686 { China’s Quest
for investment. Even after WTO accession, the stronger legal protections
afforded contracts and private property under Hong Kong’s British-derived
law, compared to those provided under PRC law, made it attractive for PRC
entrepreneurs to base their firm in Hong Kong and invest via Hong Kong. As
firms, foreign and Chinese, began clustering where they could most easily
obtain the human and physical resources they needed, the benefits of geo-
graphic clusters began to form. Many geographic clusters emerged to become
a global manufacturing base for specific goods: overhead lighting, shoes and
luggage, wicker and rattan furniture, sporting gear, disk drives, industrial
fasteners, and so on. China was on its way to becoming the world’s premier
low-cost manufacturing base—driven in large part by a massive inflow of
modern technology supplied by foreign firms seeking low costs.
The composition of China’s trade changed as it industrialized and global-
ized after 1978. China developed a voracious demand for foreign machinery
and equipment. Purchases of foreign machinery and transport equipment
increased in value 107 times between 1980 and 2010, with that category of
goods increasing from 26 percent to 39 percent of total imports.^18 Another
major change in imports was a rapid rise in petroleum imports. Petroleum
imports stood at $203 million in 1980. By 2010, they had skyrocketed to over
$189 billion. As noted earlier, in 1993 China became a net importer of petro-
leum. China’s import of mineral ores and base metals also grew rapidly to
feed its metallurgical industries. Its rapidly growing demand for fuels and
ores meant that China’s foreign policies increasingly scoured the world for ac-
cess to those vital inputs to its continued development.^19 In terms of exports,
the starkest shift between 1980 and 2010 was a fall in the share constituted by
agricultural goods and a rise in the share of manufactured goods. In 1980,
just half of China’s exports were manufactured goods. By 2010, 95 percent
were. Agricultural exports fell as a percent of total exports from 17 percent
to 3 percent, even though the absolute value of agricultural exports increased
over fourteen times. A major task of China’s diplomacy has been to open wide
foreign markets for Chinese goods.^20China’s WTO DecisionChina’s entry into the World Trade Organization (WTO) in November 2001
had wide-ranging implications. Established in 1995 to replace an older inter-
national organization, the General Agreement on Tariffs and Trade (GATT),
which dated to 1947, the WTO represented a major step toward a more open,
freer, and more market-based international trade system. While distin-
guishing between developing and developed countries and permitting more
protectionist measures by the former, WTO lowered tariffs, restricted state
intervention in markets, and banned quotas and a number of other nontariff