Trade reform and efficiency of resource use in China.

Three waves of trade reform have been launched in China since 1979 to enliven the country's external sector and help it better serve the cause of national economic development. The fact that exports and imports have risen dramatically in response to these initiatives has led some western analysts to conclude that the reforms have been basically successful. What is often overlooked, however, is that these reforms were launched not only to facilitate increased trade volume, but also to promote trading patterns that make more efficient use of the country's scarce resources. Has trade reform promoted greater efficiency in resource use? That is the central question investigated in this thesis. Three approaches are used to analyze this issue. First, China's trade reform initiatives of 1979, 1984 and 1987 are critically examined to see if they helped bring about greater efficiency in foreign trade. Second, Chinese foreign trade theory and tools of trade management are analyzed to see if they promote goals other than the attainment of trading patterns that embody the principles of comparative advantage. Finally, domestic resource costs (DRC's) are estimated for 21 sectors in 1981 to assess the extent to which actual trading patterns diverge from patterns that are efficient from the st and point of real costs. The basic conclusion drawn is that although trade reform has enlivened a vital sector of China's economy, the continued presence of domestic distortions has led China to trade in a manner not entirely consistent with comparative advantage principles. Domestic policy has yet to succeed in rectifying the greatest of these distortions (disequilibrium prices), and indirect measures aimed at promoting more rational trading patterns are still in their infancy. Empirical results suggest that China has not taken full advantage of it's comparative advantage in primary products. Trade patterns instead appear to be strongly influenced by rent-seeking behavior and the pursuit of strong forward and backward linkages with the domestic economy.PhDCommerce-BusinessEconomicsUniversity of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/162533/1/9014025.pd