The political economy of trade liberalisation in China

Abstract

Economists have long understood that economic policies are determined in the political market. Research on the political process of policy formation is essential to predict future policy directions. This paper focuses on China, the largest transitional economy in the world, and the political economy of its trade liberalisation. Under its opening-up policy and foreign pressure for market access, China has pushed for trade liberalisation. Its infant industry strategy, however, conflicts with its industrial interests. The outcome is that industries that received priority under central planning have been given high protection. This paper argues that if trade reform in China is to succeed, it must be a part of comprehensive reform to the domestic economy and government restructuring. Show more