major cause
of the first Opium War; British merchants discovered a strong Chinese de-
mand for opium. Beyond the narrow question of trade imbalance was the
prospect of access to broader trade opportunities if China were “opened” to
trade. Ardent Western desire to gain access to China’s markets was the major
determinant of the Anglo-French onslaught to open China in the Century of
National Humiliation.
China’s 1978 opening led to the resumption of trends apparent in China’s
economy early in the twentieth century—before the liquidation of Chinese
capitalism in 1949. Rawski concluded in his authoritative study of China’s
pre-1937 economic history:
The sustained expansion of output per head had become a regular fea-
ture of Chinese economic life in the early decades of the [twentieth]
century. This fact, with its momentous economic and social implica-
tions, represents the principal finding of my study ... the mechanism
of prewar [pre-1937] development can be specified in considerable de-
tail. Economic growth was rooted in expansion of foreign trade. New